Avnet Inc at Raymond James TMT and Consumer Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Melissa Fairbanks - Raymond James - Analyst : So I think we're just going to go straight into the Q&A. I think most of you are familiar with Avnet. That's the good thing about a tech conference, right? But Phil, I think it might be beneficial just to do like a quick review of your most recent quarter results, your expectations for the December quarter outlook.

Question: Melissa Fairbanks - Raymond James - Analyst : Okay. Have those end-market dynamics you reported in late October now here we are middle of December, has there been any change from what you were seeing at the end of October?

Question: Melissa Fairbanks - Raymond James - Analyst : Okay, great. One question I get quite a bit is how some of the trends are -- the broader trends are definitely in line with what we've seen from some of your suppliers, also some of your end customers. But then if we compare there are certain areas where you've been outperforming, maybe in APAC, that's one to highlight. Does your line card or your specific supplier exposure have anything to do with that?

Question: Melissa Fairbanks - Raymond James - Analyst : We have to.

Question: Melissa Fairbanks - Raymond James - Analyst : Great. I think one of the thing that I get asked about quite a bit and your suppliers get asked just about every quarter. What are you seeing in terms of pricing? We do have excess inventory in the channel. We'll talk about inventories in a minute but the pricing environment as lead times have come in, demand is normalized.

Question: Melissa Fairbanks - Raymond James - Analyst : Okay. Great.

Question: Melissa Fairbanks - Raymond James - Analyst : Great. That of course leads us into inventories. I think this has been one of the biggest hot topics over the past couple of years now. So in the past, Phil, I've stolen this phrase that you use that you act as the shock absorber for the industry. So we've had an unusual trajectory of this cycle. It hasn't exactly been a normal cycle that maybe we're starting to see a little bit more normalized behavior. But has this changed the way you and your suppliers are approaching, managing the supply and the inventory and that shock absorber dynamic? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 09, 2024 / 6:40PM, AVT.OQ - Avnet Inc at Raymond James TMT and Consumer Conference

Question: Melissa Fairbanks - Raymond James - Analyst : Great. Yeah, so, moving on from inventories from one hot topic to another. I think the theme of this conference this year is probably all around tariffs. So maybe just the threat of tariffs at this point. What's the potential impact on either your business, your suppliers, what are your current thoughts about what's going on? And how are your suppliers approaching you potentially working through this?

Question: Melissa Fairbanks - Raymond James - Analyst : It has been something that you've had to negotiate in the past and that's one thing that I tend to point out to investors is that you're good at responding to changes in the environment.

Question: Melissa Fairbanks - Raymond James - Analyst : Interesting. Okay, great. Thanks. So maybe getting back to the near-term performance metrics, Farnell has been a very opportunistic business for you and serves as a really nice funnel for the broader components business. But you have had some challenges there recently. If you could just give us an update on the progress there that would be great.

Question: Melissa Fairbanks - Raymond James - Analyst : Excellent. So before we get into maybe some more longer-term opportunities for the company, I just want to pause and see if anyone had any questions. Unidentified Participant_1 (inaudible - microphone inaccessible)

Question: Melissa Fairbanks - Raymond James - Analyst : Okay. Great. Anyone else? Okay, we'll move on. So this is one of my favorite topics. I always have to bring this up whenever we see each other. So I was able to tour one of the Arizona facilities. I saw the programming business in operation. So talk about what kind of opportunities does that business drive the revenue and the margin profile for that business? And if you're happy to give us an exact number I'll build into my model. (laughter) I'm teasing. (laughter)

Question: Melissa Fairbanks - Raymond James - Analyst : Okay. So all of these value-added services, some of the programming, the embedded, all of that, how does that help differentiate you from the competition. You touched on some of the domestic competition, Taiwan, obviously known for doing very high volumes. Is this differentiation for you?

Question: Melissa Fairbanks - Raymond James - Analyst : Okay, great. Maybe is there anything that you've been doing with automation more recently that could help also give you some competitive advantages or maybe attract some new business or any other future area that you're investing in now?

Question: Melissa Fairbanks - Raymond James - Analyst : Okay. All right. So you touched on this or you mentioned it just a little bit ago about some of the competition, the consolidation that happened with the Taiwanese player, took out someone in Canada. I do get asked quite a bit, this is -- it was an unusual transaction really broaden their scope in terms of the end markets or the regions that they touched. So does this change the landscape in the Americas at all? Have you seen any change in competitive environment? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 09, 2024 / 6:40PM, AVT.OQ - Avnet Inc at Raymond James TMT and Consumer Conference

Question: Melissa Fairbanks - Raymond James - Analyst : Okay. Interesting.

Question: Melissa Fairbanks - Raymond James - Analyst : Good, good. And I think we have just overall seen a much more rational competitive environment over the past several years in general. So there was a worry that we were going to get a shock to it. But Ken, I want to give you a chance to talk. We do have to talk about capital allocation. You guys have been doing a lot of buybacks recently. It was nice to see positive cash flow last quarter. Maybe talk about some of your expectations for the cash flow through the downturn. This does seem to be a little bit of an extended downturn than what we're normally used to. But your expectations in the near term, how you're going to prioritize the use of that cash.

Question: Melissa Fairbanks - Raymond James - Analyst : Okay, great. You did touch on the interest expenses a little higher. You have been doing a really good job bringing down inventories the past few quarters. I would expect that to continue barring any further shocks to the end market in general. But in terms of what we normally see ahead of an upcycle, when we do start to see that inflection point in demand return to growth, more broadly. And I think Europe is going to be a key there. Is there a REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 09, 2024 / 6:40PM, AVT.OQ - Avnet Inc at Raymond James TMT and Consumer Conference risk that all of a sudden we won't have brought down the inventories far enough or does that actually provide you with an advantage to respond to changes in demand?

Question: Melissa Fairbanks - Raymond James - Analyst : Great. Great. Yeah. Feel free to put an exact date on (laughter)--

Question: Melissa Fairbanks - Raymond James - Analyst : That's the number one question, right?

Question: Melissa Fairbanks - Raymond James - Analyst : (laughter) We just have a couple of minutes left but are there any questions from the audience? Sweeney? Unidentified Participant_1 Yeah, so (technical difficulty) embedded business and (technical difficulty) I was just curious (technical difficulty) a lot of talk about AI (technical difficulty) (laughter) is there an opportunity to invest more in (technical difficulty) I don't know if you're seeing any more (technical difficulty) so I guess how can you add more value in the (technical difficulty)-- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 09, 2024 / 6:40PM, AVT.OQ - Avnet Inc at Raymond James TMT and Consumer Conference

Question: Melissa Fairbanks - Raymond James - Analyst : Okay. Amazingly, I think we are out of time, but I just wanted to say thank you again, Ken and Phil and Joe. Always great to have you.