AVT - Earnings call transcript Q3 2018

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Operator

Please stand by, our presentation will now begin. I'd now like to turn the call over to Vince Keenan, Avnet's Vice President of Investors Relations.

Vincent Keenan

Good morning and welcome to Avnet's third quarter of fiscal year 2018 business and financial update.

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

information, non-GAAP the earnings on refer section website additional our our available press financial www.ir.avnet.com. at of release For information to

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

Financial highlights Avnet's discuss take Components. Bill review you let Chief is today that, will to have Officer, any Liguori fourth our President, Gallagher, to Phil Mr. guidance. operations here me With XXXX Avnet's to related business provide Amelio Bill, third fiscal fiscal may quarter XXXX and introduce Following Also Tom financial business questions additional Electronic highlights. some quarter

William J. Amelio

you Vince Avnet. taking Thank with hello, the your Thank you, in interest us for everyone. and time and to be

as both delivered significant make to groups progress with this our operating continued quarter earnings growth We March and in revenue above-seasonal quarter. the momentum

highest four operating high digits of result, year-over-year revenue the in and a adjusted quarters. the expanded X.X%, $X.X margins single billion in grew to As level

grew times increased to leverage sequentially than cost as faster and reduction to and transformation initiatives adjusted adjusted operating $X.XX. strong income three Our EPS XX% revenue contributed

a growth closeout out performance Electronic at original and with margin adjusted one year fiscal operating initiatives book-to-bill revenue revenue and we expect on With and we Americas with the this across and EPS Our build ago. sequential to laid gaining regions, Components our continued traction growth strong above the quarter expansion. turnaround of another its region XXXX guidance

I'd on Turning value that update an future, forward. will four to of the business like pillars provide strategy drive shareholder creation Avnet's to going the

recent specialist end-to-end Farnell; The first ecosystem design-focused our Hackster.io; pillar Premier our small solutions provider Innovation. order is and unique including acquisitions: manufacturing strategic Dragon

composed communities product, of and unbiased another brand Our sequentially memberships an feedback growth can not XX% XX% X an suppliers Hackster.io and represent they and and an that year-over-year million important nearly but to of communities awareness provides elementXX to Online exposure, quarter credibility. delivered engaged increased members. becoming community more insight purchases strong that more as only improved are as lead

democratized that online been more design and questions. and process provide technical can has engineers, use collaborate, communities. a of the problems but the they communities Internet and just information, The For product than ask forum solve by

meet seeing We in also of match significant ecosystem. we're After needs. the regions, efforts different across now applying three bases continue customer all to exposing to make to progress our analytics customer segment our our realizing and success propositions synergies businesses value advanced to revenue

to the business. potential We use core our register identify also this output grow components our to analysis further with to opportunities suppliers of designs

regions. from Europe, approved million of becomes from that registrations of This we Farnell we resulted one in was that out design which already Premier $X every as expand roll a has out tested in approved far, these qualified other believe effort, So will pipeline design two found an tools initial we leads registration. in

as to on Premier ecosystem. These ways we we from to combined end-to-end Farnell add process, customer leveraging in seeing trading we're the been our digital enhanced early also to drive and websites. few new just base the from Although of our features the unique and our higher-margin Avnet a inventory buy revenue growth functionality customers that represent products have both success allows

pillar, second multi-year processes and of digitize effort tools to utilize a our represents advanced performance. our more our of to digitization Our improve business business the analytics and

proof as digital revenue is of to our the a Our from rate million. prior end-to-end of run having we're impact annual X% the $XXX point grew ecosystem quarter nearly

We systems of new impact commerce margin lead our expansion. a and and pricing growth have tools revenue demonstrated generation, that the and of areas in also trajectory quoting, tested the positive CRM, digital on

region, our business. Americas a system performance new able workarounds than seen customers improve feedback As and part digital now have expected improve as to as accelerate the of of better to the revenue improvement higher promise indicators evidenced we system we in the and and we track as by applied real transformation current software we winning shift well upgrades as We're key from suppliers. the performance the realize to in Many focus have tools growth shown to experience. productivity, margins, tested customer a our

systems can enhancements and growth margin adding that expansion the system. on while globally As Americas in a focusing accelerate result, we're

the areas investment we global in CRM. scale on of One a will which increase is

committed and investment efficiently base. capabilities our systems growth We financial by the we priorities pipeline we we performance. provides We in believe win across will we our quoting accelerate and rep. have growth globally accelerate is solution data our of and quickly CRM to will sales allow and end-to-end new processes have that In share and it have include Other visibility, to entire a other order leads this which customer with efficiently critical pricing and business, to and points including evolving tested systems system employees more key more globalizing accelerate modified and to our areas so ecosystem, characteristics, to With produce provide reports our us tools ecosystem summary, to that track cloud-based performance our business opportunities the we and more are software. deployment orders.

focused on transformation while segments systems of processes deploying leveraging third focuses developing strategies talked our best-in-class the also Avnet on solutions. Our just strength that new high-growth goes the It global initiative, strategic pillar, by I of beyond deliver introduction go-to-market new that about.

of the we that Consumer which At Microsoft focused Internet has the distribution One data Show, of for introduced hybrid our strategies platform, and Things. growth important our transformation utilizes IoTConnect Electronics enterprise-grade analysis. Azure on the the initiative cloud is

quarter, solution, as we a to properties seven the Internet up experience a highly secure IoT secure that their to all first on This edge Microsoft Azure chose will of highly By the incorporates with who from microcontroller the partner meets ensure solution. all that and product built solution Avnet new distribute the relationship their device. Sphere connected a This connected this incorporating secure into safe selected developers Avnet's combined manufacturing in and be will security ecosystem. to services, market. chain design launch further our by important evidence bringing Microsoft for with using end-to-end solutions work is cloud. generation able across system to this the value of our highest they for product when of expertise their the supply When IoT of realize ecosystem next entire when standard suppliers customers Being can deliver way

pursued AVAIL and bring transformation management resources is expertise promote streamlined how technical alignment a in key we Another rich our growth tool. deep FAE to technologies to of focus our In year, more and in have and initiative on we've and customers a the manner. globalized we suppliers past efficient

engineers. to engineering Our AVAIL trending of have increasing that Key common indicators address up. and continuing tool, is block been of track which the performance challenges, the solutions expand number engineers our we diagrams provides efficiency

this many key awards more suppliers as The three each by our to captured been the have dollar quarter. recognized We reach in breadth with growth suppliers value several those content with accelerated we with design. two of of has and times marketplace

We also added another our XX to additional line three. supplier expanding while card with franchises coverage regional

suppliers providing fourth paths growth pillar industrial. via cost on the targeted is of rightsizing of multiple the and gaining focus including in automotive markets Our into our more strategy The traction Avnet. structure unique end-to-end market ecosystem our to and translating is opportunities

practices in annual have As improve rigor the we By on sharing and our working velocity streamlining we realize savings structure you to apply centralizing $XXX we expect calls, process. in capital and functions. XXXX our working we manage centralizing free decision-making, expanding prior by capital. fourth pillar of same fiscal told the to to We're discipline and cash up and best how our can million

person as customer invite success of of on via York our strategies to demonstrations will the everyone as New in detail I'd our to Investor our in on We out Members more and reach XX well to Avnet providing additional you or initiatives webcast be stories. growth team please department, either June Finally, need hope if and leadership City. the can join details. Relations like us Day you Investor

to like on our financial turn will to Tom? I'd the over Now, Tom provide who performance. color more commentary

Thomas Liguori

expanded Thank Revenues year-over-year. grew hello everyone. Adjusted us. positive very quarter you, Bill sequentially X% and X.X% margins A to X.X%. and operating for

EPS flow adjusted operations was EPS quarter's generated capital an reduced reform $X.XX. seven significant GAAP was from a shareholders. working tax from returned charge, impacted last increase to We million $XX by $X.XX, impairment of million cash $XX net and days, and While

Let's operating details. and in grew with contributing. revenue review the both X.X% groups Year-over-year, currency constant X%

Excluding XX% EMEA currency. the another constant currency. Sequentially, growing America revenue X.X% improve in impact previously delivered continues of in growing supplier XX% the year-over-year quarter constant changes, increased announced X.X%. to sequentially strong and

normal to million Selling, constant the general seasonality currency, year-ago million Chinese increased line of foreign with impact in profit changes from million compared in Farnell the New is Year. currency increased rates. Both sequentially, and Gross X% due increase. Components to quarter. which expenses prior-year Premier Electronic and declined contributed in primarily $XX.X the to $XX administrative the Asia exchange quarter X% $XXX of and

million We $XX to Sequentially, on due cost to Excluding to employees. we this with reductions expected in of the achieved currency movement, track SG&A of the well-deserved fiscal target goal our and decreased Of quarter. movements in million QX. and million. XXXX is the SG&A rate run volume-related XX% million of non-executive expenses to measured year-ago bonus the on from amount, remainder $XX is Year-to-date, $XXX a basis. remain a currency remainder increased due $X.X

of As these adjusted operating percentage points efforts, a expenses of our quarter. year-ago as revenue compared a declined have XX a basis to result

the XXXX. goodwill downward goodwill with the million was region. this we recorded in Now, charge associated continue quarter. We trend The to impairment expect Americas $XXX of a fiscal in third

As of our planning expectations Americas. we for part financial the certain process, adjusted

we result, concluded a charge As quarter. impairment the million third was appropriate the $XXX in

operating an target and is a expectation. X% change in to impairment to not, X.X% committed our We our operating margin of margin manner, of the are in any indication charge

Excluding million the operating restructuring and $XX adjusted quarter. December expense, or income $XXX million the of XX% impairment from charge increased

X.X% from operating X.X% quarter. in second The improvement was third basis a quarter the XX point adjusted margin of

re-measurement Our perform line, income Premier continued dollars. operating operating currency includes to other XX.X%. the well expanding balance gains Farnell sheet from items the business of quarter this favorable margin to of Below million U.S. $X.X to margins

last we've legislation, was of recorded a of our better Due the basis XX the tax On to tax the XX.X% tax rate range. points an than of related guidance primarily operating transition reform charge to million tax on adjusted by earnings. $X.X tax Our $XXX recent EPS midpoint the quarter, was improvement foreign income share $X.XX a the $X.XX Of basis, were substantial ago. third in lower quarter year $X.XX and $X.XX million a contributed EPS, the other $X.XX per and rate. favorable the of from

items, $X.XX, midpoint these was Excluding guidance adjusted the our range. two EPS of

We availability the the we need level days ended in $XXX balance working ratio XX credit quarter arise. Net of the repurchase by lines from leverage debt to improved or business. reduced quarter. the our quarter seven operating acquired the should to our X.X We and decreased stock the Technology days this due while Solutions quarter sheet, Turning improving lowering management. $XX our to Tech maintaining inventory of interest cash. of capital divestiture million with in flow objective of expense million with stock. our used activities Data was of $XX million $XXX sold primarily these in third from $XX we Cash which the the We million to million shares million proceeds March of

Data generated stock the remaining in EPS be We $XX by have million Entering XX%. increased increased from remaining working approximately the of and under declined X% cash in and capital quarter sold we the quarter. quarter, adjusted days $XXX we operations. Tech will share by repurchase have seven authorization. the $XX sequentially which million fourth million of Net In summary, fourth third revenues current

to in $X.XX to range revenue our per billion forward May of June X. share. EPS to billion. range be we $X.XX listing expect One $X.XX this Avnet's quarter, sales last adjusted $X.XX Based item, on diluted we be to effective Looking to we are to expect forecast, the of stock changing in the Nasdaq

Our be continue AVT. ticker to symbol will

Square, Investor on XX be Our at June in Day will Nasdaq New Times York.

event. forward Following presentations, aftermarket for management at We will our With the by you lines Q&A. followed the look all reception. we an let's Operator? that, a to up bell have seeing ringing open

Operator

you. Thank

Suva question. with Citigroup. Please first proceed Jim your with Our with question is

Jim Suva

Thanks need restructuring, about very and very did why sale that bit, more are between the looks margins that you I like it yet is that how a growing sales the the because were is little but do of you down. we to Can out it business are operating us just figure think sales bridge you To year-over-year, TS much. very, of year-over-year? year-over-year gap down should impressive, help year-over-year margins are

Thomas Liguori

Sure, Jim. This Tom. is

So, we a feel range. did margins to affected basically, we back is supplier good that What things on about of basis, this have year-over-year and X.X% very that losses nature. we're the

continuing the lot have historical, so Target much that I about we're relation the opportunity X.X% We're continuing margins. have back. that's pretty remaining going said, the in mix to a for Americas way we put get of before margin revenue X.X%, revenues you expanding efforts. Premier to that's a of Farnell. reduction If we're to cost think that's our and losses, of with better, margins these to X%, remains higher better supplier That and

that hope answers question. So, your

Jim Suva

more can down how you is future a your reform follow-up has new impact? tax you. think the the think probably understand help CFO a about, commentary, we on benefit that or tax I so reform, that Yes. a type for took see the go And should will then happened, Avnet for tax quick Thank rate about tax there charge but

Thomas Liguori

better is But go that. it's let's forward the XX% think is of to fiscal into making the do down rates General that and fair have honest, to XX%, the next that. my take job a really That's of our release at so say advantage we're through of guidance world no. Counsel while to I I'm while question or in compliant to and working I around year. as sure should our the take and the That's come at challenges, be Yeah, this we press one wisely. XX%, good being right? we say midpoint looking we be Tax

Jim Suva

much Thanks details. for so Great. the

Thomas Liguori

Thank Jim. you,

Operator

proceed Singh next Bank Param Our with America question Lynch. Merrill your of with question. with is Please

Param Singh

Guys, my you for taking thank question.

margin at guide, to sequentially your flat guidance quarter. June look I when So, operating be into implied is for the

Now, how could the more target lower quantify we little margin have end proceed you a flat here? is coming from improving. to Why benefit have from be margin guide? in And that X.X% your some range incremental restructuring, you bit, a do Americas helpful your I If of that'd and then follow-up.

William J. Amelio

with and is Yeah, okay. second part I'll the part. start comment, of This have Bill. I'll first the question the

Farnell, we're the we to the things. X.X% there, the X% a Tom a was to future recovering, couple on which last mentioned few question in far guiding way As as Americas add get and Premier I'll still things other

have help a transform qualify new way in we position. better plenty that efficient market, will company opportunities us of CRM that web, the inside digitizing more extremely to go cost us we the an We're work the So, improved point allows of in that elements essentially as view the which Tom? the to also more makes business we margin OpEx the of the to get a that the way well. is with and pricing, we in to look of digitization on and the as We're both point of of in lower going continuing to with view. tools. our way continue more effective is process to company The manage the how makes and projects us efficient serve more model cost leads, from funnel we well

Thomas Liguori

continue cost, M&A to this right, has to to the happen leverage apply business, front-end the in up importantly, performance and in we we Yes. and higher-margin business, that EPS operating and and more growth of EPS is is right, the have the in said, quarter, on midpoint available here, ecosystem, opportunity margin, more so That cash, is reinvesting had And some buybacks. growing through of significant improvement what working and capital, and the guidance revenues, working the leveraging. a of and free similar tremendous the the step-up, Param, cost accretion a

quarter, the we're cost we coming progress doing mix, in good revenue, to our and of want have a outcome structure revenue on quarter want in that sheet. every operating and up So slight our improvement and those discussions going margin And our said, on to to that EPS. by (XX:XX) and we revenues, making to be every balance quarter focus areas, respectful That need you (XX:XX). help cost we similar very

Param Singh

Okay.

is of you to how Americas longer being what think when and guess by negatively much in do company capital system capital system the So, and the the that I kind my expect your to level upgrade working get follow-up, as can you you is working impacted ERP the of term?

Thomas Liguori

Yeah.

back. all have increased. impact one the sizeable in or fundamental. at just don't even or It's we know a That less. of no we is working careful. the I a So, been levels. But be inventory. There's news has at to It's in is over ERP two it's it's that that is really three build-up hey, and implementation days an are XX a Part high our days today. historically going a been had the items Historically, it foundational. good is or specific company to number. capital get good XX it also, this of we system on said, But, why want There's Europe inventory

days, capital that's million down ten our to it's the putting time, and chart, phrase day get worth We every the our items We one million. we because we how $XX get and million we a working payout. $XXX $XX a day have have a at team. They actually action have internally, They're action timeframe. waterfall And items. get together do

So, maybe years, two I three range. would historical say the levels over over in years, XX-day

Param Singh

on just to on working ERP that? do And project Okay. expect clarification system that and When start a Americas. the you timeline for the in any

William J. Amelio

That in Solutions meantime, the in coming and significantly we to system seeing with to of down and going able implement midst current more in first, the more stable become we're business and already We're business and follow our our the the rest us Integrated the be allow plan get already will be following. We're helps the that see as the of de-risk then up the core. efficient. program to game inventory AIS first

Param Singh

the Appreciate it. back I'll Great. Thank you. queue. get in

Operator

question next Colby with with Adrienne Bank. with Our question. is Deutsche proceed Please your

Adrienne Colby

taking question. Hi, talk thanks hoping could the my business for of little more about I the your Americas. in turnaround a was you bit in the progression

the is single-digit when the region are return headwinds seeing region work growth of declines, us that the for past most to progress a Given still year-over-year And year-over-year expecting the and mid you've the forward? you to seen can have you still highlighted do on the remind going you you've where region, where in to basis?

William J. Amelio

talked Last watching system at look we're place. anyone discrepancies, of you pick are time disputes, levels have current and in saw we that pre take improving, live with what of we were key indicators the, all the together, with ship if in in fact, the – and associated a some about terms we of performance in orders have debit all going Americas in system, negative customer I that the

were that seen We've the stable, a when lot demonstrate anecdotally we'll also lot We've happening is which as we would direction. and see in good quarter-on-quarter both that. suppliers this of another – Americas, a our right loss also are we're Americas. that in in things compare our grew that's sequentially, actually awards the that that we're from we those more taken point growth I'd quarter taken become say out, going better. past say customers won So, to robust the the again you've out, indication starting and a from that out metrics you when going

actually take did you year-over-year, losses normalize if grow. prior So, and out we the

Thomas Liguori

Next question.

Operator

Matt next proceed Sheerin Please is question. with Stifel. question with with Our your

Matthew John Sheerin

Thanks. Yes.

couple on or you more looks First, like least color seeing demand you're trending a regions. you're look get guidance, But, at at regions. at above looked your some of seasonality. I was seasonal various to like if in of It hoping the a more in return environment to

of times metrics? seeing you could about what and you're talk lead that terms those in book-to-bill, kind of So,

William J. Amelio

lead the X.X. commodity Yeah, sure. each solid, but pretty about Phil in demand board. general, be still environment we're are see region great continue that and still color. solid are, see we and robust more There it's of expanding to some like all is over appear across course, times and stabilized. still give Book-to-bill a more stable to That's some still us in individual regions, I'd we demand talk

Philip R. Gallagher

positive, to mentioned X.X couple Yeah. at It's the that a so the positive doing board. across book-to-bill. share. well extremely Hey, and Matt. for very industrials and Europe Matt. with Thanks – of gaining range all extremely it's continue think we comments. or and we're continues, region Driven not having is it's divisions I we we the Europe Each healthy at really a quarters, minus or feel XX and there a Europe Europe. automotive just Bill in plus question and book-to-bill organically, in crazy, play say it's strong healthy the

steady. been has Asia/Pacific

seasonality. mentioned You've

the with some the get So, Chinese you're the we of coming Coming results and out quarter, the given quarter. drop-off New we're actually pleased on – correct even Year out December March the you take typically of of that.

well XX as times, traction which the be mentioned previous you've Bill's in great regions Net we're terrific. three great. bit corner, discussed see is been that starting get response, our feeling feedback. question, Promoter we some cylinders to Bill here and we've with all in really at a We've back and our very continue got of moderate hitting on is starting to the really the pretty a depending on is passives of comments the turn little really which XX-week kind memory in or to mean, depending Controllers, The in tight. XX touched bit, And an troubled out still still anywhere chain so that lynchpin times X are the any. uses that's area. if one, controlled XX-week issues, really, are bookings, some still the really there. bit. helps, Hope Matt. on Americas in the really, is on supplier Americas all much A-word you customer bit, far which area anymore, that timeframe, on Scores, lead nemesis in supply will As resisters and growth Nobody of Matt, to home you're been X of we're there We're the but it. I the has caps confident lead feel the cases, the if our will

Matthew John Sheerin

sequentially at absolutely. of following flat after is quarter, still I look Is or mix, on I I December the other that you out, to would Yeah, gross just costs why is And also be about is the flat strong margin the it the that mix to margin question, operating down with very that probably the when it? there that think answer to question Premier up would think your Param's follow-up just down the sequentially Farnell. and think ways look is because and have Europe at way coming

William J. Amelio

I'll we're make as quarter expenses quick are of you've two as the of pass Tom. in to seen. well that's backend reasons the loaded going on things: and major a richer to kind couple we're of A next comment more the versus why quarter guidance one, linear it getting and a our mix Asia in have

Thomas Liguori

September to it's is I fiscal and which December, for think expect that of the our through this quarter year And improve. to we Thank so Yeah. a the Matt, right? margin to you, say metrics others continue fair operating EPS and And first range, Bill. quarter, first, it's

William J. Amelio

our met one and of end a important I'll one every out make gave comment too. guidance, that note Last the gave guidance put that now, exceeded in to leading we year the guide place at we those and ago. year year when other it's guidance the we April, full points or we of

I company, again. demonstration got that think important back momentum accomplishment a an we've that's for the

Thomas Liguori

total And mean is on somewhere we our it's quarter our last Bill, quarter. you this again if to raising follow were fourth I guidance, take year. up

Matthew John Sheerin

Yeah.

Okay. Fair enough.

lot. Thanks a Okay.

Operator

with Our with question Financial. next Tindle your proceed with Raymond is Adam question. James Please

Adam Tindle

you. Thank Okay.

Bill or a know, for a this margin Americas, key improvement in obviously, is question opportunity. focus is First I Tom. primary

improvement region margin, the and margin in think are half I to in operating was in region. operating historically we You've below currently that? sales magnitude like this is talked in the about of us you understand help closer the there America any Is X% sequential could which historical once way levels? type this

Thomas Liguori

I one piece information, We're That said, improvement. about like good a at basis news. more significantly of quarter-to-quarter, below. give really can you This XXX we're lot points do. is we there's

William J. Amelio

I'll more Farnell of there we – to still there. your possibility to well. Farnell Premier mix continues thing we forward one margins to have to Premier better expand continue that and going see as as a be

to be in more to of that course we an So, the helping have able mix more with work and that's with out take efficient opportunity then getting the digitization, all costs. we do the ecosystem, project, transformation

Adam Tindle

to impairment. color Okay. more And wanted for the Tom, I on ask

is to but goodwill and sense just which other today all of to market rest XX% on and impairment the could Premier XX% of you strong Farnell intangibles going is intangibles to I and the a would be indicate ex-Premier seem risk think, additional Farnell written because about results, the insulated seem updated based us the goodwill down? of Thanks. give about of

Thomas Liguori

Yeah, that's question. a good

it we're of in and test. related associated is So, acquisitions, related this that as expectations two is changing to to to with prior-year really a the first it Americas pre-XXXX compared is the all, goodwill

that right? the impairment to which do assumption on that conservative we'd range. X%, say, So, we our better, you in a Americas assumption to want if better that is the we for is assumption of the Let's even use know total same X.X% in do I company target

tests. Farnell, to to continue on they're and especially This do better don't continue performing favorable You have a Bill's any Premier revenue, on end, do changes we'll And other results and at to, our goodwill foresee nicely. from material year-end. look we they really Adam. they to We continue point, they good you anticipate other when year do very point, as better operating margins

Adam Tindle

Thank Okay. you.

Operator

Please SunTrust. with with next William your Our Stein question proceed is question. with

William Stein

follow-up allocations Great. question. the Thank in It clearly we earlier think extended the passives. pretty discussion what a taking about your for is times lead my on you on going

the these but that's tell can your to how situations, margin Oftentimes out-earn you you you affect color Thank maybe not you going expect appreciate forward? this going So, you side of forward? is. shortage from happening to distributors us sort business it factor provided that that's affecting and are earlier, progress it able do that the maybe how to in you. expect How from today,

Philip R. Gallagher

Yeah, that this two get increases, we're looking we of us appreciation customers it lot raising is some a based inhibit I ASP the from of of on to Phil. Yeah, so answer Thanks getting some prices. contracts One for cost think the with A parts I'll you're that. response. question. have is

that the we some what So, utility core that in of our business, business. but our to an have Yes, of part board. call in business, the time-place raise absolutely I'll our, absorb we across it's not do prices

it's no answer. of kind So, a yes and

engagements where not hold So, chain we part able up some of obligations There's so we really the that, are our bit do of the okay? question it's We a other seeing to you're relatively as get that, some we products have some asking that to shipments like in supply is little in of And It's to more, contractual business customers. particular. but we can of areas but be other some small, material. have it. the that

William Stein

a capacity can materials small parts? the are of or you that through sort to the year hit growth overall in on you enable are rest shortage to enough because of a And shortage adding just you of concerned the wall the of grow suppliers number of

Philip R. Gallagher

suppliers' rather I'd Yeah, capacity. the comment not on

not into across that's that, the So, insight have we – I but board. a some mean,

I see hitting us constraints of think the important of an laid product targets as question is, we've okay, part inhibitor, we the more don't out. our that

William Stein

Great. Thanks, guys.

Philip R. Gallagher

You got it.

Operator

question with next is Longbow Our question. Shawn with Please with proceed Research. Harrison your

Shawn M. Harrison

Hi, morning.

Thomas Liguori

Hi, Shawn.

Shawn M. Harrison

Hi. little Devil's I a Advocate want play to here.

sequentially knowing the I'm positive how the weaken, of you range? the sound guidance the trying wondering of to so what So, guys take is to pretty you like I'm end could weaken figure June get to quarter? that range what upbeat, to in all guidance end down just would for out that you the within bottom could bottom regions, potentially the book-to-bill

William J. Amelio

Asia is reductions Well, loading to that of will end out the the expense two as the come towards back-end of One regions earlier. I mix shift well made as points quarter. our the

why. that inside two quarter. that. run to year won't major the full the beating also we get the reasons year guidance I a again And are we substantially full pointed So, ago, That's gave rate we

I also. that's important think So,

Shawn M. Harrison

deceleration but billion Bill. from Sorry, solely on a rate bit third the your down anything solely the sales in just I meant because $X.XX suggests at you'd quarter little doesn't quarter, sound front, sequentially, the like sales. fourth a into bookings run it be

William J. Amelio

We're correct. that at deceleration not that's is with number. kind and concerned Yeah, to sales what We of now right respect hope we're guiding big here beat to it's it.

Shawn M. Harrison

bracket we on Okay. bucket, XXXX? help that there know Because OpEx be could should inflation $XXX annualized in Tom, we're be as you the I'm me in savings that if exiting exit seeing? was $XX be year-over-year line. quarter, I million of potentially but on hoping offsetting on bridge there, of I the what the a you have will that the will OpEx fiscal savings to what any million trying that be basis but year-over-year basis would

Thomas Liguori

view percent we fair. improvement. this revenue more I mean, would point it talked I why inflation Well, roughly the million. think about That's I – is OpEx basis is as to was equal XX Yeah. as $XX of and this a and

these to way goes I'll to these I lived it's something are examples this reductions reducing a bottom In costs, is and this cases line; cases, through it So, reinvested. view quarter. that in initiatives two the you okay. are some cost are, give other

I online function HR even they took Bill paper labor-intensive we another my saved Our result my to to information, saw I started, the put million on went we and a I before of manual had very since thing all of first When said, of couple day, system. CRM information, started department an process, part I And I my online. We as took initiative the human our that tax personal and system in dollars put benefits. had a more it and my as I reinvested, globally. put resources and in

showed areas to The things some is non-strategic investment bottom reallocating line. of from drop example the very market-facing activities. things Solutions well results. good the into nature. moving They So, us it's It the positive, presentation them one We costs our Integrated and visibility from pipeline a from was had that and to a taking group. CRM of the on with the good strategic our, of very

time line, we're our So, though part percent of these I are of a which initiatives good that the we of see should Over that part cost numbers, these Does clearly initiatives as leverage cost reinvested. of would as help? getting look out drop which get initiatives. at the bottom revenue, the to

Shawn M. Harrison

quarter fiscal remaining if expand quick just that that that does. you March It then XXXX, you enter XX year-over-year, the should points it's synergies? because you'll into a XX% I the so than the saw Maybe more in basis the could as have of clarification,

Thomas Liguori

Yeah.

Shawn M. Harrison

Okay.

Thomas Liguori

doubt. a Without

Shawn M. Harrison

Okay. Perfect. Thank you.

Operator

question your Please proceed with Delaney question. Our with Sachs. is next Mark with Goldman

Mark Delaney

Yes. the Thanks taking much for very question.

help question bit process thought expense and more terms of First is of spending could the a picture us you think hoping about in big company. the the

You're same coming cost-cutting Farnell, million and some the that Premier efforts the investments small toward the $XXX digital like into making at cetera. end Hackster.io, time like batch program and et of

sense just there helpful. cost-cutting of the rate other guys you would put next maybe some year, thinking place of expenses of may large you to those into you investments even areas? be start growth increase of in expense about think levels towards to programs So, sort any run want want or So, are more

William J. Amelio

this a improvement continuous Yeah, is process.

place in transformation you We know project which about. have a

help We every the one going day margins X%. to X.X% to will of it attack and to efficient continue to that our ways that's to and we're and that more expand structure cost get get each our

Mark Delaney

prepared to what the question you a is environment it little And your the a have some I those towards that on about of the executing and about go that margins. some conference incentives opportunities? Avnet Bill, Okay. and bit talk for remarks, call, achieve. some place little Thanks. incentive was margin in suppliers in of try like Can December quarter follow-up capturing put and and bit a for better think In how you doing Avnet doing is talked

William J. Amelio

could question, What not the mean? you do clear that? repeat you on I'm

Mark Delaney

December if suppliers talked call payments. I You and had gross Avnet and in put margins, that goals, think in got quarter think, place conference incentives you there certain were think, bonus achieved I some I your the about certain of expanding type of kind

William J. Amelio

yeah. Yeah,

Mark Delaney

just could about. you If talk

William J. Amelio

I demand demand got was That regard creation it. our continually creation. and to in improving

they If up. all you creation metrics, demand our at look are

better as our board, the doing up, across is, you then are are know, higher up, margin significantly we're and registrations us. a wins which for Our opportunity

So, on a appreciate card that's a lot reward line us for lot of that. – really suppliers our of the that and

Operator

Research. Steven with is Cross with with question next your question. Please Fox Our proceed

Steven Fox

Hi, in good I you're last had offset some was But the to got if adding year this losses the of you just over can covered, help a a of sense morning. in for off. back terms I are suppliers us can what apologize you've or has cut give do how in and growth? so, or would year-and-a-half sense having so you the for that you anticipate further significantly expand give last that the where us cover to process, to happened you

William J. Amelio

of overlaps a always give on more A little give bit couple and color evaluating little now, I'll to detail. gaps. a we're Phil we things, you have

supply year, gaps, backup key that some lost had last when this again. lines made we we So, than obviously, more but

the executing earlier for bodes and I that metrics us So that's out why against the right in in we the have are put the in direction, future. all going right places in technologies well creation place the and well demand really we're right pointed

Philip R. Gallagher

how is doing? good I Steve, question. Phil, cover Yeah. this, I didn't know this it's you're a

good working as good the us, back and to our win the news to revenues for XX% okay, right losses, a which XX% registration wins were up, much So now and leading indicator design all-time roughly highs between of design Bill are losses those said, make as we're pretty at is business. really

focus and we Bill with two always line positioning and we're our gaps technologies overlaps, the line talked The suppliers, or got want at the a lot we our of suppliers. progress area, covered card, suppliers still the always that's having, have great mentioned three the with adding while now, that about, Much we're and sake a to these card suppliers. So, as Bill looking of add particularly us, for adding around it's the just okay? future in for but as we're we for the to and of future, technology, good good such good that should the strategically provide that move the for want growth tomorrow not IoT areas not don't suppliers, certain us wireless, for needle

Steven Fox

volume expansion is the Farnell, helpful. of cost is synergies, just the mix there in way you've think just I Premier what's recently, Yeah, about just to Premier Farnell you of then color. related, margin on Thanks. that the that's so seen appreciate just walk or is the margins? piece And sort easiest it it through there, of can sort

William J. Amelio

of to ability cost able cost. us as to supply web that. is are efficiency of into the to be get adding we All higher-margin lines do Premier To System the being get which well to margin our continues improved the Farnell continue space of us, Premier take great. to better, We've performance some all are these on speed We've structure, as the continues in more things new them better. able more capture Farnell, above. added also lines into supply

Philip R. Gallagher

not didn't been they with of between the them introductions get core closely work some add synergies new to into them Premier and really Bill core, I Premier to the as with, the And lines Steve, call overall, playing. customers have EM, Farnell and the okay, some which revenue into to they larger work traditional can community that, well Farnell, core then before the leads coming business our we new help pointed the is component as and together as with Bill? out, where supplier from core, the add have the may product team Premier

to is suppliers. revenue positive So, real there as some well our our really which too as synergies resonating good customers

for there growth. linkage driving tight real So,

Steven Fox

Appreciate that color. you. Thank

Operator

Our proceed with next question. Lou Research Please with your is question Pivotal Miscioscia Group. with

Lou Miscioscia

great. Okay, guys. Thanks,

flat at Obviously, first be consider get the which you're is normal so I what do to that going you midpoint, XX-plus I the don't bit. obviously, know, the just to growth June like into numbers years So, suggest have question seasonality trying it looks to understand going going that a back, you some and, be prior quarter?

Thomas Liguori

to up, normal X% Yeah. historically. out we zero Technology range X% slightly Solutions, to to to X% have Seasonality and adjust it's

Lou Miscioscia

Okay. X%, Well, up XXXX are Electronics Marketing. in XXXX my numbers to just

just TS, sure include that why, So, not numbers. your not does

of if Okay, next could, going have I I question mean, did there? affect if that with any ZTE? some changed I things anything it, guess, on

William J. Amelio

us. United some our in States took anything they going do government them actions essentially impact de not results, and have against whatsoever any minimis when on several ago the We is some years forward had actions

Lou Miscioscia

going nine systems with I'm even off, a months, the are be when it you're and we that – steady to just to visibility stuff or your mean, drop in at IT couple to work how some in months, have six any XX, through great. continue sure I'm going you Okay, as as The a to I of these see actually might material maybe – consultants invest just things? much not general more a curious spend on to of pretty would much state IT systems, as

William J. Amelio

pointed doing give going us a to out on some time. out current to that's I be shave the company, do the as be efficient is in the with want more to is able Investor about was forward things some costs get system you taking questions In over we're spend roadmap now which going the nice that to to expense IT of our the going to Day, We'll to out going place and one allow with answer respect what yes. of earlier more of we're I

Lou Miscioscia

Okay. real seems things have side. ordering I component just this cancellations it the that any quick, on, double going on, Last but from given wasn't on sounded one, been tight? or Phil going guess, It

Philip R. Gallagher

seeing out really from are in quantities seeing that. our have Yeah. sharing about customers X.X book-to-bills our seeing but and of coming X.X MRP I be X, an good from pretty visibility in were by of at which it on we closely, mean customers, sharing, watch MRP not that'd think for they're so business now is watch not that, Phil. we yeah, they good. very And to the range I not healthy the if the think issue, this done We're inflation that. Look, is what XX% We inflation, there. we We're is

of on get now. daily track – time also percentage right you would expect average and and pullouts cancellation as more than right they're rates bookings. We the our a pushings all and We

So, anything see time. seeing in the – there seeing any would at this we of it first it okay, in regions, we're we're and not not point

healthy. think we it's So, pretty

Lou Miscioscia

all. you Thank Okay.

Philip R. Gallagher

Thank you.

Operator

remarks. no time. over to and questions there Vince the this back Ladies would gentlemen, at are further And I to closing Keenan turn for call like

Vincent Keenan

Thank participating for you in earnings our today. call

Our at third format quarter PDF under downloadable fiscal in our www.ir.avnet.com, be the release XXXX earnings can Quarterly website, press you. Results accessed section. Thank

Operator

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

this lines your disconnect you participation. for time. at may You Thank your

Avnet (AVT) 26 Apr 182018 Q3 Earnings call transcript