AVNET INC Q3 FY2025 earnings call

• Achieved sales of $5.3 billion near the high end of guidance and adjusted EPS of $0.84 above guidance, generated $141 million of cash flow from operations. - Results driven by better performance in Asia and Farnell, offset by weaknesses in West and challenging EMEA market. - Global book-to-bill ratio improving, Asian region achieved parity, IP&E book-to-bill ratio above parity. - Backlog lower due to shorter lead times and customers in destocking mode, inventory is a strategic asset and will be optimized. - Electronic component sales affected by economic and geopolitical factors, Asia was only region with year-on-year growth. - Farnell sales up 6% sequentially, operating income increased to 3%, team executing strategy. - Adjusting systems and processes to mitigate tariff impact, leveraging global logistics, collaborating with suppliers, offering alternative origin products.

Third quarter sales were approximately $5.3 billion, near the high end of the guidance range and down 6% both year-over-year and on a sequential basis. Regionally, on a year-over-year basis, sales increased 13% in Asia but declined 24% in EMEA and 9% in the Americas. From an operating group perspective, electronic component sales declined 6% year-over-year and decreased 7% sequentially. Farnell sales declined 10% year-over-year, but increased 6% sequentially. Gross margin of 11.1% was 78 basis points lower year-over-year but 54 basis points higher sequentially in part due to a seasonal mix shift to the West.

• For the fourth quarter of fiscal 2025, guiding sales in the range of $5.15 billion to $5.45 billion and diluted earnings per share in the range of $0.65 to $0.75. - Fourth quarter guidance assumes flat sales compared to last quarter at the midpoint, driven by favorable foreign exchange rates, especially in EMEA. - Overall sales guidance in constant currency assumes lower sales in EMEA and flattish sales in Asia and the Americas. - Assumes similar interest expense compared to the third quarter, effective tax rate of between 21% and 25% and 86 million shares outstanding on a diluted basis.

• Challenging market conditions including economic backdrop, geopolitical factors, and weak demand in some regions. - Uncertainty related to tariffs affecting customer orders and financials. - Uncertainty regarding inventory levels and the progress of destocking process.

Q: Regarding the difference in revenue guide for the June quarter compared to some suppliers' guidance and inventory expectations A: Ken explains that the revenue guide is based on regional performance with Asia having growth but the West being weak, and inventory decreased by $57 million on a constant currency basis, expecting further reduction this quarter Q: About opportunities for supply chain services for customers regarding tariffs and financial profile A: Ken and Phil state that leveraging global scale and geographic footprint helps reduce complexity for customers, part of Americas business from China can be mitigated via other regions, team adjusting in real time to tariff changes Q: About Farnell's performance and inventory A: Phil says Farnell is executing plans, operating margin improved, inventory is a strategic asset and will continue to reduce inventory but balance is needed Q: About impact of tariffs on order patterns and visibility into AI-driven components A: Phil and Ken say tariff-related order pattern changes are not significant, there is some pull-in in Asia, and there is 3%-7% visibility into AI-related components