Earnings call transcript Q2 2023

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Operator

Welcome to the Avnet Second Quarter Fiscal Year 2023 Earnings Conference Call.

I would now like to turn the floor over to Joe Burke; Vice President, Treasury and Investor Relations for Avnet.

Joe Burke

Thank you, operator. Earlier this afternoon Avnet released financial results for the second quarter fiscal year 2023. The release is available on the Investor Relations section of the company's website. IR slide via will earnings the well on the can today's release, of website. as found Avnet's be link the copy presentation accompany that remarks as A of section in the

Some contained those company's differences of in statements. results news on detail could assumptions involve conference the filings this from statements that that actual SEC. of in are contain and statements predict. uncertainties or guarantee XX-Q release are such materially that with factors to in Such Form cause forward-looking forward-looking subsequent are such and call could risks, XX-K recent differ information the Several in contained and and the the and Avnet's contribute most the difficult described performance to not

speak date this These publicly obligation no of new information circumstances as company of regarding statement supply the to the and this or of only the forward-looking presentation. the statements presentation undertakes update forward-looking any date after

be Avnet's CFO. Today's call Jacobson, and led CEO; Avnet's will Ken Gallagher, Phil by

With call Phil Phil? over the that, me Gallagher. to let turn

Phil Gallagher

and another Joe, financial which our am XXXX sales our exceeded to joining higher guidance. I us we conference you, quarter solid fiscal Thank you year everyone second earnings that share of end pleased quarter call. thank of delivered for on the results, and earnings

in minute. headwinds areas of certain a the our affecting we I'll importantly, macro results which touch these More on despite achieved business,

and gaining our and sales thanks eighth resulted We sales dedication large growth grew market of quarter believe we quarter, in of year-over-year execution employees. customer to currency, our in another it the year-over-year growth. quarter share, in partnerships part consecutive In the constant making of double-digit XX% our this

three of margin to growth operations on also of than of that to nearly operations sales greater times strong combination operating revenue fourth our of X% and quarter basis. consecutive enabled increase operating of a allowed effective us of which us margin. faster operating the is than year-over-year management Further, the X.X%, income solid drive Efficient management

EMEA the of slowing in in During see the continued electronic and quarter, and on we shutdowns, to which began impact customer strength and Farnell. Americas the components regions Asia COVID-XX beyond had some both saw signs

helping complexities, face has chain market executed in as and well manage they uncertainties. team conditions dynamic very our customers supply Our

From in In vertical continued we a the the most demand perspective, quarter, that times continued we saw lead the many in in lead call, quarter indicated earnings and second transportation times products. improving. strength trend that And industrial. last were key notably segments, for

products, remain certain lead still times extended. Although, for

we've manage and closely regions, coordinating to customers been with suppliers effectively all Across our backlog.

of ratio As second a the during our on the quarter book-to-bill those parity exited quarter a result global below actions and we basis. overall softened

chain, to customers, turnover inventory comfortable our inventory levels products, further they challenged parts heading the quarter, of working our into of inventory to our required key to levels improve to be his to higher with elevated, increased many continue inventory remain In support also supply the commentary. their the of which third including Across speak quality order and customers. are Ken remain that Overall, we and inventory will our the as all complete quarter. this with in obtaining

is a of environments. particularly in these uneven critical distributor as role types Our

years, for them proactively the Avnet to serve our their a helping proven suppliers, to customers complex our environment have we operating tower ability the is the supply As manage chains. over value as of and and control

future. change a confident as resilient marketing today have changes past and made and With and we are years, two-and-a-half company more adapt deliver are stronger the the in much value well positioned that the over organization conditions we to to I'm quickly

were up In currency. sales to the growth regions. across of constant business Component growth the Components drove constant organic consecutive year-over-year all year-over-year Electronic for that, with XX% highlights me sales business. in seventh greater three So let sales XX% turn currency, quarter our or Electronic

delivering operating of and in progress EMEA and highest strong continued transportation. quarter the I proud both years. and our particularly also EMEA several team, make key strength and income delivered record with Americas The in for am verticals, another to sales, steady sales and regions industrial Americas operating benefited achieving from the team income The quarter. notably,

worked of demand to experienced we time Asia, improvements. lead their In to customers a backlogs with softening as due we adjust

gaining operations of consistently the the continued COVID-XX continuity, at due team's our our business challenges in I'm cases. share region proud in it in the many to Additionally, rise across experienced region ensuring but the Asia success their time. customers market with of only not same

business Asia during margin favorable of operating year-over-year. sales they a mix the saw quarter get our expansion continue quarter sequentially share to and the slowing, during to second both signs led Although and market

revenue to Overall We and creation. demand regions with capabilities gross ongoing field strength suppliers. for digital creation across dollars benefit our provide is of the both engineering to from record achieving our profit capabilities design our increasing customers believe all and the indicative again engineers we unique demand and tools once continue we of this application and value

Farnell year-over-year and Now to let's declined impacted turn sequentially to continue be and and availability our sales Farnell by business. pricing. product

at orders pricing certain demand volume affecting moderate, As shortages begin shift and for their some distributors customers parts will Farnell. to to of thereby

in end certain single-board computer, are Pi which when single-board we available the more to more the realize And The the towards expect announced remains applications. quarter, our key year, computers fiscal exclusive potential semi-electronic components we see distributor robust. become backlog Raspberry industrial of sales. to As last we continues for for such

quarter. X% over Operating margins for Farnell the were during

Avnet's margins It's margin. two Farnell's are margins times that of quarter. important overall really operating that still operating are lower note to Our this

XX% placed and user this results Farnell's to of improved experience continued yield total in eCommerce of investments sales quarter. Our XX% with through total platform and eCommerce Farnell's platform the orders

computer introductions expect become with traffic and the new are products single-board as increased new available. for to acquisitions and and in come We quarters pleased components see customer these results more to certain product

on-the-board diverse and test also supports solves well Additionally, measurement not product but as needs, has operations as as repair maintenance a and Farnell mix industrial customers only that needed.

opportunity the Components' better key about for very suppliers a This and our leverage For to Avnet. and product and remain unique serve customers to continue to collaboration. Farnell's see introduction and and us allows new for differentiator synergistic production to is we Electronic long-term, excited mass Farnell

To on we more and inventory impact visions recap, lead while the we strong are year levels better-than-expected market the for XXXX the the as backlog quarter, monitoring pleased the products of component and available. and calendar of times our with results become are closely finish

on impact the the with the sales We the workforce expect to holiday return COVID-XX seasonal of Asia is due Lunar some to how end once may of uncertainty a in experience the declines region New high over. Year

of keeping slowing in of the eye an also the the and impact We're inflation economy. rates interest growth on rising global signs

We and to team's our continue customer confident partners. execute our be environment ability in to delivering value to and supplier a in dynamic by uncertain

the business over been in have We for years. XXX

cycles never the have play many to greater to been of our center weathered that Avnet capabilities offer up for critical a We is supply and team challenge. need market at the has to technology chain. There continue role we forward the and a has to the look

quarter over to results. our Ken to with into that it dive I'll So second turn deeper

Ken Jacobson

compared team in Thank Avnet. Avnet you, interest to thank year everyone of Phil. quarter for Good afternoon, quarter. sales another the your strong delivered income The and and ago you growth operating

second performance. XXXX our very and pleased year quarter are with the financial We calendar

guidance continue our sales growth well-positioned trend the top of mentioned. we currency, our the growth. and basis typical deal and region In currency, were with XX% growth. included up range. We exceeding represents contributing higher year-over-year flat was from with XXth was be quarter constant that above believe the which year-over-year, uncertainties each quarter, a to of sequential a constant seasonal sales end $X.X Phil Sales our to were In challenges regions. billion, our the consecutive our XX% to Western market of second mix sales previously year-over-year sales nearly on in This

We Americas in across EMEA, and constant billion Asia. a had $X.X regions sales On XX% which by a in sales of record sales. grew year-over-year basis EMEA, all year-over-year XX% currency, X% of delivered in in the growth our led

sales group flat in nearly X% the currency. an with year-over-year was Farnell constant From sales XX% currency. perspective, currency. sales constant constant operating grew flat year in Electronic XX% and year-over-year declined were Electronic or prior component Component in quarter-over-quarter

grew Excluding constant single-board year-over-year sales currency. computers, sales Farnell in X% of

For down margins from in gross well was the and was improvement the second basis quarter, XX to Asia quarter-over-quarter three points higher gross XX.X% mix year-over-year. regions a improved as margin XX basis Western points shift sequential due sales to The of across regions. primarily as all

constant operating support continue X% SG&A quarter, sequentially. around and increased to X% the expenses in expenses X% Adjusted year-over-year expenses operating were million maintain We to as growth. up year-over-year the sales discipline XX% currency for down adjusted $XXX

a than increased year-over-year XX% quarter were expenses percentage operating adjusted quarter, year exceeding dollars, operating eighth profit full lower of the than operating the our sales gross is XX% income grew of XX% growth. of a greater ago. points million $XXX income eight consecutive percentage a sales. times Adjusted This X.X As in growth second and the

X.X% year-over-year points margin operating quarter-over-quarter. XX adjusted XX in quarter, second and was improved the Our improved points which basis basis

year-over-year X.X%, Components Electronic XXX group, points up and million, basis XX% up basis year-over-year. operating operating margin EC XX By quarter-over-quarter. income points up was operating was $XXX

operating $XX points led regions income expanded margin X% was year-over-year EMEA basis XX% down year-over-year. by quarter-over-quarter. more in XXX and points operating quarter, EC quarter-over-quarter year-over-year. business, EC three saw margin down our million, points operating which XXX down Farnell basis expansion and XXX year-over-year All was margin operating by the than basis Farnell

of margin for related from gross sales expected the more due The single-board pricing gross primarily profit a in The decline margin. availability lower combination decline of of in margin computers as of components part unwinding primarily premiums became available. in components was profit Farnell operating driven certain by and lower certain to to a lack the was

highest Avnet's operating continues times and continues margin two Avnet greater operating be margin to margin. than be to income Farnell the income their within overall

of operating for half similar sales seasonal by We Farnell the on components. second certain the will margins as premiums of offset unwinding at XXXX growth be to levels continued fiscal remain pricing expect

expenses operating gains below and income. Turning to

quarter-over-quarter in and earnings to share $XX diluted amounts due expense impacted $X.XX rates interest expense support interest capital and to of quarter adjusted million $XX by year-over-year. per $XX higher working in primarily by negatively combination Second a increases This of interest million borrowing increase increased year-over-year increases. million

$XX GAAP settlements, million. one-time second gain of During a the per This benefited second which $X.XX. quarter in legal earnings share we gain by quarter, resulted into entered

Adjusted share effective were quarter-over-quarter. XX.X% which flat quarter, tax in per Our adjusted and were year-over-year XX% earnings the rate increased for the was income quarter. $X diluted

to Turning the and balance liquidity. sheet

a the working quarter, million in $XXX million including increase capital by During $XXX inventories. increased

for which increased As capital capital days working the a result days XX increase, working was quarter-over-quarter. of this quarter XX days

our six days increased and increased approximately approximately by receivable days by Our quarter-over-quarter. days days four inventory

improved and capital working continues XXX year-over-year. on capital over than higher return our of be Our basis to points cost

Our inventories components quarter increase grew a of in during the to to Farnell inventories, an including as in shipments of customers became currency exchange factors, delays rates foreign requesting product combination last quarter due available. changes readily more compared and

We This to improve contributed their challenges. have timing quality product year-over-year. increasing slowed rescheduling freshness shipments an turns to inventory, the the days trend of and customers inventory, of of and quarter. our as as production they in during flow The continues manage cash seen increase inventory

saw second the also we receivables. collection a slowdown of During in the quarter

Our to risks. receivables with due bad diligently and effectively collect customers manage team to past continues work debt

a minimizing activities by the pandemic job the in with managing tremendous onset since our Our done collection team proactively of the customers. and debts credit bad has

we top our While are turns appropriately. we on continue focus priority ensure managing is overall inventory customer to risks to improving

X.X of end and operations. a The debt million $XXX a led the to use to led gross corresponding at of increase in debt increase of increase approximately times an from $XXX in The the of quarter. in working cash leverage capital million

million At liquidity. we provide approximately to capacity teams to hand of had our inventory quarter on on collecting work and selling borrowing and end, receivables $XXX continue available additional

we quarter, approximately shares, X% repurchased of second million outstanding. $XX which of worth represented the In nearly shares

current million authorization have left our third the repurchase We entering on $XXX share quarter.

capital capital share We repurchases. when we continue business existing to evaluate our needs and expenditures including working prioritize

million an investing increase expenditures quarter, During or being approximately EMEA. second $XXX $XX capital cash new quarter-over-quarter, built used a of warehouse primarily including was to support for the activities in million

last During improved a due dividend an share of of the foreign also exchange our rates share quarter, $X share approximately to to or lower $X.XX or count share per per $XX of in $XX we per approximately million. currency value increase per strong combination changes paid to share earnings, and quarterly compared Book quarter.

Turning $X.XX to range of earnings we to of third of guiding and in the range quarter the in are for the $X.XX. to sales $X.XX $X.XX per guidance, share XXXX, fiscal adjusted billion billion diluted

market current to on quarter and decline is guidance third Our X% sales conditions of implies based a sequential X%.

from New the XX% the an a basis. for growth due primarily and and sales to guidance of similar diluted Western guidance the seasonal between interest rate Lunar tax seasonal This This outstanding second XX% sales million a assumes Year regions. expense below quarter to assumes and shares XX.X in Asia, compared decline on effective

In another sales closing, delivering want strong for I to quarter our growth. and thank team earnings of

sales and diluted of During calendar adjusted delivered $X. earnings over year over XXXX $XX we per share billion of

and suppliers, conditions. are key of and challenging will diversification markets be enable Avnet's products end us resilient, we serve uncertain differentiators to the that market despite

that, to it operator up Operator? the With turn open I for over to will back it Q&A.

Operator

Instructions] question-and-answer Thank conducting be Ladies and Thank you. session. a [Operator you. gentlemen, we'll now

James. your first Please proceed with with Our question Fairbanks from question. is Raymond Melissa

Melissa Fairbanks

and times really results the today. guys. very Great to Thanks these work Hi outlook. uncertain kind of see great It's much. navigating

a that on mention products to maybe Last us us wondering could longest some you products. of on that. the quarter more was times did lot if for still little which you improving lead bit detail the times. I give You detail are gave had lead a

Phil Gallagher

Sure This Appreciate is for that. and your Phil thanks compliment Melissa. there.

is know improvement modest. modest that right? hot we maybe right, a seeing this So So little bit did one, a some than yeah, say yeah, better we're I

are power, FPGA But automotive at day are higher like XX-nanometer, many vast in levels at in lead-times the logic majority still of MOSFETs, programmable they've end So, products are in XX% than in while constrained. particularly products the cases still significantly to okay? some of pre-pandemic, coming but XX% stabilized products MCU analog the IGBTs, the

than makes the past. that's much what we've maybe what this So, complex market experienced more so in

to like thick and lead-times. weeks. still XX passives And IP&E weeks, XX. XX XX ceramics some XX to XX are to XX to films cases Resistors still XX [indiscernible] week

bag. a So, it's kind of mixed

the the connector products. averaging The as statement XX probably probably in are overall, interconnect. depending of the XX a categories connector to again of on again weeks all general guys They're lowest type

I controllers, amps, was no cleared all I kind so, for up, those tight op as things the along anything it's just automotive. -- high-end But said it's voltage So, still you, -- still of -- bit are much summing power, over right? pretty But as map. regs, a yes -- well around probably lines as little

Melissa Fairbanks

growth No, close attention helpful. that in Absolutely. the paying that's detail. This one really is something actually on Yes, inventory. everyone Maybe appreciate obviously I really Ken is really for the to.

it's different the few the driving Was this of there? You breakdown Farnell? And well it. highlighted growth contribution quantify fairly you of a think understood was But it what's quarter. -- due factors majority the I maybe behind kind can to what was the the

Ken Jacobson

Yes, have slower we actually is driven about the call XX% things. of Farnell just challenges was I it rest FX of was XX% by about those say did and there. that let's say some turns types that and would then another

quarters kind the what of normalized. was I But it will past a kind over the of of two wash comment impact offsets kind so FX the be would last that FX quarter has

in quarter So, growth West was some broader Asia. in this inventories quarter versus clearly the mostly it mostly last regional the just

Melissa Fairbanks

you Thank very all from me great. now. That’s Okay, guys. much

Phil Gallagher

Melissa. Thanks

Operator

you. Thank

with Our Please next of from question question. Ruplu Bank is America. your with Bhattacharya proceed

Ruplu Bhattacharya

thanks for questions. if delve bit segments. deeper Hi, of for wondering margin the was the my a performance you I taking can into each little

pricing parse can the revenue, that that in points say margins mix the there versus of So, we Is versus component sustainable about because And XX sequential should flat basis was segment? you versus out of you improvement. margin any of much level think components FX? way had in how on volume how of

question of out mean parse all between sequential for these to any I Farnell, points basis decline same that factors? And XXX way

Phil Gallagher

in. first and let go I'll Ken jump Yes,

the first most mix. the the part is answered not necessarily okay? of the of increases Ruplu. mix. price is percent that not of A inflation that little of dollars, of it lot the Regional a on ASP kind that But lot the affect but margin had really in Very we question maybe this margin. would mix, although supplier You of quarter some

had when the Asia in We that softening strengthening some end we saw the up coming And that we said some West. and out pick quarter at we noted margin. of we happens that the of

just good team. execution it's by So the really

well. natural appreciation again get constrained some call On so so, Farnell, get let's market or as in we've it They upside. a a yes, more they signaled some upmarket this a

they products coming the that customers question of those of some space. the -- the And volume starting Melissa lead call get as are back come times to I'll -- into into in from the back just more it got some nontraditionally come where we some are to

Ken comment? decline. and the margin they've of drop-through. do some volume course Thus of to pressure you some So, negative seen want the

Ken Jacobson

Yes.

On it's product customer more then but mix favorable we regional let's would the say did a components have business, I mix. say

recall there. we said you quarter what a If little was bit because margin down gross last was

more the All Asia the regional right? there was between favorable of controlled businesses our the mix then had obviously, and a regional with mix bigger expenses West driver versus

And then I say, sales That's gross of approximately margin the premiums. right XX-XX unwinding of the to then about to the would profit piece it. get and deterioration the probably to between way when you Farnell, the the think due

Phil Gallagher

I -- core. are Farnell. Their pleased to times we're though still operating do margins highlight want the extremely two Farnell with

So doubling performance the going and to on growth. continue we're down Farnell be to

Ruplu Bhattacharya

the for Asia next Okay. a you there. is softening. Phil, made comment you're the West. the growth quarter below seasonal details And Thanks that guiding for in

little that progressing And versus as that bit are can you you into softer like maybe West? and see go the So, verticals you in year? now markets in which end Asia which a the deeper touch through or do how

Phil Gallagher

Yes.

call to year. the throughout tough So,

right talked And a Asia-Pac But right there's just we've much. some to in about oversupply So we had general, the fluctuates look, okay? inventory Ken quarter already on bit because increase talked that of want last be about there. inventory in now, careful so market I one, as

Except consumer, really automotive, fact we've pretty end applications, is in PC, industrial, great of It's weak. got still the automotive your momentum to strong. Asia-Pac. and mobile, the Matter look continue automotive the in they

And means that's more off anymore with will, of then with a no you got you and years the New the traditional, to of if last couple the Year, on -- we're word reminder, just COVID. kind been whatever that So Lunar remember right?

into Year. of to right, that work back the the market got back to volumes Lunar that to come they New if come we've and work, see So affects the go how people they when

So we've got to watch that.

And the happen And a to But that had the we're of then, our going unpredictability course impact want negative we of COVID, really I believe well. us with be we're gaining pleased performance and right? overall, what's got clear, we on as share. to Asia

market really Asia, really We Southeast well Taiwan. is the doing you I lot Asia, in diverse times mean of have a Greater we're Asia everything a think China. in

a business Japan. have nice We in

as bit well. little a of in presence a just of we diversified So But have China more outside course China. good

So, bag. of bit a a mixed

On years. from you comment traditional we'll I -- the on But lot West, old December will to kind these West I They've mean quarter-on-quarter from couple this and last little bit. the should the thrown March. been quarter-to-quarter of see you're curves, I sequential out are the can if again, a seasonality, all increase say. a of of typically a right, the

come quarters back. in in much record good having typically, the the But you see as West We Europe. we -- And had frankly a pretty said performance just West. do we're

we a tough the is compare in number the Americas. March going Europe believe just And for the so quarter as against but they're solid

Ruplu Bhattacharya

over as for in. been looks It Phil, Okay sneak a you stable couple of costs? profit, gross forward? it's OpEx gross do If going like should to Or level OpEx levers we I the now? quarters. at there. that about out have the is one details can in more percent thanks think So Thanks. how of the last a more XX% profit take of

Ken Jacobson

sales. but I planned this of may our is think tighten time a Ken. cost at significant depending about these Clearly levels at takeout. This wouldn't little I to market no would actions conditions, first we additional bit, say, strings on have

I would this it's level percentage a at And so stable pretty sales. say, of

Ruplu Bhattacharya

details. Thanks it. Okay. the all Appreciate for

Ken Jacobson

Thanks, Ruplu.

Operator

Thank you.

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

Matt Sheerin

quarter can are you've seeing you on region? Yes. Thank you're that you. as gotten seeing little more bit you're from customers, well? the on specific book-to-bill seeing And the I'm you be gotten cancellations as Phil, that a hoping so far that worse through then the push-outs ratios or has And by that stabilized?

Phil Gallagher

Matt. Thanks Yes.

we'll in Asia, the then said yes, say, we're share but that we provide we're in regions. that's then okay? we book-to-bill, now book-to-bill the would all don't to still level at the Americas closest I -- on is regional it parity a below or So just one negative the Europe as script, parity

were that healthy before -- We've So thing. I but on this I run-off book-to-bills that the had we see all of negative think a a moderating, know they're as and positive book-to-bill. of natural said I that the this don't and moderation such as is a call excessive

So, doesn't it's not really any overly have -- concern.

said of And part second We're buffer backlog. mean, to any absorber They on – this, canceling. cancel. shifts XX% in I'm we're backlog working But because we're day, to in the Matt out. our lot now calls given as will if our in our XX% form say, still pulling having that with rates suffered, your in market certainly And some of the to where a is, as and I I've to you cancellation the might managing to pushing the there's we're reluctant this. shock do previous adjustments is but out want looking at rescheduling, in either backlog. which our push so I chart roughly customers be

we're running now, Right XX%. around between roughly

up but watch And a couple of it's daily nothing we a again, on that basis. overly points, that's So, alarming.

think, think, So, a negative mean, that's it. don't seeing how we're I I it's I thing.

is market the that, market the in required. adjustment an it's think, I

Matt Sheerin

a will they're commented be saying seasonal Europe going up sounds to though It like even sequentially? next you're below regarding and America seasonality previously that you quarter. be And question on both North

Ken Jacobson

in and higher I quarters got into fourth remind mix we say, down slightly, from. of the Western a our drop revenue think then third everyone, comes sales. move would and to where down. to we've I Matt, Asia when flat obviously just But that's And

decline more higher sales offset some that mix. we of So, because gross margin, of favorable by the

Matt Sheerin

Okay.

too. Europe So

Okay.

lastly Great. it XX% was inventory, up Okay. then on roughly your the And inventory year-on-year. just looks like

Your guiding modestly year-on-year. revenue down you're

You your out pushing Are canceling down? to own working or this and Can do customers turning suppliers same talked about orders out try you start you the pushing orders. thing? around to to

Phil Gallagher

one-off depending a in also on those every is we're commodity Matt. got supplier are. different working all Everyone the has we non-cancel customers. and But different can, place. with we've Yeah. out where things NCNRs our – certainly And non-returnables we

So, good inventory. believe, do we as The inventory. we say, inventory we'll that start turning fresh It's is inventory.

customer needs some help We long have in for for we're And the a a haul. it that challenge.

we So pay customers, the little we that's the doesn't a for for because don't not them want not that be going may work them more to with not need. relationship. want well be carrying they're bit know for or for bode take and long to or would we to – we to force something than term, able some And

constant of our situation early. that's been we've rodeo, not really one-offs. so again, important in we're say – ship positive I negotiation it's it's We're the not before a point. not seeing a suppliers is, this but And all yes, first – I think will

with got to it's just, so parts So builds. sure need out finish the – then they up, customers get we've to work other to based But see coming lead what on their times that question. catching okay, in I'm – and I'm they're going to

Matt Sheerin

Got it.

Phil. Thanks, Okay.

Phil Gallagher

Matt. Thanks,

Operator

you. Thank

Citigroup. with your Suva question. proceed Jim with from is question Please next Our

Jim Suva

from kind time, little you, were went supplier up there Phil, of for Phil of when bit had you were away a Ken. changes. Avnet bid for relationships some Thank that and some

Avnet. Some of them affected adversely

of them did Some not.

new two it's different? been it we're that, years talking Now and COVID are about like the or anything the three seems past but you. anything Thank or coming exiting Because changes suppliers terms stable. to back

Phil Gallagher

again were the Yeah. I say quarter I'll even when extremely the Jim. those supplier comes behind demand it like go our supplier, us, positive. They're Yeah, creation this ratios creation leaning more destabilization. Thanks, that, some saw numbers demand to – actually as been some years. we to up record on And No, they're we us interesting have note supplier think things with numbers.

So for asking I and think them. more as are they actually strong supplier partnerships they're to are the relationships that, do relationships us

now, the about buy who's I'm we know, We very open we well potentially who, So for only to and sit that much the one execute the looking suppliers on in We And don't pretty top at them. can control number when this. how side boardrooms. top we two suppliers side, of don't the one every we're or the semi them. on IP&E with look and

conversations strategic are very right we here as sit So, now today. very positive and

Jim Suva

And mean way in disengagement that or a share didn't like negative losses no Yeah. minute. – I in a

could far evolving more didn't demand as services consignments or are Just discussions as that be they potentially into more creation pre-COVID? holding or happen

Phil Gallagher

Yes.

Jim. So, thanks,

solutions. solutions, looking the And what can the solutions we where that just as right? customers offer are the not suppliers So chip of that customer. total want plus solution are the value of solutions much are for chip – of that's balance some acknowledging for around as they chips Board they the –

we've and not scarce software got help and So other to. be get become to the side, more and customer that more get to – resources can may with and suppliers they the and that to more engineering as them difficult able reach us on to to scale get the base

it's So in of that that first regard the matter not I mean we're creation. want the supplier you a not demand thing meeting talk about. talking to fact, about have with there's A we

of R&D say, we to supply need marketing us some some the capabilities. out business our drive we've manufacturing, and customers or and coming OEM into had chain the Velocity help sales for "Hey on suppliers we you as supply large Avnet suppliers then call us more and building our And want in chain know Supply-Chain-as-a-Service supply chain capabilities. The

positive So I last these think years it's and through a think very that's real I been sticky. X.X

Jim Suva

should a a Farnell's bit down mentioned Ken, to sales, those those you of or of due margin a model maybe margins for where it of resolved, coming shortages. come due you, still then of I'm more some the out or we premiums completely premiums that the it follow-up now happened the the Thank ahead? quarters And to gentlemen. been wondering came in little are Ken. – during premiums compression premier bit largely have removal some the little model,

Ken Jacobson

Yes.

for So question. Jim, the thanks

be would I'd think and sales where really by it uplift a unwinding. at was of how commentary that but in seasonal it they're have be I business I kind continued more because – they'll said the this – look think of will a in Western I the offset

– half, say to most if some don't but over I'd still there's I say So know, go. I'd but

– because offset we're what state. And a so steady to kind operating further by expecting a deterioration you stable some margin to of have get a that's as flattish higher margin or sales pricing

especially And when see we being what going signals, components do a into single-board positive fiscal comes computers about to the that it XXXX. our product we just year needed with positive availability, talked momentum the and we see

Jim Suva

your for Well, time. thank Ken. and Congratulations you, and to challenging Phil a you teams navigating very

Ken Jacobson

Jim Thanks,

Phil Gallagher

Jim Thanks,

Operator

Thank you.

is William with question next your from Truist Please Securities. Stein proceed Our question. with

William Stein

my Great. questions. Thanks taking for

receivables First, increase guys know not I think issues. had little sort historically unusual bit of collection the was have any you a unusual. I

you'd or you in end increase the market we don't geo the expect during this other categorize to if I that cycle. can comment AR as But I think, any So wonder either concentration or way by it? any

Ken Jacobson

like any customer customer We that flow I the across say it cash customers would don't tell I part own major we're concentration. matters. beholding have kind Bill. I the their it supplier. the through to about. we concentration guess specific any or talked one of worked that board not would was or with we supplier fact regionally, But no and again, But that Thanks, what situations Phil Yes. of concentrations challenges like is was you

people it the XX then of other want of quite just in And frankly, December next was recovered in pay January that and the and was which to piece early a kind was it quarter. us on part

bit has about improved little amount the saying clearly dues it's a normal a continue aging have on. little they're but think past to So I actually on had would we areas with high-risk team because business definitely And collections, in. any the can are just today actually focus focused a of improved but credit get say we involved something I we call that we Still bit. the a

Phil Gallagher

just Well jump on I'll that.

been because with we bad concerned the – and we've years sheets. actually make that of were customers ago, of of weaker collections add going COVID, extension receivables and X.X that debt write-offs we've this all okay? we're teams okay? when that, ones not to a with couple to our the And that complement will pleased, had a a sure A aren't to if You on. balance concerned from it all exposure actually business little frankly debt about bad started yes happen over it. the want And I and been we're minimal, actually overall. and our years very for actually have that's to But just receivable standpoint ago you

William Stein

think would event, more one Two and quick real way the okay. global Yes. metric. that's order more talking the of sounds I one changes – I It appreciate like China-focused a sounded order It but well, a you then backlog, were if more like depth time the of that. reduction. in that a lead other in is one patterns, about was the

I'm can that. just set me hoping So, on level you

Phil Gallagher

on global It times don't know. a Asia. -- not definitely And it's is. are no it's basis. just The I No, not lead

on clean that saw as was now. As little we in just in said anybody assertive than to is, with again, are still what making I stronger being doing said, said, Pac bit the all. going working a would and the us Asia even what's -- more we're Pac in we're And little customers West And backlog it sure -- that's book-to-bill bit up. the that with I surprise a right the I Asia we're West

point, with the customers right? want negotiations coming don't that want, product in in that don't Well, we in we're side. fair Matt's the suppliers to So

no to suppliers product have don't shelf good. want on the that's the And us

they build As out to real They their and want what's capacity. what's not. know

other the are want because So, that's to question, out some ultimately want, a little and of they're suppliers the NCNRs build don't with letting working really, suppliers well to really going customers back to bit Matt's us rigid. that not are stuff more going they

everyone to So bit little unique of a but a is Asia. not one-off,

William Stein

I the increases the us future you capital you the so what dividend if it Thanks can in. one, much be tactics Can plan in for Last or remind want might to guys. particular, there? it that. allocation Appreciate squeeze describe however, of strategy

Ken Jacobson

Yes.

at historical we particular, I bought has We've since I look the our buybacks once increase, dividend our think of pattern months. year pretty we've back would -- in in the September think a the our been shares good quarter, been in there. X% last XX

CapEx. This quarters, have quarter, did a actually CapEx that than would you'd larger dividend say, if I higher so of any we look few plus past our at was buybacks the plus

shares to standpoint, for of terms So the back and from before have capital, quarters. into going past to repurchase below on to has capital relatively looks and a shareholders. returning continue others we'll of it an attractive at think trading to do especially, we enough use value to we still even below it our needs priority look business, we're prioritize versus -- we to we and start CapEx, is well get cash cash generation over working flow price to stock as like But working the in couple though performed able to book be still get

William Stein

you. Thank

Phil Gallagher

Will. Thanks,

Ken Jacobson

Thanks, Will.

Operator

Thank you.

Our with is proceed Quatrochi question your from Joe with Wells Please Fargo. question. next

Joe Quatrochi

for like are Thanks to being a the question. pressure in you taking thinking seeing Farnell, kind leading worried business. Is you little you're components pricing correlated or how guys maybe curious, about about? this precursor the was as a do indicator of that bit the that Yes. I a

Ken Jacobson

it. don't worried about I I would guess, I that. that we're know answer

I about and and points I it expected. diverse Farnell but north And We there, think do characterize set, market in pretty a it right? guess, they still gross basis healthy how product have was got it there think we some uplift we would a the correct that I normally very is, knew itself. in we the talked of little would margin range XXX maybe bit in a have margin as I

what a of their type maintenance pricing that's when measurement, about test we areas in kind talking also semiconductors and on-the-board other premiums and certain they There's talk IP&E. we're about of lot business components. have on-the-board And But really repair.

So that margin steady there's a nice balanced portfolio believe. that keep we can

Phil Gallagher

Yes.

is just concern. just a last that. ramp them week it's Joe a No, the in So, this, spent I'll We with week. UK Phil. not

got that we've afraid We've of signaled down. we As really that's call a the I, solid Ken plan. quarters a backlog -- come we this got matter this team. going little computer Since really, single-board is solid ago. But top to on a and fact, They're growing.

So that's end impacting some that of as definitely the fiscal into back the pointed of fiscal And 'XX. top our come will Ken QX year near line.

Joe Quatrochi

that's Farnell little maybe pricing in the to spreading core a it see Got what potentially just it. happening I guess into I ask. you And differently. Do business, the is pressure trying bit guess ask components I'm

Phil Gallagher

Yes.

Okay. Got Yes. you.

much lines. -- good So There's core, not question. along shipping different right? the as debit from those and things Again, buys the Farnell than

our okay? you'll a on pressure. core we'll I still see On -- some January. side There's in raised the XX-plus of different. start Right pricing that -- out factor So, so now, as matter -- seeing still it's suppliers prices there's side, not called much,

lead So back them to all Lead -- because raising of not in prices. the are first question all still time. on times coming they're

seeing to system, right pressure right? always have now impact. we're not the anything negative overt But that's there's going in big a So, that that

Ken Jacobson

we with well as us pressure IP&E that's demand of thinking talk that can put -- Farnell just that, our margin, filling right? the we growing pressure our higher-margin as kind always and on the stable, to offset keep of but about margin And we to we're Farnell model. there So about overall the again the helps on I will gross Supply-Chain-as-a-Service, and add but probably have to pressures how help are we're initiatives do kind down, going going always would have revenues getting keep creation funnel including some competitive competitive

Phil Gallagher

Yes.

to And Sorry online we've question. back I that's and revenues transaction. because to XX% in why online record-breaking to drive number drive good and digital, had Farnell, of And got and a just in is jump right? sales. Joe, of a And were but done eCommerce that's we the got this XX% the why think we actually

and lower that business. have touch, lower really that drive helps to cost pressures, serve piece offset So, of some on you because you much a

I want just to that So, add in.

Joe Quatrochi

the generation? also of as maybe nearly quarter there's this how with declining about start just think Yes. onetime positive? then to midpoint, follow-up Should do think on And revenue cash March the And flow do more kind helpful. a quarter? about that CapEx? quarters? CapEx we That's that a of couple we we on think inflecting just maybe how about of I in do note maybe the How as know about CapEx we think next guidance

Ken Jacobson

flow. it's consistent the I'd Yes. say, more To maybe answer CapEx first, question

there So, to say on yes or $XX levels give would work kind I'd cash the be is something receivables. get expectation And answer but do inventory the some million-ish quarter flow, of take CapEx. the a down and to the on got collect we've

So, that's clearly goal the down. when go sales

through. working capital, less inventory receivables less Our and model then needs less and works including it

it like. then a But than the into clearly focused quarter. we're next quarter So, fourth this more we'd bit going and time may take little that's on what

Joe Quatrochi

you, Thank

Ken Jacobson

Thank you.

Operator

Gallagher, CEO are at hand for this questions to There you. back over I would like no call Phil Thank time. any further the to closing comments.

Phil Gallagher

to early I for Thanks a earnings great our report earnings XXXX. thank third May. to quarter today's Yes lot. in call. again look everyone speaking you attending a want I forward to in fiscal Have

Operator

today's concludes conference. This

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

Avnet (AVT) 1 Feb 232023 Q2 Earnings call transcript