Avnet, Inc. Q4 FY2025 earnings call

• Fiscal year 2025 revenues were $22.2 billion with adjusted diluted earnings per share of $3.44.
• Fourth quarter sales were $5.6 billion, exceeding guidance, with adjusted operating margin of 2.5% and Farnell at 4.3% operating margin.
• Asia had 18% year-over-year sales growth in the quarter, bookings improved across regions, backlog is growing, and inventories are reducing though work remains.
• Key executive additions included Dave Youngblood as Chief Digital Officer and Gilles Beltran as President of EMEA region, with succession planning in place.
• Coordination with suppliers and customers to manage backlog, new customer orders increasing, indicating inventory normalization.

Electronic Components: Fourth quarter sales were $5.6 billion, up 1% year-over-year and 6% sequentially. Gross margin was 10.6%, impacted by a higher mix of Asia sales. Farnell: Sales increased 3% year-over-year and 5% sequentially. Operating margin in the quarter was 4.3%. Regionally, Asia had 18% year-over-year sales growth in the quarter, while EMEA saw a 17% decline and Americas a 2% decline year-over-year. In constant currency, EMEA sales were down 21% year-on-year.

• First quarter of fiscal 2026 sales guidance is $5.55 billion to $5.85 billion, with diluted earnings per share guidance of $0.75 to $0.85.
• Assumes sequential sales growth of approximately 2% at the midpoint, similar interest expense to fourth quarter, effective tax rate between 22% and 26%, and 85 million diluted shares outstanding.

• Market uncertainties that could impact actual results differing from forward-looking statements.
• Foreign currency exchange rate changes affecting gross margins.
• Tariff impacts on sales, though minimal in the fourth quarter with less than 3% of Americas sales and less than 1% of global sales from customer tariff billings.

Q: Comment on the more positive outlook for EMEA and end markets driving there.

A: There's modest movement in EMEA with bookings starting to increase year-on-year, though not celebrating yet.

Q: Thoughts on inventory trends in the September quarter and working down inventory.

A: EC business expected to continue modest inventory decline next quarter, with Farnell offsetting a bit, still work to do but progress in core regions.

Q: Asia trend continuation, mix of regions, and impact on core business margins.

A: Asia has been strong with 4 consecutive quarters of year-on-year growth, margins holding up, with hope for West recovery to improve margin mix.

Q: Actions to improve Farnell margins, digital sales contribution, and margin trend.

A: Changed leadership, reduced non-value-added expenses, digital progress with Dave Youngblood, aiming for double-digit operating margins in 4-8 quarters.

Q: Views on inventory correction inflection point.

A: Close to inflection point with indicators like book-to-bill increase, lead times stable, inventory days down for some suppliers and OEMs, but some inventory still exists.