AVT - Earnings call transcript Q2 2019

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Operator

Our presentation will now begin. I would now like to turn the floor over to Ina McGuinness.

You may now proceed. Thank you.

Ina McGuinness

Thank you, operator. released for Avnet Quarter Fiscal afternoon, XXXX. of this financial the results Second Earlier available Investor on the is release The the company's Relations website. of section today's website. via A can as earnings on of the section presentation well will copy of IR Avnet's slide release as be link the accompany found the in the that remarks

this obligation be statements the new date of Bill only and circumstances after results will statements and with release. conference forward-looking company such recent or most statements date could of forward-looking forward-looking that any by presentation that update the SEC. its Lastly, statements the no some of the not in containing Today's undertakes or regarding publicly predict. the contain call speak the led differ contribute information as supply to materially here information Avnet's Q&A to over are Several are cost news Amelio, release Avnet's to risks, Tom CFO; filings of from in call the uncertainties, is Form those Avnet's also These participate forward-looking Gallagher, Amelio. Bill? turn assumptions XX-K Bill described and to Global that, Components Electronic contained in guarantee could Liguori, of the Phil and are detail the statements. that difficult let on performance in this actual company's and with the involve to These section. XX-Q President, call differences And such and me CEO; subsequent factors today and and the

Bill Amelio

place a We a of everyone. strong exited year financial Avnet. ago. I'm for Ina, pleased than afternoon, different to quarter Thank in you, calendar very XXXX another and performance good report

for starting off up earnings our and fiscal share the is our adjusted digits strategy the growth Revenues diluted to leverage commitments second across made our is June. transformation Our across and two roughly we Avnet unique on strong were years solid double quarter from at to ecosystem. pay initiatives healthy up remain Day really show ago. globe and the per with execution ago. from began Investor XX% a meet year We last operating our continued a we to track were

Importantly real slowdown my our I customers current it’s remarks in a conditions today. and few and that share will our that has of itself. and suppliers Avnet examples Asia momentum There's brief are mixed. marketplace correct will in with a definitely now in unclear when The decidedly the

that of remains with has doing growth and opportunities markets even which However, an western unit Europe healthy, of are and continue is areas strength. but a moderated, Avnet's the position us. for driver Americas vertical several in Defense very improving. Transportation is the transportation is area to increase, demand Industrial where steady aerospace well. is is demand and content and strong

I'd Now on laid to you like made progress we've our give you this the update a quarter strategies with I've out brief to previously. five

past is up in Components has core from win This and region second of pipeline. which quarter quarter, consecutive dollar stable achieved in a forward and ago nearly first and healthy design growth execution In region, momentum. the year Revenues area a X% an Americas our The show indicators good showing quarters. recent is our Americas now dramatically business. growth, QX accelerating our improved its were Electronics

Europe Americas done performance. solid on the outstanding region getting to restored, remained new up And more an great work has has very in been increase again which customer and by opening is back doors importantly Our the for and with growth I a thank ground Americas lot want significantly they've growing evidenced the confidence the Net satisfaction Americas come. that and supplier team there's for in as Scores. our collaboration. improved Promoter steady to

most in Asia, revenue, which profitable constant team has of delivered Asia Europe year-over-year even billion a to delivered clearly $X double-digit in year hit represents be though growth the strong of is current The team difficult region, our revenue slowdown region. over the and In the to a double-digit Our increase extent currency ago. slowdown a predict. continues from

quarter, saw order accelerate we which very situation calling quarter indicators progressed, believe our We're somewhat time makes challenging. the bottom the appropriately. for in the During weakness coming as captures Asia and we carefully monitoring current forecast the our

margin Revenues and passives, average. our corporate strong had over quarter. year business ago, interconnect, Our from grew very also with a a higher XX% electromechanical than

On I'm two regional and indications quarter in Avnet well. also new four pleased unique ecosystem this Avnet our our supply additions driver value global suppliers and card their franchises extended franchises that as as are confidence growth. front, the the added of to and These see line in of supplier a supply note to extensions

second profit-margin key strategy scaling Our our businesses. is high

cost Let start business a due in grew reduction was from There currency constant but Premier year income me X% in first Farnell. our almost XX% Revenue with efforts. the grew some operating to return sales slowing board quarter, single which of this past in are will and to growth, coming computing the to confident level. contributed growth are releases us new it but the we softness soon ago,

also dedicated of quarter, we Farnell. our higher is key look and assembly projects quarter more number is testing, global are Avnet’s prototype another revenue design supply margins our franchises. overall cost-effectively. and average. gives house new helps added our Premier critical recognizing part products Farnell Suppliers year a simulation, value development aligning highlight. service verticals, a our manufactured tested, than Premier services, designed, Farnell more their them Avnet's a in design design into growth our that unique of across customers underway get customers of revenue than access Premier how our the service and large ecosystem During with and doubled from ecosystem which product at Aavid, notable gets second proposition the capability and to number company a provides design with quickly seven at and If ago significantly

capabilities. digital our expanding strategy, key third Our

tangible investments starting to digital were Our benefits. show

next plan In have piloted where generation uplift. we the the improve capability 'turnaround productivity several we on entire specific to well this the that tools out For this We We're lead gains this and broadly invested future. as in demand tools have as example, examples help process. in invested rolling turnaround capability, in and reduction in a in significant also we've a result. strong customer experience more over as areas tie seen our to months. will the our times'. of more margin ecosystem We've near seeing specific together I share times

simplified. road Our been has IT map greatly

We savings, functional and process have critical such have areas yielded some management enhancements. in that tools prioritized simplification, SaaS-based data pricing and as

ecosystem digital customers on billion remain The stated our our On goal to this expand to opportunities. track opportunity. is the year. leveraging new we new pipeline expand continues fiscal e-commerce $X channel front, of growth and continues hit strategy Avnet rapidly revenue customer our through of and its to channel to our IoT fourth through e-commerce revenue

development at cloud $XXX an we're to gateways, are to applications with fact, in does opportunities first more end-to-end than represent This million. not of new adding devices, solutions customers. the our rate. accelerated half the that include IoT exceed that XXXX, tripled In supplying software, the and already of fiscal device In we are security, number market [ph] total three-year pipeline revenues

volatile bit of to a a ecosystem Our is effect. create starting

explain we briefly work mean? I me what First that with have partners Let us.

complexity can cost and capabilities that their You the can market, time in reduce speed to reduce cycle. see end-to-end development our

as moment. to leads prime Microsoft A So describe is a in and they of opportunities which are result. this sending Avnet a I'll example just

sources the customers. of parts In ecosystem are addition other also revenue given of leads list other now ecosystem exposed non-traditional the being the multiple are is Avnet's needing of a particular customer Avnet to reach This include within creating ecosystem. services expanding generated being our is a as to customer. of from customers growing opportunity Avnet's

the just take solutions closed ecosystem payments with the Avnet I'm supply of customer a provided designed manufacturing. smart which dollar for multimillion through that and leverage we to get types. quarter multimillion hardware supply health design customer service this Avid example company. Avnet then to is report For recently to decided cryptocurrency market. began valuable component for several from a We their opportunities solution the following: advantage our breakthrough chain cryptocurrency to accepting Avnet dollar to happy And a deal certain closed and

will acquisition We purchasing enhance capability also a Softweb critically our greatly by Solutions. ecosystem that and IoT made important

record services. This IoT development Softweb and solutions has addition is market proven to track a and data our a digital advisory bringing ecosystem. major to possesses AI, world-class

Avnet's offer strategic Avnet Sphere Softweb Microsoft to relationship now for brings want about first Microsoft. expertise the make to Microsoft's software, the elected AI, also cloud complete business, to end-to-end with and important customers. distribution and point premier a Azure was Azure I partner partner. an is our analytics necessary solutions

IoT ecosystem solutions market partnership As Microsoft a is its help IoT and to their this Avnet's Azure capability faster. customers result leveraging get of now to

Starter from great significant is Using orders to and Azure-based with platform, We and solution of example design customer connectivity Avnet capability Microsoft have engagements a cloud received predictive coffee Tier directly Azure to we've machines. and and Kit this partnered brings X that Starbucks. Microsoft Starbucks the

up shipments leveraging and just secure of the next solution ramp and to ecosystem. continuous focusing bring performance on last this This our solutions begun strategies IoT The volumes Microsoft working unique one will is we're improvement. months. our over have and opportunities market excellence operational is We several of many with of five to driving

we realizing areas here through An cost the this example we regions low-cost to quarter in Our is in and are how Americas sales to demonstrate from efforts. world. customer and successfully the of migrated the operations certain service this results quarter fully earnings leverage our optimization transformation functions other

while executing savings from administrative a overall support to and relationships. long summary, moment. have of remain more year on-track our scores million in over will We reduce ago. well costs, our managed a and Tom a improving customer In that to the and years way about $XXX has and our Avnet target three talk committed is next come simultaneously in to We satisfaction deliver

our are about control plans in We that place control. and we optimistic contingency confident things with outside can have the are things and

and Our ecosystem and our offer creating is customers. is truly for benefits value suppliers our unique we real the

with make our working call profitability Tom? the customers Many a me that, to strategy growth well. strong Tom market is some drive we the real turn additional difference in around growth in over customer to With continued and solutions let IoT Our world our as the accelerating financials. will commentary pipeline. to and bring our are for of with

Tom Liguori

everyone. afternoon Bill. Thank Good you,

pleased the strong structure. XX% sales to a year-over-year our and quarter quarter contributed range. to cost a above adjusted are EPS report of Both of of results growth these and improvement this year-over-year midpoint with We streamlined the $X.XX, guidance for

year-over-year Our billion. declined margin year-over-year and the America’s expansion. Adjusted financials Sales XX% diluted improvements. number acceleration expenses administrative to of per sales general XX% increased Selling, share earnings second growth $XX reflect for $X.XX. increased a to with quarter $X.XX million. continued by and

lower, an year. we And in reduction in of shares the million remain Our In $X.XX prior the $XXX diluted XX X.X% from and as quarter prospects. in share dividend million payment than approximately count was is second year our our long-term confident total, buybacks to quarterly shareholders last higher XX% we returned dividends, quarter.

the with margins. X.X% In our X.X% sales to consistent XX%. Premier turn and on income quarter, business Farnell's Operating growth Let's with expanded with year XX. currency Premier from prior slide operating X.X%. increasing Farnell first Farnell was Sales XX.X% in in performance the starting quarter quarter year-over-year margins Premier constant to grew

continue year-over-year, to of XX.X% on posted an ago. X.X% from with sales up X.X% year-over-year of expand segment and basis. growth billion growth Components of income operating Components. Turning year-over-year year $X.X Electronic margin a sequentially Americas Electronic operating a sales margins X.X% X.X% The to delivered to

to EMEA in growth constant operating sales performance. region perform XX.X% in regions well delivering all margin year-over-year currency or continued XX.X% led and Our

$X.X billion year-over-year. of quarter, a this sales Asia XX.X% delivered increase

sales X.X:X strong in in are we quarter, this ended growth post in book-to-bill to the quarter. continue we slowing the at seeing second Asia which a While ratio

XX margin due income sequentially, Asia XX.X% year-over-year to of mix the down Moving down flat higher the of was statement. revenue. points so Gross basis

cost. $XX business parts our included charge streamlining several prior and our expect We enabling selling, structure distribution from IT Building further quarter. systems of resources continued ability on part ERP and impairment actions and and to applications $XXX sales a comments, growth refocused of back implemented administrative optimize compared of digital cost to by Americas reducing pricing lower-cost such our demonstrate CRM, reductions We by we strategic regions. this of as and Bill's long-term cash integrating These expansion, margin restructuring year cost automating severance integration to margin capabilities, actions and to million million offices which processes, the to of facilitate expansion. and now all earlier more and in expense quarter realigned and which to further resulted stable our optimize non million With moving operations. we've to as we our plan our general $XX cost

structure optimize operating will million deliver a are or plan to greater IT replaced X.X%. of for of income warehouses more these steps process. select various XX savings and income implemented. five In we longer once As margins we utilize. $XX year-over-year, are realigning and sequentially scenarios. expect labor prepare we Adjusted being so result, assets Brexit continue to well for totaled million, points our as increased as lower or Adjusted no $XXX.X up year-over-year. XX.X% decline cost impaired we to operating basis a and which our that efficiency cost Altogether, as basis points manage distribution, fully we headcount, Globally, we quarterly to

our had by was XX%. tax adjusted decreased adjusted Our EPS which unfavorable currency loss, $X.XX. rate We

cash Turning sheet to and statement. balance flow the

working XX days days This quarter by sequentially days. net to rose capital three

will to and fluctuate down management. any in continued our with make up we capital given working receivables inventory progress or quarter, While payables

lower We our low fiscal to days year. end working expect the capital range our of by to XX-day the

target was quarter million. the $XX days. remains by below long-term Cash Our operations in provided XX

impacted While $XXX of $X.XX million and with associated tax share million. which shareholders made of gains we $XX for a cash the per had the our in TS share sale $XXX million strong form totaling returned we repurchases of to flow. payments dividend We earnings, business,

acquired Softweb. $XXX the million debt increased We second quarter. position these also by in net our Combined

to sequentially gross level. Our increased still debt conservative a leverage X.X

scorecard progress plan our to to you at earnings $X of quarterly track know, in for achieving share. we've most provided per As

which see our slide our we at progress. XX, you call Looking scorecard can

to quarter Asia. in our mix report. you total fast due This as sales, from businesses of a percentage a growth our yellow our Hence the decreased higher see progress margin on

most its uptick in to see and green are acquisition accelerate recent grow working would sales. opportunity showing capital be capital IoT although, slight days, be saw ability metric to margin yellow every think The to All offerings. continue We metrics short-lived. of with and our our this to move We example we higher Softweb a will other improvement. operating

March be with in see sales to sequential expected year-over-year we a $X.X lower in the EPS in due sales in result as decline sequential we to count. expect In adjusted quarter, to growth flat billion. regions optimization we All and a expect are share of Even $X.X sales cost up to forward, our be and the other Asia. of Looking a lower to slowing sequentially. billion programs range

environment. range year-over-year Operator? in progress of We to represents expect adjusted spite EPS uncertain line $X.XX. guidance to sales. with be in quarter X% midpoint, EPS macro adjusted growth let's results, pleased EPS expect $X.XX are second and we a X% our of for in Overall, continued that, of we adjusted the and an the With Q&A. open At decline growing

Operator

Please question. with question-and-answer session Thank you. first Ladies Raymond line be Tindle will conducting the James. Adam and now a from Our with proceed comes question [Operator gentlemen, we Instructions] your

Adam Tindle

region. component the good know was just operating X% $X and start Day a wanted Analyst to target. X.X% Americas and EPS I Americas accelerating Thanks on the bridge to key to I the to evening. the Okay. margin

You've of region. but seen little can margins couple in more the turnaround a in growth hoping on that revenue the comment I'm of region, a quarters bit you

about the be inning optimal historical and that levels steps timing, talk we And of profitability? taking, needs in? what Just how done below you're levels? we at Americas What get this to are far logistics So still point? are magnitude, to that to

Bill Amelio

I I I'd the time, give at think what a where that's characterize data, some to and inning to some you Thanks, it to I'll in this course give good more Adam. we're is little bit of of is, we way say than a It’s are. give you want third Bill. that inning.

We're future. way we're As essentially talked past, we've about a with still all above were But historic us want leading improvement. got way actually in to to do historic we're just to and the behind surprising front and we’re with a the we enhancements, lot to see think they're how Americas. signs improvements upside the we're Americas. we the couple about seeing we system I now momentum We've more off we to now. of where we continue will to the work of get in are far now and and levels, the place and in levels. not go where us so respect And the of many great said, to still as on issues clearly There's ago, put in the we positive opportunity made years be we in

Adam Tindle

maybe follow-up just I March-quarter the ask for one maybe And a on to wanted guidance. Okay. Tom

I X% flattish at sequentially profit dollar the declined implying revenue midpoint you're that operating think but sequentially.

hoping but can are through operating see a some this growth leverage initiatives. there So you typically quick with cost I change the I'm that assumptions in walk negative you just revenue some because underlying this, know like

the that dollars revenue that So just confidence some gave you keep can while sequentially? of flattish you declined buckets profit

Tom Liguori

mix. We'll revenue say Year. have it's first the New I'd is Sure. Chinese profitable Most is plus a more of the mix. Asia decline

and time, expect to initiatives per OpEx or So million one quarter. OpEx, a improvement we’ll talked about I kicking a in in will that respect of are $X be strong, With up And $X America some place. this pop is Over we EMEA $XX that in this million million higher fairly Adam, gross to in coming that so profit. of quarter. the have the

expect about in flat. and count release share to statement, interest shares. slightly about income talked income press believe about And expense to we XXX the other the those down expense, lowering the stay Going -- I million

about come you’ll up with that if So you our through midpoint guidance, I think $X.XX. go of

Adam Tindle

Okay.

the you I much but achieved sorry I am cuts. clarify cost cost cut, thus how on in $XXX have to far? if the missed Just it, million

Tom Liguori

expect coming the line. million this improvement plus in quarter, So, operating in $X expense

Adam Tindle

of But outlined $XXX end? you the million Okay. the that at

Tom Liguori

that over a Adam, off a sorry million. I'm $XX third put way so identified, the little

Adam Tindle

it. Got

very Okay. much. you Thank

Tom Liguori

you. Thank

Operator

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

Shawn Harrison

everybody. afternoon Hi,

Bill Amelio

Hi, Shawn.

Shawn Harrison0

Hi. and on expecting are you at was the in EMEA? And the the for in basis. Americas parity a book-to-bill any above or on Americas If December-quarter? Asia, more may it just declines year-over-year looking of Outside I either year-over-year EMEA the

Bill Amelio

press we still I'll we're -- December, both will at have were some in western regions. and in X.X seeing start in exited it’s said Phil the momentum we in in give western Asia, as we're I positive as [indiscernible] the above and the we And release; regions.

Shawn Harrison

expectations, the the in be so flat of And up they revenues? year-over-year will to in March-quarter terms

Bill Amelio

That's correct.

Shawn Harrison

as a terms within follow-up are an turned and it then when of guessing And it's are Asia? order Asia, to metrics that things any figure know out? visibility -- guess negative you that increase But have a is you're in cancellations I of that year year, time might Chinese tough nature. you but getting are in for of -- seeing the I you out what out bottom I'm with in the

Bill Amelio

where a that. I we my little think as so is, and remarks, got we call we big you at looking rightful to it at been is Well, we has definitely been was cancellations think every to can imagine sure one, we're [indiscernible] that’s about than the lead you anything think And one more we're contained. and backlog times, hit erratic orders, these it which call conservative, previously, make the able in the guidance that measure talked

Shawn Harrison

cycle to dollars then year, terms you free that the days share? may. flow the half can have the of last target for in fiscal goal you or exit for back of Tom Okay. do anything a if And cash in cash year I the with

Tom Liguori

Okay.

that's question. -- good quarter this So a

quarter plus. about million to expect the This quarter $XXX is $XX and in cash we from be million third ops

Shawn Harrison

Okay. Perfect. much. you so Thank

Tom Liguori

you. Thank

Operator

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

Steven Fox

afternoon. the on dig Hi. I was performance. little Premier Good if could Farnell in you a wondering bit more

say from You are operating related see mentioned rectifying? slowing getting do you're the you on some do Farnell Premier getting of kind certain Thanks. over few it with you like few leverage that And specifically was quarters what just how next the growth well? we profit products. has next leverage profile compute think that now And do you as where on And then, What for think let more quarters? to?

Bill Amelio

Sure.

you high-margin is seen XX% at as X% We've growth Farnell rates. of our know conversion businesses. one Premier So, with

our that so will to we So that's yeah due and slow again. that that pointed back respect computing growth map be improvements and was see with there there some converse quarter out are to we this that it's that and we product bounce and see to road webs single-board should

that again. pretty come we're see back to So we're certain going that

Additionally, up us add there. ways a cost And we've improvements been Premier make continue Farnell points continuing more go diligently position the of the we've the Premier to percentage board in on working there to margin still from to standpoint got for Farnell. on

Phil Gallagher

Well see of jumping point that I'm growth and us That get just and the We've to at Premier side revenue need Steve. of it. as And in Yes, frankly is okay. we see it Farnell. the been pleased to focused growth the operational And couple We've which Premier Farnell growth This really do. Phil. where we that's we've compared last years in But the stabilization double Bill plan growth in. out. as the got to to invest down been we as our to is okay it. on operating where of investments maniacally pointed driving a allows side other high what really we're to margin

Steven Fox

swings seasonal and have Premier that you is Thanks. next other of if a go there think helping talked under has are That's But helpful. I we what guess, that Or digital the is quarters? saying look that of about? just now when follow-up. mix still quick at Farnell then your just we with sort few And some bottomed. about I margins for that understand I to as Asia properties, you're scenario the hopeful you some

Bill Amelio

be we on Asia We one correct in think our into We thing. think guidance out. where we put said going we together simply in to the that me quarter. that assumptions account didn't we’re that bottomed say it's Let how our taking

-- just is the think and question other what? I So

Steven Fox

Yes.

the... of sort Just

Bill Amelio

the in margin mix be than get more associated in uplift definitely East we so quarter, West that's The heavily the a coming Yes. this why weighted that. will with

Steven Fox

any beyond thoughts sort that on of do have Bill, with line trend you mix? But

Bill Amelio

I Well previously seen. same we'll pattern follow seasonal the think we've

been robust Asia. mean So see I Asia in we'll the growth every I top-growing think continue region. to has

Phil Gallagher

as through to Well in the start the a December, Asia slide book-to-bill saw billion we too quarter we you shipped although Steve, is pointed over still $X which near-record. out in

So that to the book-to-bill obviously was But highlight. started the deteriorate.

Steven Fox

Thank you. Understood.

Operator

next with Our question the Singh Lynch. with question. proceed Merrill your Param of Please from comes line

Param Singh

Great, thank you for taking my questions.

So firstly leverage on ago been going back you here, follow-up. really a operating you're that going some to or the couple But And thinking a what of you've the I like have here. kind of XX% you Premier then about? And targeting margin understand a was business margin had gets to I to quarters get XX.X%.

Bill Amelio

recall, put map. $XXX our million we you If together road

such and was integration as what HR, back-office with be business that legal, areas et information Premier a and One Farnell finance our doing portion of and Avnet core them is global cetera. of we're to between going systems

some moves make to room have we more there. So

also a in pretty high-cost We're have use low-cost grow We and growing versus solid a area. with area low-cost a to jurisdictions. able strategy

to few those operating line. So improve will things our essentially continue expense

Param Singh

And any quarters, reason down last the in that? then couple -- was it for come of like why how

Bill Amelio

Param? was What down again

Param Singh

in of Farnell The quarters. last Premier operating margin couple

Bill Amelio

it's mean ahead going to mix path We us. got you've higher. told we that. No. a Well but just I quarter-to-quarter few clearly much of to we've how you get think get a seen high points just definitely exactly got of I haven't

Param Singh

IP&E demand IP&E are you the in weaker OEMs demand difference regular my and any terms is seeing at what as side then semi much and like Because in semis follow-up, this And the point. because And between of then is business? looks looking Okay. helping on it definitely your revenues bigger of margin some are there trends? at your

Phil Gallagher

the a IP&E Yes. well division I'll is our Param. well, a a Europe got seeing on real thanks. on Asia in is got growing great it. bag. Phil, in focus -- growth that's year-on-year touch call on -- IP&E. so separate let's This We've Abacus to okay. that. of We business teens double-digit with as It's we're focus and got killing mixed nice absolutely We point nice kind touch in I a clip, it really let the at your that me a Americas mean

and the the really times times in You to get times are some large lead are map. companies. that then coming all into And announcements really lead the due over capture just the we're Everyone to and leading that's is really lead yet. not And seeing the some indicator. consumer all assuming frankly,

weeks. but So want of some the XX weeks, stabilizing sheet but the it, might I they at get weeks, to be XX capacitors, stabilizing, they're XX-plus

those XX, So XX now in a for XX freed particularly to weeks resistors. all it's in times that's caps discretes, It weeks some to passes always change. little the up while. okay. can not like stay Even times discretes several all quarters we're so going and actual lead you there getting go XX back products is up and indications lead and are The are

So, going a again we it's what's memory, mixed on know Obviously, with bag. memory.

XX-plus balance mix present IP&E semiconductors still our is today about So total. in

Param Singh

much for all so Thank color you the guys.

Operator

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

Matt Sheerin

Yes. Thanks.

on the by up following region. Just guidance

to is and America year-over-year own you Because obviously lot is is do inventory – weak. from I the is sort the Europe, to you customers up and think of looks sort demand macro. down math both inventory it probably their a on the But an North slightly going XX% there's I flattish there do in there's overhang? the XX% of your sequentially. of to guess, going understand weak If to like question growth Asia booking be be

start there? not that is going because whether thoughts to So what's your bottom knowing about And you're Bill of Asia pressure talked or of I earlier some issue? inventory this pricing see not, think to really you will quarter we

Bill Amelio

quarter. working Well, capital days very Even this went a though, we're couple managing diligently. up of

back to down that We expect come again.

this So I'm and in over all glut we not subject concerned having us over a fact inventory with are Asia. of in

We it moved. will get

Phil Gallagher

I'll Matt, Yeah, to that. add

we saw saw we continue track is again really indicated down, cancellations in rates and maniacally. to Asia what we and cancellation in what Asia and manage to In the look And at at come fruition we West, that. the we our book-to-bill as look came adjustments okay. first we in And So we the – when backlog.

We adjustments major adjustments in our days or from dollars are not customers. seeing of number or of cancellations

we that and on As work Bill's on point, we do with that suppliers immediately us as well. to our move

Matt Sheerin

quarter? Yeah. more going into go also don't through again they're going that question so the June might particularly was seeing hurt No. a as customers to I think Asia you the correction guess inventory, you

Phil Gallagher

we we Again, don't business sharing. Matt. some to track coming scheduled kind in XX% and of is Well, MRP. have the is insights an of forecast our What all customers our from of MRP

will see and seeing we there. dramatic in right in I'm is. that let there any excess that a I'm But there's fashion, out real some sure one. not sure now okay alone So, inventory again,

Matt Sheerin

Yeah.

June and you're guidance Fair given any revenue are the haven't And but margins. in you Okay. then operating you to year-over-year. continuing of improve in as the probably seasonal look you at seasonal, June there, you you'll down be But the some looking enough. appreciate quarter, to at if quarter I just if that still look

tougher? is of been your be So that initiatives the to with the operating going you've that be able doing? question is will grow to margin some Or you still year-over-year

Tom Liguori

First you'll see improved continue all, I of think mix. to

you'd expectation with operating both definitely and consolidated The with it profit gross margin. Matt those June as You'll in our the March. in percentage and see it see help well of

million be second range the what's But through changes operating those and probably June. went in half the we're of similar that distribution think over March, quarters. internally and margins is year. a will in in layer we the we down amount so So also IT the plus for $X making upper And or we'll helping X%

where – know will be should land. year. the don't our right, this operating we of increasing the Asia But to percentage -- now trajectory, half margin point second so right through Bill's So

Matthew Sheerin

All great. Okay right. Thank you.

Operator

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

Mark Delaney

very question. Good for afternoon. much Thanks my taking

region Europe. could being is European bit in comments region. and The I the the was little first certainly question more heard about on positive dig into in you overall book-to-bill hoping European a

and industrial in I the some think some Europe semiconductor think even to companies a trends. and have European in auto FedEx have I seen weaker of in see connector slowdown and started

would more you what seeing guys can other chain Europe the parts relative color the seeing of think Avnet so any we what of to are there? of about some helpful, kind is in on supply be So

Phil Gallagher

is This Mark. Yes Phil.

this just the a I of one. morning matter Regional spoke that tackle President’s with me fact. as Let

yes, X.XX:X in the okay. X:X came as around it -- okay book-to-bill just from QX X.X, So not well Europe just over was X

So see across still we board. in positive the it Europe

No. it is year was from where ago book-to-bill okay Now a it X.XX? ratios

a in we're So Europe. seeing a definitely bit of correction

not, don't So we're think that. -- I saying not we're not

we're performance our consistent as are. mind, Germany, headlines we're reading in seeing Europe. still with the in you from However team that same

on For for Yes, us, up. distribution Avnet. relative down that's going contents we're seeing be for basis electronic And but that still a in units newer might automotive strong. total, a segment

West nice market. growth still quarter still the we're for we The the for Europe. out as seeing put March us including So transportation Again, it of the forecast today steady, okay. out we industrials the are see for

today. seeing we're what you giving just we're So

Mark Delaney

orders tariffs. your tariff extent semiconductors. And you their know a higher think with on you're second update My it's of price responding? Phil. end to But cost And the passing customers on ahead distributors of understand the flat the all of helpful how were the question color some to those guys you. to of to That's topic ramifications exactly any increases? having give effective get Do XXXX on maybe issue try the any your pulled of suppliers maybe about Any customers you prices into us can ability tough be on I be was know raising I may increases? to certain potential to is Avnet

Bill Amelio

South plan accomplish some essentially comments had in America. outside able profitably were shipped we warehouse with that's Canada, that customers what from we were United like that. United Guadalajara, mitigating and had and a and place you so the United gets make in that associated regions in Latin tariffs States the the States Kong an to of to is previously through America extensive out or about was I'll that ship We direct ship put States Hong

worked also it's to other so, We've second-source it Philippines the with Vietnam Malaysia, out. to us to have United them out -- or China able and Thailand resource they helped to move will and States be going that's out China of world. areas. pass on with So of coming Importer suppliers in one into China regions use in versus We Importer be tariffs particular we of would to less. because of Record worked those additionally on that suppliers directly then customer facilities in the and for If they're Record other the the the

place. you complicated arrangement a put pretty see, that as it's So in we've

going doing have that it. inside because we issues any juncture, people clear this not on that we were company. that not made very we've to extremely able We're the indications plenty have to any and absorb been we have tariff working it of that collecting a well. to we're being seen We going pass At that's on

Mark Delaney

one is the helpful, last Softweb acquisition. on Solutions That's Bill. Yes. My

next much. that accretion. it about higher was EPS accretive. what What sort contribution? the impact levels ramps XXXX for think understand it's immediately be we Trying by $X.XX should quarter. of thinking to very Thanks of to $X.XX I is linearity fiscal think to of as I And earnings up

Tom Liguori

Hi, I really Mark. This but capabilities. benefit to the say, Tom. accelerate Softweb financial of our really done is somewhat linear, IoT is would it's

So other $X.XX teens us as whether earlier those itself. some the benefit $X.XX margins high acquired of those that operating see are in The what accelerates company the is revenues that in release Avnet benefit to to faster, IoT believe revenues press Bill we script to operating mentioned a get of because there's we it margins. which XX% we higher from projects the the financial at that's listed

acquisition. So that's benefit made really Softweb, we why the to the at financial and us

Bill Amelio

the the suggested analytics, platform third-party in revenue applications so content are we're we're that to network, providers. will the setting with now on participating and as be the a to And not gateway, applications. participating we the cloud, in So, also and Tom Softweb even able handle price up building the only that us margin, allow

great something revenue margins. we at us we're setting So in recurring up a get puts really that position higher to is think

Mark Delaney

you. Thank

Operator

you. Thank

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

William Stein

taking guys. to earlier semi want the make some sort questions, my Thanks of one comparing I understand And your Great. of of some discussion sure the There's to timing. I just been companies. about the outlook some in for thing questions

give there weakening now with more you think demand whether quarter, last it while to demand less later. there the business? look sounded should about And semis as when us to indication just that that or all retrospect clear sort quarter of to what semis quarter Is going a is about think sort to how signs. to of cycle to was Is the regard essentially that were happened? a in happens for say you an later when influence And trends, as one your to you. unfair? it Or that's we fair happens something to with I I that's to is question might that a stabilizes already seeing them regard fair probably see for think things way

Bill Amelio

were had trends. meant I Phil but coming what correctly from that any that I believe we transcript the And previously. definitely to didn't quarter. said, We would what actually levels at if we say, it book-to-bills deflated would mentioned Well, said were give indication softening was down book-to-bill, I look last we Asia of our see starting

in difference just that's think I gave us. the So dialogue that you only

William Stein

sort not step to on in can. sort of that company past to the is That's in a platform, feature margin finesse a of that of in and a Bill Premier A good couple where introduce? operating that? further make Or margins function much it's Farnell level a transition from richer and Okay. as talked customers trying more others less enjoys the the you'll progress I the if as ramp. Any that future of about Avnet clarification. of volumes out rich the decline core of you've your trying sort where

Bill Amelio

between core Premier Farnell. leads deploying tens back and thousands No. Farnell We've of to pass seen Premier of

to in wanted but family. in So we Avnet could got and And moved help they fact small it Premier service Farnell they higher customers, -- from difficult they the to margins they was the I'd which were be better more well. were actually because Farnell them because for to how what into what core actually fact manage Premier us say about as much back passed of surprised we many businesses got part were were for

seeing part process absolutely we're the makes come yes, that alive. this as So, whole this ecosystem of

William Stein

now? quarters set One other remind and your Day couple in I you those of now Analyst us feel confidence about the can. targets if you that? relative How those the at of after Can a you we're achieving

Bill Amelio

his showed up Tom a had we scorecard that Well in presentation.

green. say are to to hard them I'd what's we Right point that And you get So we're couple yellow, and that in confident that's have to we're green. -- that we're going get really but working we're that all keep happen. now those to can I make going a going

William Stein

Okay. Thanks, guys. it. Appreciate

Operator

Our with Fargo. next question comes of Quatrochi Please with from proceed the line Joe your Wells question.

Joe Quatrochi

countries talked is weakness large the actually question. Yes. is within? to Thanks kind on was of mainly the I quarter double-click I weakness has wanted China. Asia. know it Taiwan China spread well. in in that still quite taking other you in for I or to wondering about last I seeing your you're as business know

Bill Amelio

China, but countries definitely say, more affected. would But spread Asia. is in Yes. definitely it's it's mostly I China across most the

Joe Quatrochi

OpEx of kind do rather, some down, think from fixed your how as that How think if variable efforts And follow-up. So of see were kind Okay. cost-down we the those your structure Tom, slow do a then ability accelerate to you're market versus of about we about we continue to a standpoint? implementing? to

Tom Liguori

benefits It's one our the of model. of

have on $XXX if plan softens revenue would a million. We the And accelerate. we

Bill Amelio

those would bars variable buckets four that's that the on we're focus that we remember, you'd If the go that the you associated with take and out $XXX costs of see of the the cost to million one chart still there weren't it, cost Essentially take if you other But we takeout. growth bar. if to growing. out has going that's

Joe Quatrochi

you. Okay. Thank

Operator

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

Tim Yang

Tim question. Suva. the follow-up This the Jim question behalf on taking Hi. of calling Maybe channel Thanks Yong a on inventory. for is

down came inventories two quarter-over-quarter basis. years, are on quarter sequentially a December the December normally your But Your past up. inventories in

work to you that need level? like maybe forward down going with now So, inventory your inventory? Or do do you feel you right comfortable current think

Bill Amelio

Well, the days our this. haul. is XX long strategy over Go

accounts got and we working payable go clearly, capital, to of accounts on course each element inventory. it's So whether receivable, work of

yes. So

Tim Yang

quick then a the And on follow-up Okay. seasonality.

you quarter, right will lower don't bit your a be have that the seasonality. quarter normal the a think Do the normal Or March visibility now? to June is seasonality? you So, guidance than Thanks. back

Tom Liguori

quarter March the in Well, book-to-bill by heavily Asia. is influenced

question I fair a seasonality. to as So due well you think you're tracking out took Asia probably if

Operator

as as today's Ladies participation. thank and your well concludes gentlemen, session today's you call. question-and-answer this for We

time. Have wonderful may disconnect at lines a day. You your this now

Avnet (AVT) 24 Jan 192019 Q2 Earnings call transcript