Avnet, Inc.

Greetings and welcome to the Avnet third quarter fiscal year 2021 earnings call. I would now like to turn the floor over to Joe Burke, Vice President of Treasury and Investor Relations for Avnet.

Thank you, operator. Earlier this afternoon, Avnet released financial results for the third fiscal quarter of 2021. The release is available on the investor relations section of the company's website. A copy of the slide presentation that will accompany today's remarks can be found via the link in the earnings release as well as on the IR section of APNIP's website. Lastly, some of the information contained in the news release and on this conference call contain forward-looking statements that involve risk, uncertainties, and assumptions that are difficult to predict. Such forward-looking statements are not the guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent form 10Q and 10K and subsequent filings with the SEC. These forward-looking statements speak only as of the date of this presentation and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this presentation. Today's call will be led by Phil Gallagher, Avnet's CEO. and Tom Liguori have met CFO. With that, let me turn the call over to Phil Gallagher.

Phil? Thank you, Joe, and thank you, everyone, for joining us for our third quarter fiscal year 2021 earnings conference call. I hope everyone is safe and healthy. Overall, we're very pleased with our third quarter results, and I'm excited to talk through some of the quarter's highlights. Over the past year, our employees have continued to demonstrate incredible resilience despite the enduring challenges associated with the pandemic. and I'm personally impressed by and proud of the strides we've made as an organization. Sticking to the plan we set for ourselves, even in the face of what can only be described as a complex operating environment. Let me kick this call off by providing a bit of insight about what that operating environment looks like today from our seat in the Center of the Technology Supply Chain. As many of you know, while there's a glimpse of light at the end of the tunnel as countries around the world work to vaccinate their populations, We are still operating in an unpredictable market. Supply constraints combined with a recent strong rebound in demand have resulted in the kind of widespread inflation we have not seen for many years. As we highlight in our second fiscal quarter, we saw notable demand increases across the automotive, consumer, and industrial segments. Those end markets, in addition to communications and computing, drove end market demand throughout the third quarter. Customers are seeking to reduce supply chain risk by securing longer-term supply agreements and exploring second sources, providing welcome opportunities that we were not previously seeing. On top of that, many suppliers are also experiencing raw material price increases, such as resins, coppers, and more. Adnet is, in most cases, able to pass along these price increases to our customers. While this type of operating environment is not ideal, We've certainly navigated similar circumstances throughout our 100-year history and have a number of systems and processes in place that enable us to effectively serve our customers and suppliers. Those systems are incredibly effective and enable us to continue to compete in this market. But what really is key to our success is our commitment to prioritizing strong partnerships. ADMET is and will continue to act responsibly, and many more. provide us with strong visibility into potential pricing shifts and customer response. We take great pride in the supply chain engagement practices we've built with both our supplier partners and customers and we strive to maintain this approach. Of note, we continue to see strong design activity coming off record registrations in the second quarter. In our fiscal third quarter, our demand creation revenue, design registrations, and design wins increased sequentially and year over year. Really proud of that. We tie this success directly to the investment in relationships in our engineering capabilities, which include digital, self-serve, and design tools, and of course, our account management team and field application engineers. Not only does this result in engagements with stronger margins, but it improves our revenue visibility, which in turn allows us to operate our business more intentionally with fewer surprises. Our success in stabilizing our business by prioritizing strong partnerships is has proven effective as the environment has become more dynamic and I'm confident it will enable us to continue to adapt to the changes as we have for the past 100 years. Now, turning to slide five, you'll see evidence of our progress in the third quarter of fiscal year 2021. In the third quarter, revenues were $4.9 billion up year-over-year and sequentially, exceeding our guidance range and also up sequentially and year-over-year on a constant currency basis. Excluding TI in both periods, sales grew 22% year-over-year on a constant currency basis. We were pleased with how we performed in the Americas and the EMEA regions, and we are encouraged by the continued progress we are seeing at Farnell. In the Asia region, a shortened Chinese New Year and continued strong demand in all the markets contributed to continued momentum in the region. Looking at our core electronic components business on slide six. Red News were up year-over-year and sequentially in the quarter at $4.5 billion. As mentioned earlier, strong continued growth in Asia drove the outperformance in this segment, demonstrating solid execution against our China growth plan as we gained share across the entire APAC region. We were also encouraged by better than expected results in Americas and continued incremental improvement in Europe, our strongest region. Lead times, of course, lengthened throughout the quarter. driving very high book-to-bill ratios in every region. We are continuing to tightly manage our backlog, and our teams are working closely with our customers to gain extended visibility, which we're then sharing with our supplier partners. While it is difficult to forecast how long the supply constraints will continue, most market participants expect it to extend through at least the second half of calendar year 2021. Turning to Fresnel in slide seven. Revenues were up year-over-year and sequentially in the quarter at $396 million, and operating margins increased sequentially to 6%, progressing towards our target of 10%. We made the conscious decision this quarter to continue to maintain operations at both the Leeds Distribution Center and the existing facility for the foreseeable future. This decision is in line with our commitment to provide seamless service to our customers as we continue to see increased demand out of Farnell. We remain steadfast in our commitment to continue to invest in this critical aspect of Adnet and are excited about the clear potential of Fresnel as we further digitize our business. Case in point, Fresnel saw e-commerce sales up 20% year-over-year. We are bullish about the contributions Fresnel can make to Adnet's value proposition and continue to invest in Fresnel. We added 67,000 SKUs through the first nine months of fiscal year 2021. and progressing on our plan to add up to 250,000 SKUs through the fiscal year 2022. So with that, I'll turn it over to Tom so he can dive a bit deeper into our third quarter results.