Avnet Inc Q4 2024 Earnings Call Transcript

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

Question: William Stein Stein - Truist Securities, Inc - Analyst : I wanted to ask about a couple of things. Perhaps first, inventory. I think in recent quarters, I'm not sure if you used this word but I would call it spiky or not well dispersed by supplier and maybe also by region or end market. Can you provide an update as to whether that condition improved and your inventory became a bit more dispersed by supplier or we're still in that sort of spiky situation?

Question: William Stein Stein - Truist Securities, Inc - Analyst : One other. As I listened to some of your suppliers or large semi companies that may, some of them maybe not even suppliers anymore, there were two interesting takeaways from my perspective. One was that demand conditions both for orders and for bookings as well were less dispersed by end market, maybe if we take out aerospace/defense, maybe that one in particular has been strong. But ex that end market, it hasn't been as much of an end market story. It's been much more of a geo story. And the story that the semi companies have told have been that geographically, they saw a meaningful recovery, a big snapback in China. Have you begun to see a similar trend? It didn't sound quite like that in your prepared remarks, so I'm hoping you can clarify. And if you can identify the -- maybe the difference between what you're seeing and what your suppliers are talking about, that might help us understand the broader picture.

Question: Matthew Sheerin - Stifel, Nicolaus & Company, Incorporated - Analyst : Just following up on Will's question regarding demand. I know you're -- and I appreciate you're just giving September quarter guidance, but it sounds like you're not ready to call the bottom yet, Phil, in North America or Europe. And so given that and what we're hearing from other suppliers, should we expect those two markets to be below seasonal, meaning down sequentially, offset a little bit by Asia so that your overall business may be flat to down sequentially? Is that the right way to think about it at this point?

Question: Matthew Sheerin - Stifel, Nicolaus & Company, Incorporated - Analyst : Yeah. Actually, Phil, I was actually just talking about the December quarter, kind of looking past September based on your backlog. And then my question was, should you expect that to be below seasonal on those two regions?

Question: Matthew Sheerin - Stifel, Nicolaus & Company, Incorporated - Analyst : Yeah.

Question: Matthew Sheerin - Stifel, Nicolaus & Company, Incorporated - Analyst : Got it. Okay. And then regarding your margin or backing into your margin guidance, it looks like component margins would be below that 4% target that you have. And it also looks like gross margin will be down by at least 20 basis points sequentially. Is that really all mix-driven at this point or are you seeing incremental pricing pressure as well?

Question: Matthew Sheerin - Stifel, Nicolaus & Company, Incorporated - Analyst : Okay. And just on OpEx, Ken, looking past the September quarter. You talked about some incremental restructuring, so should we expect OpEx to work down from there or not?

Question: Melissa Fairbanks - Raymond James Financial, Inc. - Analyst : I've got one a little related to some of your commentary on the inventories. Just wondering what we can expect moving forward either in terms of investment in end-of-life products. I know you've had some unique kind of strategic opportunities there or maybe some expansion of your supply chain services business.

Question: Melissa Fairbanks - Raymond James Financial, Inc. - Analyst : Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 08, 2024 / 4:00PM, AVT.OQ - Q4 2024 Avnet Inc Earnings Call

Question: Melissa Fairbanks - Raymond James Financial, Inc. - Analyst : Okay. On the supply chain services business, I think this maybe going back to the December quarter or maybe even a conference in the December quarter. You had some opportunities. You onboarded some inventory. I believe it was for an industrial customer. And then you saw potentially some opportunities longer term in the auto space. Can you give us an update on that business?

Question: Melissa Fairbanks - Raymond James Financial, Inc. - Analyst : Yeah, okay. Love to see the good progress on the inventories by the way. Maybe if I could squeeze in just one more quick one. We've talked a lot about Asia today, but we've heard about some increasing competitive or pricing pressures in Asia. I'm wondering what you're seeing there, if that's impacting anything? Obviously, Asia has been one of the better performing regions for you. But if you can comment on the competitive dynamics there.

Question: Joseph Quatrochi - Wells Fargo Securities, LLC - Analyst : Just kind of curious on the target of being sub-$5 billion inventory, how long do you think that could take? And then just to clarify, is that including the supply chain service inventory that you're holding as an agent for your customers, or supplier side?

Question: Joseph Quatrochi - Wells Fargo Securities, LLC - Analyst : Okay. And then on the -- you talked about the opportunity on the data center side. Just kind of curious, how big is that from a revenue perspective for you today? And how should we think about the margin profile relative to the corporate average?

Question: Ruplu Bhattacharya - BofA Securities - Analyst : First one is on Farnell. So what do you or Rebeca plan to do different to turn the Farnell business around? And Ken, you talked about margin improvement throughout the next fiscal year at Farnell, how should we think about the cadence of that? I mean, where do you think the margins in Farnell can get to by the end of the 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. AUGUST 08, 2024 / 4:00PM, AVT.OQ - Q4 2024 Avnet Inc Earnings Call

Question: Ruplu Bhattacharya - BofA Securities - Analyst : Okay. Maybe for my follow-up, if I can ask you on your capital allocation priorities. I mean, from the prepared remarks, Phil, it seems like we're nearing the end of the inventory correction in the channel. So how many more quarters do you expect of this correction? And in this environment, where would you focus your investments? And how should we think about the trade-off between buybacks or doing any M&A or any other type of investments that you may have? So if you can just kind of weave in like how many more quarters of correction you expect and where do you focus your efforts in terms of investments and capital allocation?