Avnet, Inc.

Welcome to the AFNET Fourth Quarter Fiscal Year 2023 Earnings Conference Call. I would now like to turn the floor over to Joe Burke, Vice President, Treasury and Investor Relations for AFNET.

Thank you, Paul. I'd like to welcome everyone to the AFNET Fourth Quarter Fiscal Year 2023 Earnings Conference Call. This afternoon, Avnet released financial results for the fourth quarter of fiscal year 2023, and 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 our website. As a reminder, some of the information contained in the news release and on this conference call contain... 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 presentation. 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 Ken 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 our fourth quarter and fiscal year 2023 earnings conference call. We maintain our momentum for fiscal year 2022 to deliver robust financial results for fiscal 2023, including a record of over $8 of earnings per share. Our sales were up more than 13% year-over-year in constant currency. Operating income grew two times greater than sales, and our business units achieved operating leverage as electronic components delivered for fiscal year. As we look ahead with the breadth of our supplier line card, our diversified customer base, and the strength of the end markets they serve, we are well positioned to capitalize on the industry growth expected over the next several years. Now, let's turn to fourth quarter results. In the quarter, we grew 3% year over year. Now, let's turn to fourth quarter results. In the quarter, we grew 3% year over year in constant currency, and we delivered adjusted EPS of $2.06. Similar to last quarter, we continue to drive efficiency in our operations while still making the necessary investments in our business. These efficiencies couple with the stronger than still making the necessary investments in our business. These efficiencies, coupled with the stronger-than-expected sales in our Americas and immediate businesses, helped us achieve a 5.1% turnover. This is the second consecutive quarter of 5% or greater operating margin at EC and 4.8% adjusted operating margin for AdNet overall, delivering on the margin targets we communicated our investor day in June last year. Partially offside, by expected sales declines in Asia, which was a continuation of the slowdown in demand in certain Asian end markets. From an overall demand perspective, we experienced continued strength in key verticals, most notably transportation, automotive, and industrial. We also saw continued solid demand in defense and aerospace. Average lead times for many components continue to come down, although lead times are still elevated for certain product categories, such as high-end microcontrollers, some power, and many of the components that go into the automotive segment categories. As a result of the current demand and lead time conditions, our book-to-bill ratio remains below parity in all regions, Similar levels to last quarter. Our book-to-bill ratio remains below parity in all regions. Similar levels to last quarter. Our backlog remains relatively steady and consistent with the minimal to date. The pricing environment also remains stable during the quarter, with declines in some standard product pricing. We are hearing from some of our suppliers with declines in some standard product pricing. We are hearing from some of our supplier partners that they don't expect input costs to come down anytime soon. Our historical approach in our EC business was to merely pass along price increases to our customers without marking them up. We believe this approach is a reason we've increased our customers without marking them up. We believe this approach is a reason we've seen stable gross margins in our EC business year over year, including this past quarter. Turning to our operating group highlights, electronic components had a strong year, reaching nearly $25 billion in sales. Sales for the fourth quarter increased 3% year-over-year and were flat sequentially. This marks the 12th consecutive quarter of year-over-year sales growth in our extent operating margins for the quarter, noting our EMEA region achieved the second consecutive record sales quarter with very strong operating margin, and the Americas team's second record sales quarter with very strong operating margin, and the Americas team delivered another solid quarter of sales and market share gains. Formidity across all regions. High levels of design registrations and wins in prior quarters, resulting in yet another quarter of record demand creation sales and gross profit. Resulting in yet another quarter of record demand creation sales and gross profit. Our customers are engaging our FAEs for new designs for the next generation products with component shortages. Demand creation continues to be an essential capability needed in today's technology supply chain. Our EC inventory needed in today's technology supply chain. Our EC inventory levels were relatively flat on a sequential basis. And as I mentioned on last quarter's earnings call, this quarter we will characterize our inventory levels as stabilizing. And we're optimistic that as we enter calendar 2024, they'll more closely align with sales. We continue to be confident in the quality of the inventory and our ability to work down inventory days in the quarters to come. Moving on to Farnell. Following a record sales and margin year in fiscal year 22, Farnell had a solid year in fiscal 23 with sales of $1.7 billion and operating margins of 9.5%. Sales of $1.7 billion and operating margins of 9.5%. In the fourth quarter, Parnell sales were up 1% year-on-year and down 3% sequentially in constant currency. Operating margins were affected primarily due to an unfavorable sales mix of lower margin products. I joined the backlog for single board computers, which will help their sales and operating income dollars in coming quarters. As I reflect back on fiscal year 23 in coming quarters, as I reflect back on fiscal year 23, I'm very pleased with the progress we've made with the near-term goals we communicated, attained our operating margin goals, and achieved a record EPS for the year. I'm especially proud of the commitment of our team to execute and deliver in one of the most dynamic and uncertain markets I've seen in my career. But there is still more to accomplish, and the future is really bright for Avnet. As we head into fiscal year 2024, we will continue to make good in our cash and growing operating profits greater than sales. Our supplier partnerships continue to be one of our key strengths, which has helped lead to market share gains for several quarters. We are confident that our supplier partners see the value we bring in helping to increase the growth expected over the next several years. Our line card features substantially all the key technologies our customers need, and our high-performance line card is unmatched. The key technologies our customers need and our high-performance line card is unmatched. The key end markets we serve, which include industrial, transportation, and defense, are expected to have high growth rates over the next three to four years. When combined with our supply chain as a service capabilities and the overall market need for customers to have resilient supply chain, supply chain. So with that, Let me turn it over to Ken for a look at the financial results for Q4 and the fiscal year.