Avnet, Inc.

Please stand by. Our presentation will now begin. Welcome to the AVNET First Quarter Fiscal Year 2023 Earning Conference Call. I would now like to turn the floor over to Joe Burke, Vice President of Treasury and Investor Relations for AVNET.

Thank you, Paul. Earlier this afternoon, AVNET released financial results for the first quarter fiscal year 2023. 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 AVNET's website. 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 day of this presentation and the company undertakes no obligation to publicly update any forward-looking statement 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 Ken Jacobson, AVNET's CFO. With that, let me turn the call over to Phil Gallagher. Phil?

Thank you, Joe, and thank you everyone for joining us on our first quarter fiscal year 2023 earnings conference call. In the prior fiscal year, we delivered record results and continued to take strategic steps to position AVNET as a more durable company with an increasingly critical role in the global technology supply chain. We are well positioned to continue to deliver value to our customers, suppliers, and shareholders, even in the face of a more challenging and uncertain operating environment. I am pleased to share that we kicked off the fiscal year with another quarter of solid financial results, including meaningful sales growth across all regions and improved profitability year over year. We achieved these results despite the macro headwinds affecting certain areas of our business, which I'll touch on in a minute. In the quarter, we achieved sales of $6.8 billion. This succeeded the higher end of our guidance up 6% sequentially and over 20% year over year. On a constant currency basis, sales increased nearly 29% year over year. Efficient management of our operations also enabled us to drive solid operating margins of 4.3%, which is the third consecutive quarter of a greater than 4% operating margin. Further, the combination of a solid sales and effective management of operations allowed us to increase operating income three times greater than revenues on a year over year basis. A significant driver of our results in the quarter was, of course, the continued execution by our incredible global team. Our team has effectively managed market complexities and has served as great partners to our customers and suppliers as they faced fast-changing supply chain conditions and uncertainties. We are more deeply engaged with our customers and suppliers than ever before, which enables us to maintain the necessary expertise and capabilities to help them navigate today's supply chain complexity. And with the structural and organizational change we made to our business over the last two years, we are well positioned to continue serving as control tower for our customers and suppliers. In the quarter, demand remains strong globally and in key vertical segments like transportation, industrial, and aerospace and defense, and we have continued to invest in inventory to meet this demand. You will see that inventory levels were higher at the end of the first quarter as compared to the prior quarter, which Ken will speak to you further in his commentary. This reflects our need to support sustained sales levels in Asia and quarter increases for specific supply chain engagement. Overall, we continue to be very comfortable with our days of inventory heading into our second quarter. With that, let me turn to the highlights for our business. At the top line, our electronic components business saw sequential and -over-year growth across all three regions. In constant currency, electronic component sales were up nearly 9% sequentially and up over 31% -over-year, reaching $6.3 billion in the quarter. These results were primarily driven by another record quarter of sales in Asia and consistent strong sales growth in both the Americas and the MIA regions. Increased sales in Asia were driven primarily by growth in the transportation and industrial markets. The team in Asia was also successfully gaining share in the region, leading to record quarter billing. The Americas and the MIA regions both benefited from strength in key verticals, notably industrial, transportation, and aerospace and defense. We were very pleased with the growth in these markets, as highlighted at our investor day in June. This is proof that we are well diversified across the end markets we serve and reinforces our expectation that these end markets will continue to have positive long-term growth prospects. Further, our enhanced focus on growing key supplier relationships and addressing their supply chain needs continues to bring benefits across all of our regions. We continue to coordinate closely with customers and suppliers to effectively manage our backlog. As a result of those actions, our overall -to-bill ratio continued to moderate, as was near parity leading into our second quarter. We continue to benefit from our unique engineering capabilities with our field application engineers and digital design tools resulting in another record revenue quarter for demand creation. We believe this continued strength is indicative of the increasing value of the capabilities we provide to customers and suppliers, and is important to supporting our margins in a more uncertain operating environment. Turning to our Fresnel business. Fresnel sales and profitability were impacted by currency fluctuations, particularly weakness in the British town and ongoing component shortages that are affecting Fresnel's ability to fully meet demand for single board computers. Even with that, the backlog for single board computers remains robust, and we expect to realize such sales when product becomes available. Additionally, Fresnel recently became the exclusive licensed distributor of the Raspberry Pi single board computer. We are really excited about this development, which will increase our market share and favorably impact Fresnel's revenue in the midterm. Operating margins for Fresnel were above 12% during the quarter, impacted by a weakening of the British town. We expect currency fluctuation to have a continued impact on Fresnel into the second quarter. We remain excited about Fresnel and continue to see opportunities to leverage Fresnel's electronic components unique and synergistic collaboration to better serve our ad net customers. To conclude, I want to reiterate that we are a stronger and much more durable company today through the changes we've made to our business. And I believe our recent trends and results reflect that. While we cannot control the overall market, I am confident in our team's ability to execute in a challenging and uncertain environment and continue to deliver value to our supplier and customer partners. There's never been a greater need for the capabilities that Adnet has. And we look forward to continuing to play a critical role at the center of the technology supply chain. With that, I'll turn it over to Ken to dive deeper into our first quarter results.

Thank you, Phil. Good afternoon, everyone, and thank you for participating on today's call. As Phil mentioned, we are very pleased with our first quarter performance. Our team's continued execution resulted in significant sales and operating income growth with excellent returns. And we are encouraged by the great start to fiscal year 2023. In the first quarter, our sales were $6.8 billion, up 21% year over year, well exceeding the top end of our guidance range. Sales growth and constant growth in constant currency was 29% year over year with each region contributing to the growth. We also grew sales 6% quarter over quarter or over 8% in constant currency, which is well above our typical seasonal trend. We had strong sales in the first quarter across all of our regions, led by our Asia team, which delivered a record $2.9 billion of sales. On a year over year basis, sales grew 33% in the Americas, 42% in Europe in constant currency, and 18% in Asia in constant currency. From an operating group perspective, electronic component sales grew 23% year over year or 31% in constant currency. Electronic component sales grew 7% quarter over quarter or 9% in constant currency. Farnell sales declined 6% year over year, but grew 2% in constant currency. Farnell sales continue to be negatively impacted by the continued shortage of certain components needed to complete single board computers. Excluding sales of certain single board computers, Farnell sales grew 7% year over year. For the first quarter, gross margin of .4% was down 85 basis points quarter over quarter. This decline was primarily driven by higher Asia regional sales mix and from declines in gross margin due to product and customer mix. We continued to maintain discipline around expenses in the quarter as adjusted operating expenses were $475 million for the quarter, down 4% sequentially and down 1% year over year. Adjusted operating expenses, the percentage of gross profit dollars was less than 62% in the first quarter, which is the lowest it has been over the past several years. Adjusted operating income of $293 million increased 64% year over year and grew three times greater than sales, demonstrating our ability to continue to drive operating leverage as we grow our business. Our adjusted operating income margin was .4% in the first quarter, which is the third consecutive quarter with greater than 4% operating income margin. Electronic components operating income was $267 million, up 65% year over year. Electronic components operating income margin was .2% up over 100 basis points year over year. Most notably, our America's business continue to make progress towards their operating margin improvement goals. This is the eighth consecutive quarter of America's year over year operating margin improvement and we are encouraged by the momentum our America's team has coming into the December quarter. For now operating income was $52 million, up 4% year over year, despite the 6% decline in sales. For now operating income margin was .1% in the quarter, up over 120 basis points year over year. The quarter over the quarter decline in for now operating income margin was primarily driven by a combination of lower sales and a lower gross margin because of the foreign currency impact on for now's pricing and related gross margin. Turning to expenses below operating income, interest expense of $45 million in the first quarter increased by $15 million quarter over quarter, primarily due to higher debt balances to support working capital investments and from rising interest rates. This increase in interest expense negatively impacted adjusted diluted earnings per share by 12 cents quarter over quarter. Our effective income tax rate was 23% in the quarter as expected. Adjusted diluted earnings per share was $2 for the quarter which increased 64% year over year. Turning to the balance sheet liquidity, during the quarter we invested in working capital support our sales growth resulting in approximately $700 million increase quarter over quarter. Of this working capital increase, approximately $300 million came from additional receivables and approximately $400 million came from additional inventories. With respect to our inventory, we are comfortable with the quality and age of our inventory. The increase in inventory was driven by several factors including support for sustained sales levels in Asia and an approximately $120 million increase specific to a single supply chain engagement that came in at the end of the quarter. We expect the inventory related to this specific engagement to shift early in the quarter. Additionally, we continue to work with our customers and suppliers to come to mutually beneficial solutions as certain customers have high levels of inventory as a way for the golden screw components. As a result of this working capital increase, working capital days was 73 days for the quarter which is within our acceptable range of working capital days. Our returns on working capital continue to be significantly higher than our cost of capital. The increases in working capital led to an increase in debt of approximately $700 million and a corresponding $650 million use of cash from operations. The increase in debt led to a gross leverage of 1.9 times at the end of the quarter, still well within our required leverage ratios. At the end of the quarter, we had approximately $600 million of available borrowing capacity and we expect to generate positive operating cash flows in our second quarter because of seasonal declines in sales from our Western regions. In our first quarter, we purchased approximately $150 million worth of shares which represented nearly 4% of outstanding shares. Over the last two quarters, we've retired approximately 6% of outstanding shares. There's $383 million left on our current share repurchase authorization entering the second quarter. We expect to continue to buy back shares at similar levels during the second quarter as our shares continue to trade at meaningful discount to book value and at a lower multiple than our shares have historically traded at. During the quarter, we also increased our quarterly dividend to 29 cents per share, an over 11% increase from the prior quarterly dividend. During fiscal 2023, we expect our capital expenditures to increase primarily to support a new warehouse in Europe. Turning to guidance, for the second quarter of fiscal 2023, we are guiding sales on the range of $6.35 billion to $6.65 billion and adjusted diluted EPS in the range of $1.80 to $1.90. Our second quarter guidance today is based on current market conditions, including a $60 million negative impact on our sales guidance at the midpoint from the recent strengthening of the US dollar as compared to the first quarter. This guidance implies a sequential sales decline of down 1% to down 5% in constant currency and assumes a typical seasonal decline in sales in our Western regions, as those regions have fewer shipping days compared to last quarter because of holidays. This guidance assumes similar interest expense to the first quarter, an effective tax rate of between 21% and 25%, and 94 million outstanding shares on a diluted basis. In closing, I wanna thank our team for delivering another quarter of sales and earnings growth. We believe that we are well positioned to continue to gain market share in the future. AVNET's diversification of suppliers, products, and the end markets we serve are key differentiators that will enable us to continue to deliver positive financial results despite uncertain and changing market conditions. With that, I will turn it back over to operator to open it up for Q&A. Operator.

Thank you, ladies and gentlemen. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from Melissa Fairbank with Raymond James. Please proceed with your question.

Hi, guys. Congratulations on a great quarter and guide. Really refreshing to see amid all this uncertainty. I was just wondering from modeling purposes, OPEX was at kind of a record low as a percentage of sales. Just wondering going forward how sustainable that is. If OPEX needs to kind of trend higher, as we go forward, or can we expect to see this kind of operating leverage in the model?

And Melissa, this is Ken. I would say in general, the absolute level of OPEX, it would sustain around the same levels. Sales continue to decline. We have some levers on the overall OPEX side, but we feel pretty good about the absolute number of OPEX now depending on the level of sales, the percentage of GP might change a little bit, but we feel pretty good of the range of OPEX we had this last quarter, and that can be sustainable into the fiscal year.

Okay, great, great. And maybe just one quick follow-up. I imagine you're probably going to get a lot of questions on the inventory balance. I'm just wondering, is there any risk to the inventory due to price inflation? Meaning, as you've been able to accumulate the inventory, as some of these supply constraints ease, is there any risk going forward as we get into maybe some normalization of pricing next year, that the value of inventory is overstated?

Yeah, I would say we don't see a huge risk there. We do have some price protections on lowering prices if it happens to come from the suppliers, but at the same time, we have commitments from our customers and we work through the inventory levels, but we don't see a huge risk in terms of taking inventory losses and things like that because of pricing. Yeah, Melissa,

just to fill out this. I'll just add all this, thank you. I apologize for my voice on the call. Everybody is fighting similarities here. But yeah, Melissa, we're within our range for inventory and the returns we model around the inventory. And that's important, so I'll get ahead of the next question. The quality of inventory is extremely good. Our reserves are well in line and the aging inventory is not increasing, so it's relatively current.

Okay, excellent. Great. That's all for me. Thank you.

Thank

you. Thank you. Our next question is from Matt Sheeran with CEPHL. Please proceed with your question.

Yes, thanks for taking my questions. Phil, just trying to get your perspective on the outlook. It looks like you're down a little bit seasonally. You're booked to build spondyliaparity after how many quarters of very positive. Some of the suppliers, the semi-electrical suppliers and other component suppliers are modeling or at least looking more cautiously to Q4. Texas Instruments last night guided down double digits. Other component suppliers are starting to see some inventory correction going on at customers. It doesn't sound like you're seeing that in a big way yet. Is it that you're lagging the cycle or are there still those hard to get parts where customers are still dealing with that imbalance and they're not going to start cutting their inventory until that straightens out?

Yeah, it's part of the $64,000 question, Matt. Thanks. But look, we're giving the outlook as we see it today with our backlog today in the next three to six months backlog. And it's a straight roll up from the regions. We're not pressing it. We're not pushing them. It's a number we feel that we can hit at this point in time. And if you look, we called out intentionally the industrial defense arrow, transportation. As we see it today, those still look pretty solid. We're not as exposed in the consumer. And some of the compute even that others are. So, and the other thing, Matt, that's leading us is we're watching the backlog. I'm pleased the book bills are coming down. We're helping to drive some of that. You and I both know that's not realistic what's kind of been going on here the last 12 to 24 months. We're not seeing, as I get to the cancellations, as much as we're seeing some push outs and we're managing our customers backlog with them if they can't get their golden screw and all that kind of stuff. We're not seeing they want to remove it off the books. So we're driving frankly to some of that. Okay, we want to make sure it's real. The next three months or so, this is the outlook we see based on the roll up in the teams.

Okay, thanks for that. And then on the gross margin, I understand why that was down sequentially because of the mix. Looking forward, as you said, North American Europe has fewer selling days. So would you expect gross margin to remain at these levels and be down, I guess meaningfully, year over year or is there some pricing power or other reasons why gross margin could be higher?

Yeah, Matt, I would say flattish, but we're still going to have a higher mix of Asia in our second quarter due to the holidays, but that gets offset by a better product and customer mix than we had this quarter to kind of offset some of that impact. So flattish is probably the right way to think about it. And then when you get into the third and fourth quarters, you'd have a higher mix of West, you'd get some of that margin back on a gross margin perspective.

Okay, and just lastly on the S&T, it was noted that it was down a year and year. How much of that is related to FX and the natural hedge that you have in regions like the UK and Europe where the currency is in favor? Basically a favorable swing for you on the OPEC side.

Yeah, from a currency perspective, somewhere between 35 and 40 million, Matt was the benefit I guess we got with overall OPEC from a reported perspective.

But on a year over year basis? Year over year basis, yeah. Okay, terrific. Thanks very much. Thanks, Matt.

If you are one of these investors. Thank you. Our next question comes from Jim Suva with Citigroup. Please proceed with your question.

Thank you so much. A quick question on your operating margin. Given the state, I think Bill mentioned there's a few pushouts, but nothing material. I keep an eye on it as far as cancellations and such. What about operating margins? Do you think they're kind of sustainable at these levels? Because the investor concern out there of course is that if ASPs come down and order pushouts and cancellations ratchet up that operating margins could be under pressure. If you could just kind of help address that elephant in the room, that'd be great.

Yeah, I guess I would say we feel pretty good about the second quarter operating margins still being above 4%. It's implied in the guidance. As you look out, clearly there would be an impact on our operating margins if we have a deterioration in sales or a meaningful deterioration. So that's a given. I think when we think about it, we feel really good in the mid to long term that we can sustain that level of margins. And so there might be some temporary declines as those market factors come through the model. But in general, we feel good about our OPEX levels, feel good about some opportunities like demand creation, supply chain services, IP and E that can help still give us some positives on the gross margin. But clearly we would lose some in the, say if the sales go down meaningfully.

Great, and a quick follow up, interest expense outlook. A little bit more on that. Does it include a planned November increase by the Fed just so we can kind of think about that?

Yeah, I would say it contemplates a potential increase there and we're looking at kind of flattish from the first quarter.

Thank you, congratulations.

Thank you. Thank you, our next question is from William Stein with Prima Security. Please proceed with your question.

Great, thanks for taking my questions. First, I'm hoping you can elaborate on the control power topic. You mentioned this at the analyst day. I'm not sure how deep we dug into this topic but I understand it provides your customers with a way to envision their inventory across various channels. And you maybe spend a minute or two talking about how your customers are using you for this and what the financial implications are on your business. Thank you.

Sure, Will, this is Bill. Yeah, we started coining that term. We went through the pandemic and we saw the supply chains break down. Yeah, we're right at the center of that, technology supply chain. And that's the value we bring to the market is managing supply chains, of course, demand creation as well. So we've had many customers and suppliers from all verticals frankly starting to come to us to help them rebuild their supply chains. There's just a lot of, I'll use the word transparency, lost from the end OEMs to where the manufacturing was, multiple manufacturing sites, hundreds of suppliers to tens of thousands of SKUs. And when things started to break down, they just lost a lot of that visibility. And the one you're right, we had to investigate was Milwaukee, right? And they spoke very clearly about that. How we were able to build them a, we call control tower. They can help aggregate their many different SKUs for many different suppliers, and then filter that or drive that to the right, in this case, EMS provider that's driving the manufacturing for them. So it's really a visibility on the transparency and then there's analytics in there to help them with their forecasting and demand on the front end as well as what's coming in from the suppliers as we manage lead times coming in to the MRPs. So hopefully that helps explain what we're talking about there.

A follow up if I can, can you talk about the distribution of parts that are still in a shortage situation? I think, certainly the microcontroller companies, for example, those buying from foundry on very trailing edge, they talk about how this is still in a, sort of protracted shortage situation. And then there are other components like memory, broadly speaking, that's in severe oversupply. Can you talk about the mix between those two dynamics? Unusual to have sort of disparate things happening at the same time. We know they are happening to have it for a while, but can you talk about how that's trending and what the mix is between those two dynamics?

Yeah, I'll do the best I can. I mean, there's tens to a hundred different commodity breakouts. So I'll just give it a high level, which is what by the way, with some of the lead times coming in, it's why we're getting some more inventory, which is again, not a bad thing. But even start with the interconnect. Interconnect for most part has come down a bit, but they're still in a wide range of, I don't know, eight to 30 weeks or so, with it's improved two to eight weeks since the beginning of 2022. We don't see that happening in the defense side and aerospace side. We think that's gonna continue to be extended lead times in particularly in that no-arrow connector space. Then you go jump over to the capacitors, MLCC, the general purpose. Those lead times have come back to more, most notably in the mobile center, back to normal levels in the 12 to 18 weeks. But even in capacitors, if you look at the high capital, large size caps to go into automotive and high voltage large case size, they're still out 30 plus weeks. So just in the past, the connector, there's a huge range of disparity, if you will, in the lead times, which is why it's so tough to just summarize it. If you jump over to the semi side, you got, again, products primarily supporting consumer and compute, we're experiencing lead time reductions in that area. You mentioned one like IE, memory, come way down of recent. But demand is still outpacing in the MCUs and power discreet, for example, lead times remain in the 40 to 52 weeks. Things like op amps are still 40 to 52 weeks, voltage regulator is 48 to 52 weeks, programmable logic, even some programmable logic, although some of that's improved, still out anywhere from 20 to 26 weeks. So it's, and the controller space, as you pointed out, not much change there, 8, 16, 32 bit, pretty much across the board. Low end might be 20 weeks, higher end 52 to 60 weeks. So it's that, I'm not even, every commodity is one of the time to do that, but we do this for our customers, though, by the way, that are using the control towers and all our supply chain services. So we do continued update on what we see in the market across the board, and be glad to do that in a separate session for anybody on this call as well, by the way, as to what we're seeing overall. So hope that answers at least at a high level, it's certainly a mixed bag out there, which I think what's driving the complexity and the disparities and confusion as to what the market outlook is.

Thank you.

Thank you.

Thank you. Our next question is from Rupulu Bhattacharya with Bank of America. Please proceed with your question.

Hi, thanks for taking my question. My first question is on Farnell. I was wondering, how did the e-commerce sales impact revenues this quarter? And then if you can touch on the margin performance, I mean, you had pretty strong margins, even this quarter, 12% plus, but last quarter was very strong at 14. So just the sequential margin decline, how much would you say was the effects? How much was volume? Is there any color on that sequential trend? And how should we think about Farnell margins for the third quarter?

Yeah, so I'll go first and turn it over to Ken. Thanks, Rupulu. E-commerce sales still really, really strong. We call that, for most of that, is -the-board computing, so components that are on the board, semis, IEP, and E. They represented roughly 73% of the activity, so the line items coming through Farnell, and still in that 52 to 54% range of the revenue. So we're really, really pleased overall with that, those stats, and overall pleased with Farnell still. They had a couple other things that impacted them that Ken touched on, the effects with the pound, and then a bit with the single board computing, but drove some volume

loss. Yeah, from an operating margin perspective, I would say it's about 60-40, 60% was driven by, just the sales decline of 40% was driven by the impact on gross margins for the pricing.

Because... Okay, thanks for the details there. For my follow-up, can I ask a question on the core business? Phil, it looks like you again had a strong quarter with Asia. How should we think about that trend going forward? Do you think that region sustains, and the demand there versus Europe and North America? Just your thoughts on regional mix going into the next quarter, and then just the same question on margins for sequentially between the June and the September quarters. What were some of the impacts there, and how should we think about core margins in the December quarter?

Yeah, so I'll hit on the revenue like Ken touched on the margins. So I didn't know what to say. We're really, really pleased with our team's execution in Asia-Pac, with all the mixed messages that there's another record quarter for us in Asia-Pac. And we're also really watching their backlog as well, for the reality of the backlog, and the integrity of the backlog, and our leadership team there has been very, I would say very assertive in making sure that it's as clean as possible as we move forward. And if you look into Q2, we're seeing pretty steady performance in Asia-Pac from the September to the December quarter, which is, we think, pretty positive. So as of March quarter, we'll look at it. We don't go that far out, but we'll see how the traditional Chinese New Year and the holiday in Asia impacts March. We'll talk about that next quarter, but right now the December quarter is looking pretty good for us in Asia, as we

see today. Ken, you want to touch on that? Yeah, so from an overall Asia mix, you're going to see an increase in Asia sales to this next quarter, because the West has a little bit softer sales because of the holidays, less shipping days. So, and then you get into the third quarter, you'd see Asia become less percentage and the West become higher. So that's kind of how to think about it from a seasonality, not talking about anything. And the Q3 sales levels are just more in general, they came to the business. I would say from a core business operating margin perspective, we'll have a higher Asia mix, so that'll put pressure on the operating margin, but I think we'll have a better product and customer mix offsetting that. So flattish is the right way to think about the core operating margin into this next quarter. And we'd expect it all things being equal seasonality, that to go up as we get into our third and fourth quarters with the higher mix of West business that has a higher gross margin.

Got it, thanks for the details, Terry. If I can just ask one more quick follow up. Did you Phil mention what was demand creation as a percent of total revenue? And how should we think about that going forward?

Yeah, we did roughly 30, 31% of our total revenue. And with the revenue being as high as it was, there's another record of demand creation dollars. The funnel looks good moving forward, registrations and design wins, still a big part of our success story as we move forward. So pretty bullish on our demand creation.

Okay, thanks for all the details, appreciate it.

Thank you, our next question comes from Joseph Cardoso with JP Morgan, please proceed with your question.

Thanks for the question. First one is just a quick one and a follow up on the Farnell margins this quarter. In prior quarters, you called out pricing benefits that you've seen in the margins themselves. So I was just curious, did you see any pricing benefits on Farnell margin in the September quarter? And if so, what was the magnitude of that?

Yeah, I wouldn't say we saw any pricing benefits from the Farnell margin. If anything, a couple of those commodities where the lead times have come down, we might've got a little pressure on it, but I would say the pressure we saw this quarter is really purely FX and the difference in pricing due to various currencies between US based competitors and Farnell being a primarily UK based company. So that was the main pressure. A little bit of noise here and there, but nothing meaningful to point out.

No,

I understand, thanks

for the clarity. And then just my follow up, last quarter you spoke about seeing ASC inflation for EC. I think it was somewhere in the range of 7, 8% high single digits, I suppose. Are you still seeing that same level or has there been any shifts in terms of where you're seeing ASC inflation? And then kind of more importantly, how are you thinking about that trend going forward? Are you seeing any signs that we're kind of cycling past the peak? And could we start to see some moderation? Thanks for the question,

guys. Hey Joe, let me take a shot of that. I think you kind of broke up, but at least don't honor it. So you're talking about the pricing inflation we talked about last quarter, right? Correct. Yeah, okay, yeah. So yeah, last quarter we said it roughly the 20 to 25% of our growth would have been for ASP, price increases. It doesn't affect our margin as much. I'm not sure that's part of your question. It's more GP dollars than anything. It's not GP%. And then this quarter we started to see some of that moderate. So some of it would have been from carryover, but a lot of the price increases have seen to work through the system at this point. So in quarter, we've got very little impact on any further price increases. But year on year we would have seen some of that.

Ken, any comment? No, I think that's about right as far as the long term. I mean, I think, you know, we're hearing mixed bag, but we don't necessarily hear a lot of commentary, at least from our supplier partners, about them lowering prices. So yes, the pricing increases have moderated, but not a lot on lowering prices. And so that's kind of how we're viewing it right now, but clearly continue to monitor the tone and conversation around ASP. Thanks for the question.

Appreciate all the color,

guys. Thank you, Joe. Thank you. There are no further questions at this time. I'd like to turn the call back over to Phil Gallagher for any closing remarks.

Sure, thank you very much. I just want you to again, I want to thank everyone for attending today's earnings call and one more time thank the admin team around the world for a terrific performance. And we really look forward to speaking to all of you again at our fiscal second quarter earnings report in January. Okay, have a good rest of the year. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.