Avnet Inc Q1 2025 Earnings Call Transcript

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

Question: Joseph Quatrochi - Wells Fargo Securities, LLC - Analyst : Yeah, thanks for taking the questions. I wanted to understand your comment in terms of just Asia returning to year-to-year growth. I guess, I wonder, ex the data center opportunities that you're seeing, I think those are probably fairly nascent a year ago, are we seeing ex-data center return to

Question: Joseph Quatrochi - Wells Fargo Securities, LLC - Analyst : Okay. That's helpful. Maybe on the Farnell side, I mean, I guess, as we take a step back and we try to think about the go forward path here, I mean, structurally, do you think that this business can still return to that double-digit EBIT target? And I guess, what does that require? And then maybe, just along those lines, I think when you guys gave that target, there was probably some assumption around like pricing and the impact of pricing as you on a go-forward basis. And how does that played out relative to your planning?

Question: Joseph Quatrochi - Wells Fargo Securities, LLC - Analyst : Okay. And maybe just as a quick follow up to that. I mean, did things get worse from here before they get better or do you think we're kind of bouncing along the bottom here?

Question: Ruplu Bhattacharya - BofA Securities, Inc. - Analyst : Hi. Thank you for taking my questions. I have one for Phil and one for Ken. Phil, just in terms of where we are in terms of the market correction, I mean, what innings do you think we are in? Are we at the bottom or do you think there's another couple of quarters of this correction? And also, have you seen any impact from the WT Micro, Future acquisition, either any positive trends or negative trends, if you could give us your view on that?

Question: Ruplu Bhattacharya - BofA Securities, Inc. - Analyst : WT Mirco.

Question: Ruplu Bhattacharya - BofA Securities, Inc. - Analyst : Okay. As a follow up, Ken, can I ask you about Farnell, another question on operating margin? How much was the impact sequentially from FX versus you talked about a worse mix of on-board components being lower. How much was the mix impact? And then when we look at this business, what is a reasonable operating margin target for this business? Do you think that it can you ever get back to double-digit operating margin? And what are the drivers for margins over the next couple of quarters?

Question: Matthew Sheerin - Stifel, Nicolaus & Company, Incorporated - Analyst : Oh, yes, thanks. Hello, everyone. Phil, a question on the commentary about your guidance for the December quarter. And I think you're looking at sort of flattish sequential growth across the regions. Is that right? Because it seems like EMEA, typically Europe is down sequentially just on selling days and it sounds like Europe is the weakest market in terms of demand right now. So could you just clarify that?

Question: Matthew Sheerin - Stifel, Nicolaus & Company, Incorporated - Analyst : Got it. Okay. And then on gross margin, it looks like 10.8%, that was the lowest number that I see going back a few years and I know that mix is working against you and then you talked a little bit about Farnell. But how should we think about it? It looks like gross margins should be flat again on that mix in December. So how should we think about gross margin as we get through the fiscal year? Is it just dependent on mix or is there pricing or other things in the mix there?

Question: Matthew Sheerin - Stifel, Nicolaus & Company, Incorporated - Analyst : Got it. Okay. And then just lastly on the inventory, I know you're targeting a fairly big reduction back to the 80s in inventory days. But you haven't really seen any significant progress where some of your competitors, a lot of the [EMS] companies have been cutting inventory. So I guess the question is why have you been lagging? Is that partly because your customers are still pushing back on our rescheduling orders? I'm just trying to figure out the timing of this inventory.

Question: William Stein - Truist Securities, Inc - Analyst : Great. Thanks. I have a couple. First, Phil, you talked about strength over the next three years. I'm wondering if you expect revenue to turn to year-over-year growth during fiscal '25 towards the end of the year and maybe even if you have a full-year view at this point, do you think we'll wind up seeing sales grow in the current fiscal year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 30, 2024 / 4:00PM, AVT.OQ - Q1 2025 Avnet Inc Earnings Call

Question: William Stein - Truist Securities, Inc - Analyst : That's helpful. At least, one other if I can. You highlighted the increase in turns business. And I guess what I've discussed with some of your suppliers in the semi companies I cover is this potential to misinterpret signals when customers come in with, what we call, turns business, right? There are a lot of potential reasons for that. I think it's easy to interpret that in an optimistic way and say, well, they're -- demand is improving and they're wanting product really quickly. The other way to view that is simply that they've grown accustomed to your having quite a bit of excess inventory and able to deliver in very quick turns. So why should they give you tons of visibility? I wonder where you think we are in that dynamic. Do you think the shorter lead times in the turns business is more optimistic demand or is it more of a view that they're relying on you to have the inventory and that, in fact, we're not really seeing a pickup in demand?

Question: William Stein - Truist Securities, Inc - Analyst : I appreciate that. If I can have one more follow up, please. I'm wondering if you can level set us on end market exposure. I think we get that from you all. Once in a blue moon, you disclose end market exposure. Even if you can't give it on a regional basis, can you just remind us what -- because when you start throwing out things like, aerospace defense and AI that we know is strong, sort of reminds us that we don't get that on a quarterly basis from you all. So I wonder if you'd be able to discuss that with us for a minute.