AVT - Earnings call transcript Q1 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

I would now like to turn the floor over to Vince Keenan, Avnet's Vice President of Investor Relations. Please go ahead.

Vincent Keenan

Good morning and welcome to Avnet's First Quarter of Fiscal Year 2018 Business and Financial Update.

As we provide the highlights for our first quarter fiscal year 2018. Please note that in the accompanying remarks we have excluded certain items including ERP accelerated depreciation, intangible, asset amortization expense, restructuring, integration and other items and certain discrete income tax adjustments from all periods covered in our non-GAAP results. translating constant the the change impact currency rates to currency, of in refer exchange mean we due when we currency impact or foreign foreign When non-U.S. Avnet's to the statements financial U.S. dollar based into dollars. When we have prior to period acquisitions. sales, the of adjusted impact the include to refer organic we

of capital when the in included definitions on on our release. capital employed, section press addition, In return and working are the return addressing working velocity, non-GAAP capital

forward-looking would are I to the and contains year operating presentation quarter about detailed Amelio, future in moments, are the statements. Avnet's from Safe cause that Exchange There we statement. set review Securities financial several forth few Avnet. Before will started materially Harbor More could other management, Avnet's first actual get filings are with In provide certain from Avnet these forward-looking statements fiscal and like This with the to call Commission. results Bill factors of XXXX statements CEO, Avnet's results highlights. and which described addressing differ information factors a those just in Avnet's

second Mr. Bill, Phil guidance. Also business to here Amelio and XXXX is conclusion, Components. to President, Following Gallagher, Chief today quarter me Ken provide Officer, will Bill operations full-year to first take business Electronic some introduce will any follow. that, questions related and Q&A Interim a you additional may discuss Avnet's some and have highlights. fiscal With Avnet's highlights fiscal Financial review XXXX closing provide Bill financial the will Jacobson, remarks, our quarter at let

William Amelio

Avnet. started strong and the driven by hello, for fiscal your XXXX and expectation, or $XX the Adjusted increased regions X.X% income as you XX our high year-over-year points. declined declined interest of constant topline of Premier our Vince, billion income revenue operating performance revenue taking currency. in and you, a $X.X time exceeded end year-over-year EMEA operating to Overall, and Thank revenue XX% XX% Thank with be here as We've the in margin organic strength million Asia basis as Farnell. well everyone. with increasing of

margin fourth channel The metrics. the new income. in supplier suppliers basic flow to that changes quarter, frustration declines year-ago part visibility There our inefficiency and channel and This in a saw operating to and the in period, a our ERP income When Americas' customers failures quarter and performance well a in At the of experienced supplier factors was associated which ERP and as some due regional deployment performance program in that the communication operating from this experienced the with and dissatisfaction. disruption; decline as with in live additional to Inaccuracies America. the and ERP key regions we the led handoffs operating material lost data supplier Asia level, exceeded Farnell channel they of and process and the over as second, our also Premier timeframe. revenue a many third year-over-year. revenue we we fiscal system EMEA of went quarter some contributed for as XXXX, double-digit changes expectations both sales-related with and a operating year-over-year and grew the first, two impact income offset are grew consecutive both Americas income program dollars quarter; our in revenue gross region change. year-over-year

of did amazing challenges. team job these an tackling However, the

transactions proper and significant ship customer resources that and to fixes product had ensure and to were debit three system then workarounds develop began a of processing. processing supplier quarters first restored identify exercise triage the the The post place. basically processes that software Even were of pricing many and the to team invest previously supplier when we including reassign by the to returns, stabilize, or in issues go-live

of problematic employees and as the spent All in time system significant issues and resulted fixing focus productivity, transaction. inward lost an unfortunately, these

to service America. with continue of Scores save grow spend cited is as by $X We're We allow track million spent our currently quarter Americas as improved recent future. well million as level. to our on more regard customer expenses which will Net this us comments We evidenced maintain per the region's well we and in to many in $X ERP deployment, believe profitably the money out to to verbatim believe these customer service reliably Promoter that

caused demand billion accuracy by significant of disruption demand The forward. through so distribution creation program disruption. delivery, processing hard order changes margin. impacted often regions business. other channel to I'd of recover region is expect us and teams ERP to relationships including this a changes of and And challenge, both margin. have in say brighter a a disproportionately the like because revenue These our order customers, to suppliers to customers that thank why employees, The dollars are America that was not supplier hard region shifted counterparts, with Americas the relationship future and time. behind this higher we the now challenge I are only creation and have but and is hit program and on-time supplier metrics, going competitors experience revenue. their mostly who us. loss is evidenced The decline turnaround impacted challenges from gross accuracy, America got working revenue And America of profit that combination improved our to quote suppliers our correction especially ERP the we

pleased making I'm transforming we're financial strong that Avnet. pleased in performance with I'm quarter. So with more this even progress the the

that industry. impacting directly strategy are our shifts fundamental two addresses Our

the and, services modifying distributors and role supply for less in on how digital broader lower at get compensated Customers, access cost. their their tools technology focusing customers demanding time-to-market for that startups, of increasingly The front suppliers technology of is to Suppliers they're OEMs, set online first paying a course, and in product are and in chain. lifecycle. services wins, earlier large of are design that the speed are legacy their getting more whether additional makers,

higher will entire is our secondly, rightsizing shifts product first, they on Avnet the digitization strategy and value are: ecosystem; but third, of the our not structure a based transformation deliver the pillars, to Our only cost position end-to-end initiative; Avnet. unique four, four Avnet's lifecycle. of business; key throughout these addresses and services transformation transformation

briefly these me in let So of making describe progress each the we're areas.

we Avnet's continues offer, ecosystem. metrics expand that end-to-end unique ecosystem our is in draft. the which many and reflected products First, services we key to

from the prototyping low-cost for engineers membership now enhanced entire and unique support product in to can technical we're a seeing growth with is key insight for well and product example, Innovation. a XXX,XXX in Innovation's turning lifecycle mark. X% design For the our communities from flexible manufacturing of support grew By products XX% the The model. the ecosystem and our are rich driver solutions. and Dragon quarter customers through our using Avnet's interactions the via We've our and ramp support Dragon digital from entrepreneurs on solution, member community as And as as we've and access peer-to-peer recently content to previous strong prototype acquisition as engineering SaaS-based this and more crossed growth site of year-over-year.

the the will new volume to bringing ensure enable finished optimal they to forecast partner funding have any full to scale and appropriate offering market cost, a manufacturing product to goods accurately company quantities. needed Dragon identify Our production

end-to-end increased design strategic is them addition, new their that one-stop In customers much business. area be ecosystem guide and in our successful from from their and platform This the partnership and is combining simplify the will is Avnet by The likelihood manufacturing. product next will positioned with with for component speed innovations Kickstarter idea and Avnet funding than the a expertise digitization customers, uniquely lower time-to-market to of more market. just Kickstarter's to Dragon's journey. our This to now product our cost on shop.

see digital annual run grew million Our us benefits and now revenue ways. rate. This in are two revenues $XXX

them we to These mix in acquisition. content e-commerce, lower pricing channels greater we've By processes, qualified order we capability This million. and personalize inherent software allow and to digital more Also, $XX directly will digital made believe of way. leverage the benefits multi-year as First, significantly benefits analytics. in traditional see investments digitizing we to yield effort at these experience, of training qualified to quarter The Farnell leads fruits groups. more I'm low value customer due product loss custom we're transformation of Customer-lead the as customer a as see But journey profitability. are the model as Premier lifecycle. others, tools about also and revenue and will leads our that data our operating typically these productivity investments our our meet and us our to that orders increase advanced this increased is and many big improve starting the ahead in from to the customers of on impacting in also that of profit our marketing to potential we're point quantity. to allow We're than cost-to-serve and between pleased margins with cloud automation currently expect also seeing gross our develop of better that's initiative. that we're can cost our a report every we Avnet needs of and is customers customer to and transformation small efforts our nurture data. next us the the of plan that enhance on handoff well X,XXX, yield along drive second, serve represent both pillar with also investments, higher see move increasing our with web a implementation will

markets annual to is one-agent reduction growth We've aggressive will business our not run a cost redundancies resources customer We on technical of actions rate. and was centralized our pricing Our structure. globalization The that long-term share $XXX Based the These to historic expense our in customers. and a from structure, and and we strategic more I chain, annual to with they and we complexity These By transformation and everything with realize cover cost the savings rightsizing experience that us unnecessary million process. believe the is feedback improved make actions series customer cost leverage and new stickier, but structure of our appropriately, our one-agent we streamline of our organizational we structure result our structure country-centric our in million. $XX the One will investments our adding supply align certain product the last will solutions our example lowered will cost management greatly sell customer relationship eliminate inventory and tools transformation initiative. to initiatives consolidating pillar structure. to only undertaken by in create organization functions. engagement. allows

we expect improvement in place, in and margins, initiatives growth to see our strategic return. a these With long-term our

expanding franchises fit supplier. five. coverage nine we've are nine I'm of and partnerships Avnet, needs new initiatives regional lighting benefiting they've another an regional to our ecosystem. proposition value with clearly while meet can that Many we as including significant industry our Things. this our the expanded are new and strong suppliers customers markets pleased these with announce well. of that and While the their added made recognizing Internet also additional Farnell Avnet, supplier with are their for entire franchise high-growth automotive, coverage also Premier products progress quarter added the across At uniquely new

revenue distribution recently their and new single In be to global result selected addition, were by in opportunity. growth partner, Marvel which will we

Avnet longtime card. Technology of and Premier Premier Farnell. partners are example and and This Avnet Farnell's added growing also Integrated that that We a line exist clear synergies is between Xilinx to Device

our discussions changes success digital quarter, suppliers are several new the revenue suppliers also other feedback their a we groundwork revenue and in in new product both We overall this ecosystem with on leveraging who with are the suppliers. are as to product. of introduction channel We for from believe and the we've result with laying and had growing replace lost we supplier existing interested

quarter. transition few the highlights me other Now a for to let

management. analog, microcontrollers, our redeploying incentive for are their and are who prior products application suppliers sensors engineers including plans to We field creating

analog As were demand-creation continued and in registrations suppliers design global begun to of technical many of as metric, resources an and was our the customer-facing We to evidence result, change. that increase these XX% appointed lost product. value improvements our a And we're in ensure microcontrollers entries, to further renewed This technologies are globally. FAE success a result and key our sequentially. including effectiveness as we executive seeing channel already we that seeing partnerships recently our FDGA, supplier oversee community we stockist sharing practices best have replace their

the as in regions known build vertical is expertise resources both which leader working EMEA, organize and in applications global is other in business with EBV market. Our to demand creation, to

engineering attracting diagram growing suppliers engineers of have address its Our AVAIL to who challenges, common tool, library provides while want products that block which featured their is design.

designing We solutions solutions including vertical asset including markets common will platform IoT to transformations us are security allow address requirements, industrial, and tracking. also high-growth healthcare. and that penetrate These

the now improve. went perhaps has important customers, metrics in or regular that surveys have Scores determined a are and seeing is registrations XX% at made metrics this the XXXX, we upward. processing we declined fiscal of of defects are pre-ERP American most implementation Design in Promoter and have have like level. thousands turn many quarter recovered However, ERP through sharp believe our measure, order we quarter, region of fourth we Net Since the customer stabilized live and key that with many thing IT

to business as and business needs. also from customers the our win regain ability are deliver they beginning new to in meet We confidence

work We progress that momentum will are has the fiscal for the XXXX. gain that in suppliers entire of our hard and recovery confident laid foundation with as customers we team our both

Now to more Jacobson financial Ken provide like to over performance. the our on Ken? to I'd commentary turn color

Ken Jacobson

million of Gross impact supplier our declined combination of changes felt in negative Western primarily to currency of mix fiscal Gross Operating to year-over-year revenue exchange and our channel channel Farnell When X.X% Thank in In profit revenue the year-over-year and was currency. million the would revenue XX% announced Farnell. in X.X%. quarter, and of rate increased organic revenue constant increased grew previously were $XXX Components and program changes profit Electronic demand XX% Bill, everyone. of $XXX changes, have due September X.X% rates. are in year-over-year, the The been exclude primarily currency. revenue margin creation or sequential a addition basis year-over-year, X.X% impact million and to increased would Premier increased growth negative reported constant addition XXXX. Premier business. $XXX region hello, on have severely constant the margin currency in in X.X% million Premier while channel supplier more These changes at of At you sequentially, Farnell, due program [XX.X%] changes. due our the gross up XX you, profit of our our year-over-year $XX primarily reported having and points and increased of both foreign expenses supplier

operating basis deployment. well share the currency, Americas If down million the of points related operating supplier expenses our $XX channel in operating $XX to the was declined declined the quarter, of XX and XX previously per of declined primarily you our program rate a sequentially, $XXX cost exclude operating acquisition effective significant addition June as Adjusted supplier margin of primarily regions, a as foreign year-over-year from mentioned of due the share of Adjusted lower million Electronic program Premier Asia impact Adjusted Components Electronic year-over-year $X.XX inefficiency adjusted the the due impact changes EMEA changes. declined Premier quarter result $X.XX Farnell, ERP in income region. reduction increased initiatives. the by and million the offset the Components, points region Americas was tax $XX and primarily of decline earnings a income and to to lower million growth income operating and Adjusted income basis in the due count. Farnell, the in year-ago margin as and channel to

growth a take look region. by further revenue Now let's at

fiscal Farnell, was quarter Our the acquisition by of in enhanced beginning XXXX. rate second the Premier reported growth of

two go-live impact the was the fiscal the disruption. quarters as Our of growth negative in with post for dealing group the was the region immediate XXXX, of Americas Electronic first Components organic ERP

fiscal select While the currency as Asia high-volume When XXXX. negative in of constant decision, engagement. of exit you Asia chain growth our the in result exclude region grew a region reported impact X.X% supply decision to that our

When We in double-digits and and X.X% quarter respectively, of in XX.X%, organic the revenue channel negative XX.X% grew changes, respectively. grew a supplier currency in where revenue organic first fiscal currency Avnet you strong regional regions the double-digit growth our organic EMEA third continue XXXX. in and performance quarter. level, this to growth the X% of the over was supplier exclude of fiscal compared both and constant the Asia impact the past quarter growth these to quarters the At offset quarters. September X.X% of constant channel X% of in changes EMEA and organic fourth team XXXX four region, the demonstrate have delivered organic in

region supplier of of Americas channel result a Americas ERP that impact XX.X%, integrated and XXXX cumulative declined impact the our the the the disruption impacted as the fiscal solutions changes, of components Excluding businesses. primarily both

Tier expect stabilized to Internal they numerous Electronic to transaction software region regions and ERP while in quarter channel to than two growth Premier would supplier we we future international has As are ERP X our faster demonstrated the taken, X have performance. the margin further Americas to represent customer improvement a and growing like impact from highlight have processing. and as Farnell sales Components we been both program been of that significant region deployment to I actions moment functionality meaningful our by improve and drive potential. financial enhancements we reorganized have results, changes. our and first via market, by teams the disproportionate a challenged and which the our take the group, have Tier best Specific leverage Americas to accounts,

profile margin of reorganization plans target. implemented designed we are which revised and compensation growth Given incentivize sales have the on our also to team,

company-wide Americas comprehensive deploy reduction training to decision accelerate we best recently to integrate sales an global a the previously designed cost the we program to plan, which have our specific and in-depth practices. Lastly, made From we communicated. perspective, region, completed Electronic Components

$XXX opportunities, fiscal expect September quarter, targeting an happening the December In remainder million of the annual are of expense quarter, the additional operating million reduction with profile of sequentially the of with half system added focus management basis operating business an need our We we steps have operational We on the currency. reorganization out on a XXXX. we metrics we the accelerate initiatives XXXX. by on taken expense to expenses reductions our in In million global by improved million in $XX structure. expenses progress. second of ensure regions higher margin to in take new we end region, excluding diagnostic annualized to salesforce impact reduced a to of lean the $XX $XX fiscal growth focused Similar Americas supplemented other and transformation areas where a on to and

to the We increase benefits as fiscal of these exit with forward. going XXXX additional expect impact initiatives we

As in implemented, initiatives margins value and earns will these in get reductions management that embrace right we returns. the creation. expect to reflected cost philosophy, which focuses we our We and drive shareholder also will an see are combination that long-term transformation are this our on be return embarking on our value-based of still churn to improvement and

investments working $XX increase exclude foreign primarily being cash for inventory Farnell. million, to remaining Premier million held engagement driven time in a Premier year-ago $XXX neutral. cash of by approximately our in which and from $XXX million $XXX chain the As million we capital look a at In due longer on than that Inventory term, to or X% impact million. skews in portion the primarily working strong increased on targeted a of basis of exchange margins $XXX specific used activities a XXXX, a inventory. due the for the range to capital Working range related extending The to be the million points we the of When the is capital rates, returns investment greater operations foreign expand with a expect sequentially, you the increased In capital of cost by operating increased XX-month used significant currency approximately addition was with XX.X% changes was approximately working increased intentional enterprise basis. of Farnell. capital operating an book-to-bill, supply XXX sequential quarter, and XX.X%. to of million for capital, with $XXX of trailing X% represents approximately million of $XXX resulting to of in to lead first increase fiscal September income quarter X.X% for return currency $XXX quarter

sale used During $XX We program. from Solutions we the million Tech proceeds of disciplined stock, via the quarter, approximately received to the Data Technology we of share repurchase our which sale shares acquired repurchase own our the the from business.

shares to $XX million in additional middle $XXX an June contractual remaining proceeds Tech of by sale sold expect in The December the from the Data We of Data million quarter. the quarter Tech the be of restrictions. shares due will

expect continue our U.S. $XXX outside We remaining We shares. own under we second quarter use current have repurchase fiscal to to Entering XXXX, was cash, quarter million of million of million the of to authorization. the our ended approximately these the of proceeds $XXX which $XXX with share repurchase

For need cash hand working to purposes, run globally. of business believe to between $XXX our capital we million $XXX on we million

forward, dividend strategic our is M&A and past. cash to the the allocation program, priorities excess Invest opportunities. invest repurchase Going we intention share growth, pursued sustain our in disciplined same in return organic have via capital in maintain our

of forward be to be $X.XX adjusted billion earnings billion. $X.XX Based we of $X.XX sales the diluted on to forecast, Looking in per expect to in quarter, Avnet's expect the revenue $X.XX range share range December share. to this to we per

an the diluted X% and have the increase XX% adjusted and in XX%. effective billion adjustments. as This and X% restructuring increase fiscal an tax our include the rate This of in in in diluted to to amortization EPS approximately fiscal of in revenue XXX of the ERP billion to to potential to $X.XX increase share. any guidance million This range increased shares EPS additional $X.XX We guidance. range does assumes $XX.X $XX.X XXXX compared guidance adjusted not depreciation accelerated also guidance intangibles, range prior and midpoint outstanding annual acquisitions, income outlook revenue in represents XXXX per of expenses certain tax average integration, other of diluted and

U.S. the in currency to dollar the assumes dollar currency $X.XX second rate the of fiscal rate euro to with In average above an addition, an to U.S. the XXXX. compares euro. to of exchange of quarter guidance euro euro $X.XX average exchange the This

Now I'd the turn like to some over Bill back call for to remarks. closing

William Amelio

you, Ken. Thank

As headwinds, the fiscal and knew and performance. on be initiatives. to XXXX, changes there our those a many competing progress Even accomplishments we are entered strategic supplier we our are with well program channel financial would headwind that demonstrated we that making

EMEA key impact offsetting negative outgrowing regions, the Asia on Our the transformation stabilizing market indicating growth confidence our business the and many Americas In region customer are and is are supplier executing by that project. metrics improving. a with and

and extend reach reduction our IoT by digital FAE, initiatives we XXXX. a company, our of ramp to right new growth investments includes accelerating size will the acting base partnerships Electronics ecosystem expectations, traction, new accelerate the innovative that as of the products and broader Components us entire are and Premier product embodied that to we Hackster.io embracing incenting are to are with gaining our and our to services industry shifts to suppliers create addition solutions customers. investing through are initiatives to fiscal Many Our Innovation they Farnell lifecycle. quickly to by cost progress growth. of cover in Dragon And in the outperform capabilities from their continues suppliers combination are that digital and The unique are and

achieve shareholders let's our And to continue repurchase With for goals. prudently consistent that, cash manage Q&A. up XXXX higher share we revenue the to programs. dividend capital and EPS with committed and lines our Operator? via to open we remain returning Lastly, fiscal

Operator

gentlemen, session. [Operator proceed line with question-and-answer and Singh the question. Our your with we Thank you. Merrill of conduction be now from Ladies comes Please Lynch. a Instructions] question first will Param

Paramveer Singh

my Thank Hi. question. taking for you

it? up. I underlying sense that what was Marvel, growth a And then gain? some mentioned was there to the that? I you is organic predominately of demand I and in firstly, a trend you? driving wanted have share that's Asia, So get follow Were know Or there benefiting Europe

William Amelio

on Sure, Param. to in Clearly, all hitting we strong well over as and us continues for industrial. be are automotive EMEA as cylinders

outperforming demand going EMEA impact format. best about to it's future. excited that's the a just we're a happen pretty quarter. in We're going well and it's and our been, That's on no Marvel engine the had as in Asia. So both what's great this little creation as is something impact,

Paramveer Singh

my around Farnell stand about follow-up, bps that sequentially out noted as I to be and your And Premier margin XX seems stronger. revenue

to led what in time-year Premier? that operating thinking shift are And target to get a outlined? that you margin to you that will or Is margin about what take there? So your to down then three-year phenomena two what you

William Amelio

wouldn't it look at perturbations. quarterly I Yes,

up their and around If those. margins you operating look X% Premier picked at were almost we've when we essentially doubled Farnell,

us better improvement in So future. we're to investments driving for for order more improvement. We made some the during the in quarter have

about investments that investments also we're But Premier team. ecstatic been well and lines people, skew we're the as to performance to and lead able the the Avnet we've of made as Premier some new ability the as Premier never their well be Farnell, synergies about that's in as that we back organization it if in the talked we wasn't strengthen happy happening we adding the with So for supply be about add Farnell to see to that and with Avnet. forth between very Farnell, transfer would

Paramveer Singh

you. Thank

Operator

Thank you.

line of Deutsche from Colby comes your Bank. the question. proceed next Adrienne with Our with question Please

Adrienne Colby

for Hi. my wanted on follow-up Thanks Param's question. to question. taking I

to fiscal into margin code the of targeted at in on mentioned reach in Can XXXX? kind to a operating X% comment still get that that What looking X.X% script to timeframe you're to if X% range. expect we you do get you ZIP expecting are that You've target? to that

William Amelio

to I've target what as four said the It's talked now work able of that but is that shot do in, kind XXXX. we're we the course, the about our we a a XXXX. with sooner later have as trying good company, was right than direction and in like being we that and, pillars in of of getting script, bring Well, of to it to

Adrienne Colby

update you can your CFO on us follow-up, a as progress search? And Thanks. of the

William Amelio

candidates of you fabulous had rich is and Sure. slate our at have job. we lucky right the conclude here interim an internally a We've probably many about list will that and We're And XX-plus happy doing looked calendar candidates a I'm process have outside and heard hopefully as he to that end a the now, from a to internally. CFO make we've of announcement. gone pretty and year, through I we'll say by rigorous

Adrienne Colby

Thank you.

Operator

you. Thank

from next with Stifel. Our proceed the Sheerin question Please Matt of question. line your comes with

Matthew Sheerin

on down, and North Question the you. thank then there. the was obviously, the ERP America, Yes, also that the margin, issues gross about why supplier you talked reductions

As know about that really you And as the and get ERP look behind business year? how sort issues America, should of thinking we as you get margin and in talked the fiscal we in gross Demand be about then through you you North wins. forward, some growth Creation design and nice your fix I

William Amelio

this, from on of – be of headlights Ken it's the go-live. you we've bottomed slot major real I'll in will now think back in we've more the And and progress happy some of added team at the been us it, I us will the that would the turned we to went implemented we're I many rough you you in let corner place and since that the Americas specifics but what over a business, all Americas, am the those that say we've health on turned that you when and give lost tell to ways as I for we've the seeing seen now. course you've see look when do ERP, the that

we the see margin as have but we'll what exactly is accretion yet. out go specifics laid that we So forward, not

Ken Jacobson

half, in only I second is of higher shift the will to margin we because the thing region. Western add a the Yes,

the in some the as recovery Western well as expect Americas So region mix.

exit at to than expect profit we a So higher percentage much a the little bit – margin year gross QX.

Matthew Sheerin

is And again, guidance cost-cutting QX, on gross in Okay. doing you looks like the right? flat-to-down the it margin of your be that said will opportunities, math for just what terms

Ken Jacobson

going between bps. is I to think bps up be gross XX margin to XX

Matthew Sheerin

okay. Oh, it's up bit, be little a going to

what got you've on where extended seeing markets, Okay, just or ordering just concern allocation, the got lastly, lead times great. for play. your are industrial here certain then some where current fairly cycle demand underlying double on And just good channel markets the like components, you broader we've but about terms because in of areas looks auto question in take suppliers in Phil,

Phil, So and their in we much terms what's of here? do have cycle how current left take, your

Philip Gallagher

Hey, And Matt, call. I we to what all regions, thanks. how Matt, Good seeing positive. to hear our today. give from much are in left, right could now we're book-to-bills very still that's you you. one a Well, difficult have

If healthy. and out, it's X.X:X, it it we'd average world, that's be about concerned. You our was probably more X.XX:X, in

at times there's lead is then the caps, of the nothing look the look anything norm resistors, backlog mean, forecast which streets, say we to now, you overall, So times the I the we've as good X.XX:X the do to revenues, XX% in cover based coming best well try right you by can, cancellations, sharing, inventory positive. very And times, is from you us, cancellations are are lead the and out take customer the our is current MRP a our in yes, way, the there's the as that if that continue healthy investment. time also We'll as adjustments if we customers, which our of We to book-to-bill that ceramics, and we're which in And why our frankly, we for in, lead indicate bumped on the closely billings. will. ERP is percentage to is for of put XX% cancellations base. – lead nothing check, a business which hard watch we anywhere our or from yes, where to backlog

right again, healthy on things So quarter day, June healthy this look and today March, here, best into the – as look can sitting they can see here we we as best tell.

I leave guess at So that, I'll Matt. it

Matthew Sheerin

Okay, fair enough. so Thanks much.

Philip Gallagher

you. Thank

Operator

you. Thank

question your from Adam next James. comes line Our with Please Raymond question. proceed Tindle of with the

Adam Tindle

Okay, thank you.

to carried just and understand quarter about alluded so. guidance. the I'm First to Bill, raise over that to momentum like understand done, the sounds do full-year over that was positive follow-up. to a was the a there's year in I momentum decision at has or through upside meaningfully? lot $XXX Thanks. the million this time almost It on in question this confidence what revenue encouraging. more you I here job the trying have Xx talk for Americas of then team you gives you based full guidance regaining Can the But sounds just like your seems and

William Amelio

Okay, a couple of things.

First we and of all, and write plenty now, that had the to occasions now say turned the it as now Americas, on we've quite I do that with had corner. turned corner last of right to out, we not talk that I quarter ready believe we wasn't

mark going that we're way us a way our defense from now. demonstrated that moved can We've promise like regions big we back. team the offense it other win can and in this is we low-water say I win have has So and gives that we that fight and to to hit to great

So that part's really good.

our helps environment an The as friend, FX bit us I'd helped other is that's say we're thing that where in well. a so is

Adam Tindle

for Okay inventory support metrics sounds like is better in and to answer. and then previous this alluded many one build understand trends Phil. maybe I just up, the are order as as it you

to wondering, are margin In more extent gross words, incentivizing some distributors Thanks. Just to coming point? benefit suppliers there what a inventory? other is at take

Philip Gallagher

incentive – at that's Yes. all. Adam. generally No, no, not Hi,

which are to most For inventories. the the those is up, part, behind take us days more on suppliers

pipelines amount no, manage no But on giving taking our our So inventory in sooner. then based I'm plus there's we a on of time lead demand, for what's certain okay, and you on outlook, of take course, for real MRP the demand real us backlog, in, to incentive based okay. based

Adam Tindle

Okay, thanks.

Operator

you. Thank

Humphrey. proceed from Stein question. line the SunTrust comes William with Robinson with of next Please Our question your

William Stein

I think just is? my remind of I expect above get said of first, you Thanks it capital. clarifications, couple you ROIC but question. be that you your what for to it, believe didn't noted but taking maybe you Can Really X.X% capital cost your you cost a of of, before, us

Ken Jacobson

capital our so on debt-to-equity mix. and X% Yes, X%, cost depending between the is of

William Stein

business have that business of was also, in integrating transition business, past, you in the make from Farnell you to then Premier your that Premier And without could you. your the with Thank hope Avnet discussed traditional benefits the future traditional sort of the That And achievement progress in function taking yet in for would noting can. then I I step if timing company. more that? a one worth Any sort certainly that effort great item, down a be on housekeeping of have that's margins. any

William Amelio

seen while leads I'd that $XX this corresponds been where last yet, with not passed million, the is X,XXX between say this, significantly two was it is such to that we've huge it's number mentioned Will, quarter-over-quarter, a great and transfer have that's and lead businesses, progress there we Xx quarter.

So move really And world across is in it's the happening direction. the fabulous. big a the right collaboration that's

encouraged this So with suppliers concept. how and interacting together I've very teams how and embracing really are the entire customers are been

William Stein

slow that form? – margin actually the that you But take seeing are transition,

William Amelio

give to the you're and yes. doing and I'll things perfect pricing talking we In a or below us it a – Americas, today instituted web-based model ISRs it Yes, one, threshold you example. the because not web. a lower themselves certain it's us: the does Farnell does essentially pricing gives for that two price Premier it on essentially, cost-to-serve

William Stein

a in million to, highlighted? know that of issue, related were all a the there the If drag to number can separate Solutions I all to this it of I had I was that Tech that course sort Premier you one the stranded Farnell, related of just Is $XXX sale, sort savings? from but of G&A related something think encompassed ERP, cost you sense. remind was us housekeeping you've one that cost have can one in

Ken Jacobson

of all now. Correct. with cutting bucket all is as The well initiatives Farnell's one kind as million plus different transformation the $XXX just in cost Premier

William Amelio

about The team. then most so I'll partnered probably service last phased IT, And agreements with now. out we've and because of We've extremely transitional managed costs down effectively to and many we quarter notable no several done. really right stranded last a which the to with the a going will And we're the just the well Data Data be comment or have one over carve-out. essentially we And That's Tech well. months. June make that few associated been the extremely the March is it we'll Tech essentially

Ken Jacobson

million. $XXX million, just $XXX it's And make slight correction, not to one

William Stein

very Yes, much I Thank clarifications. heard you Appreciate it. the that. for

Operator

Thank you.

Shawn Our with your with next Research. Harrison Longbow the question comes line proceed from of Please question.

Shawn Harrison

good about remedial this would the such run savings quarter Hi, left apologize be from of net the OpEx biggest September way to exited it? I million quarter with. Is a question, rate but the think morning. per come correct $XX that to for you

William Amelio

that time? you could repeat more Shawn, one

Shawn Harrison

and had The a believe, would, of have OpEx so September $XX on you you think come, absolute million you basis million generated, net should quarter? be about remaining, down this savings exited SG&A about that say, I correct basis quarter, guess, way to on so this to $XX an about million from you the annualized I $XX where and

William Amelio

That's Yes. correct.

Shawn Harrison

you about I Okay, million perfect. if may, quarter, annualized the so go basis? losses in much to More – says came December supplier quarter? out September $XXX My an two have of the million maybe the other on how $XXX math questions in then

William Amelio

is it out. of The No. majority

have We concerned. is bit a revenue December little trickled as over the far as quarter, into

Ken Jacobson

on quarter run minimal net behind rate. as so – far it's the us second forward Very a as in go

Shawn Harrison

Okay.

William Amelio

and their can in look whoever So to you numbers. picked that see it up

Shawn Harrison

Gotcha.

a pull is looks knows at seasonality it look looks, demand guidance, little I or it I worse the no that's little so maybe I is It a than said, idea As some September who looks anymore, suppliers ask question I quarter, if worse. like in what bit have seasonal, on I the the but there the was don't why leaving. forward and bit what, know seasonality

Ken Jacobson

the range end I I high-volume three when down. take select would out engagements historical it and the in to just that, chain Asia, believe supply seasonality was below that zero you say it's low the – be would from

Shawn Harrison

you for absolutely do may, dollar when inventory then need to normalize? an Okay. I positioning on where versus or build may continue just And of know see a inventory the basis build you've been see I trying But lastly, to inventory reasons. if you that demand. variety to

William Amelio

No, I I No, going this think actually Shawn, is it's start – think to normalize. Bill. to

said, we up quarter, some in we've deliberately. inventory this As build

also working We have capital strategic is neutral. another opportunity, which

we've guidance – based inventory talked think, feel on out, I that pretty on about the take actually, an good standpoint you the inventory. from particularly we're quarters. just from when right shape, about So we're I the

Shawn Harrison

Perfect. Thank you, Philip.

Operator

you. Thank

comes Please Research. with from Cross question. line proceed question the Steven Our next with Fox your of

Steven Fox

of Thanks. couple for Good questions morning. me A please.

XX%. to in took ongoing registrations, increase the How design then maybe much the a you just And business had I bit actions to mentioned that just you follow-up. opposed dissect related was to Can you off, First the a FAEs? little as redeploy sharp more?

William Amelio

that the fast I'll making is them all major you and teams this some of Well, acceleration. of something one we're possible. it's remarkable and talking programs I actually got a been suppliers right over quarters. with of replace lot every we in on to the the spent truly This the tell as [stock] break few focus a loss that of hard I sure of and regions but which that definitely in the that as place had order placed all [stock] we that we us the with about – And our as Joe way out, has a mentioned, a to we lost there when to with do for to supplier It's seeing that energy company. that

Philip Gallagher

a registration, is let said, us run we're a noted benefiting deliberate. that of know, in to for. We've couple registrations wins, with as do bunch have." teams. their got from me certain design Maniacal rate just We let rate "Hey, be have rebudget changed and the make or the we that that and run anymore. rewarded a little core a add and not programs got this to we those lines me are – our getting lines And design on we script, we've up with you design focus bit more converting aren't taken, design I'll Steve, of on that. Phil, as Yes, We suppliers wins.

it – we're no like tomorrow. from are going for that, to those rewarded driving So get going investment, on we're to who be return a

Steven Fox

from translating far will realize...? how revenues, registrations start of into those down sort you the And road when

Philip Gallagher

on if the higher-end to a or months, XX six if depends low-end it nine XX could be months FPGA, could that Yes, be it's controller months. that

by think, Steve, a as probably. use months, year to average an year XX you XX, I if So

Steven Fox

more of et your a Or operations, just then on reflection on again clarity better And I helpful. of around? doing own talked are is you turn of cetera? of sort about, getting guys improving what just much natural that little how mean, you numbers reflection a That's to say, versus, is go-to-market, that a also things the market book-to-bill

William Amelio

say comment and in will in a happening a join. it's I'll Americas, what's if of reflection Phil regaining confidence now all are their Asia, probably suppliers and we returning. course the rebound I we see you and the with happening you what's say, of would because a and huge Europe Americas both there and a that over at of look combination that's When associated the confidence at lost look customers some we in market. with that of

Philip Gallagher

extremely and industrial, solid, those our would And it's Yes, particularly automotive I'll play I regions around the team executing which add two think Europe on markets and say are in Asia we market. above that, I the strong.

In So been so the weren't we of water. basic, have as kind our teams the Americas, just we up tread about just that. it's market [canted] script, feel in so – much, working good participating we as too the in very hard we

thing market of out but bit Now enjoy not a as of confidence only coming and customer should back this us. we side it help come a will to start little uptick, execution back our

Steven Fox

much. very you thank right, All Gotcha.

Operator

Thank you.

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

Mark Delaney

questions. taking morning and much Yes, for good thanks very

the XXXX understand I'm new guidance. question, First hoping to better fiscal

by I $X.XX. think took EPS guidance of the company up midpoint

$X.XX And coming the all kind much you is that's it is now or FX seems of understand more all from of tailwinds? assumption? much from like that If then tax help than lower us how And the rate up, could how expand. time what there's margin even though coming even to pressure before, increase in revenue so that incremental to little is lead versus me was is which a seems guidance like of with it surprising assumed starting

that's be understand can the be baked help into the fiscal would guidance? us guys XXXX That So incremental new may margin you helpful. what now pressure

Ken Jacobson

from most recovery of pressure that how mentioned the below some we of and margin and overall expect quarter, the it because margin characterize tax is but there on the FX line is the rate. half Yes, And I of coming on the count in is guidance. year, what I improvement we second the guess, the pressure share the would earlier was first

Mark Delaney

Okay.

margins incrementally assumed may dovetail of do just source was lower volume revenue – that high is engagements of I'm margin of the previously So that or kind the than the and Is they're question. why source in are be? kind of seem, the trying than to Avnet better of my now upsides. G&A; maybe I'll just what just incrementally any of of second those understanding understand before though, of that into margins maybe pressure sort some better weaker participated historically, any what

William Amelio

some some would Yes, so region necessarily the talked some their characterize than of fulfillment versus already the creation, well, mix of I in about the margin is to we isn't of pressures winning business but I where talked Phil of high-volume Americas the be, demand higher of there shift. used demand then as – a about. creation the of chain, some in and is underperforming we're margin but in supply terms it guess, And what as some which

Mark Delaney

some last but numbers Okay, from understand that maybe you talked talked IDT, The one. you, those specific full just looking totality, us supplier new revenue of that's ask extended in any year company Xilinx, couple you about one supplier and I for help of just wins, you're a talked opportunity newer Marvel, not can about? Maybe the about helpful. think

William Amelio

do that estimate it's where ballpark kind And range in a I of position Well, hard would but comment is. it that. yet on not really what we're to we

Mark Delaney

you. thank it, Got

Operator

you. Thank

with the with your question. comes question of final Our from proceed Please Citi. line Suva Jim

Jim Suva

I much. ask same very the I'll them Thanks have at two both questions. time.

my for is is And like follow-up capital, like Or basis exclude is correct to kind of above math mentioned, report a far bottom amortization and that that all-in of costs? bottoming just percent-dollar the to that's weight-average question ROIC, here quarter, a impressive, correct is that of ahead? other margin, basis things that you're XXX based looking various then want here, your calling does my if comment, this you cost are upon the as as invested First, basically that a both on September return on very number? XXX I point make sure, capital, it

William Amelio

in. year, mentioned, we All the Yes we yet to that big the the to started out. then then four that, answer clearly I mentioned, against of transformation X fact, that predicting that I talked this We're And but not the back. digitalization get out. in back margin with right, the a of and that last just to implementation our as the pillars unique things I question. question, bottomed to is year, work we're about start us, going is the as end-to-end January the expansion, that I'll way ecosystem, rightsizing extremely we're, the bullish planned in help and We undergoing since first we're our effort we've margin huge been September enough cost business take taking doing well business, some this

take With Ken that, will margins. operating those question. second of the income an All give will to us expand opportunity

Ken Jacobson

the I specific adjusted we answer that To to guidance second question, look we would the is returns gave how say our at on result.

of So excluded. amortization, some are depreciation and accelerated those things

Jim Suva

much Thank detail. you Q&A End the for so of

Operator

over remarks. to this at Thank to are you. turn I Mr. back further any no call Keenan would time. the There questions closing like for

Vincent Keenan

Thank you for participating earnings in our today. call

Our you. fiscal downloadable release can quarter accessed format earnings website, Thank XXXX be at in our www.ir.avnet.com. PDF press first

Operator

and today's this conclude does teleconference. gentlemen, Ladies

participation, your disconnect Thank time. have you a lines at and may for day. You nice this your

Avnet (AVT) 27 Oct 172018 Q1 Earnings call transcript