Avnet, Inc.

Please stand by. Our presentation will now begin. Welcome to the AVNET Fourth Quarter Fiscal Year 2024 Earnings Call. I would now like to turn the floor over to Joe Burke, Vice President, Treasurer, and Investor Relations for AVNET.

Thank you, Operator. I'd like to welcome everyone to the AVNET Fourth Quarter Fiscal Year 2024 Earnings Conference Call. This morning, ABNET released financial results for the fourth quarter and fiscal year 2024, and the release is available on the investor relations section of ABNET's website, along with a slide presentation, which you may access at your convenience. As a reminder, 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 ABNET'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. Please note, unless otherwise stated, all results provided will be non-GAAP measures. The full non-GAAP to GAAP reconciliation can be found in the press release issued today as well as in the appendix slides of today's presentation and posted on the Investor Relations website. 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? Phil?

Thank you, Joe, and thank you, everyone, for joining us on our fourth quarter and fiscal year 2024 earnings call. For fiscal year 2024, we've delivered $23.8 billion in revenues and $5.43 of diluted earnings per share. Looking back on fiscal year 2024, we began the year with great momentum for fiscal year 2023, which was a record year both for revenues and earnings per share. As 2024 progressed, we faced a softening demand environment, and I want to thank our team for their execution and perseverance in these challenging market conditions. Their continued efforts will allow us to emerge from the correction stronger as the market recovers. Turning to the completed fourth quarter, I'm pleased we delivered another quarter of financial results that exceeded our top line in EPS guidance. In the quarter, we achieved sales of $5.6 billion, and adjusted operating margins of 3.5%, highlighted by a 4.1% operating margin in our electronic components business. With the structural improvements we've made over the past few years, our EC business has now delivered 10 consecutive quarters of greater than 4% operating margin. We also had another good quarter of cash flow generation, primarily the result of executing sound working capital management as we navigate through the market corrections. Sequentially, demand declined across most of the end markets we served. On a year-on-year basis, aerospace and defense was the only end market with increased demand globally. Semiconductor lead times have continued to decrease and remain relatively low for most technologies. And as I mentioned last quarter, the growth in data center build-outs surrounding cloud and artificial intelligence is driving longer lead times for certain products, and we would expect this to continue. On the IP&E side, lead times are generally stable and have returned to what I would characterize as a normal range. And we are seeing increasing demand for some interconnect products and capacitors for certain applications. Our global book-to-bill ratio improved modestly over the last quarter, led by our Asia and America's regions, both finishing the quarter approaching parity. Our EMEA business, which has a large portion of its business driven by the industrial and transportation and markets, is seeing softer bookings and billings due to lower demand. Our backlog is lower as a result of shorter lead times and customers working through their inventory on hand. Cancellations have remained at normal levels. I'm really pleased with the progress our team has made in improving our inventory position. This is a key focus area for our organization, and we still have some work to do. While we have more inventory than we need to support near-term demand in some areas, there are other areas where we want to make strategic investments. Having the right inventory is still a key growth enabler and is an important part of our value proposition at the center of the technology supply chain. Now with that, let me turn to the fourth quarter results. At the top line, our electronic components business declined on a global basis. In EMEA, demand in the aerospace and defense end market increased sequentially and year-on-year as military budgets have increased across Europe. In the Americas, demand increased sequentially for aerospace and defense and industrial end markets, and aerospace and defense was strongest on a year-on-year basis. I mentioned on our last earnings call we were seeing signs of a bottoming in our Asia region, giving us reasons to be optimistic that the market correction may be nearing its final phase in Asia. So it is notable that our Asia revenues increased sequentially as demand in the industrial, transportation, and consumer end markets all increased, with transportation showing the best growth on a year-on-year basis. We expect a return to overall year-on-year growth in Asia in either the September or December quarter. On the demand creation side, our engineering teams continue to engage with our customers and suppliers on design wins and registrations. This stroke increases in revenues on a sequential basis and validates the value proposition we can deliver in any type of market. Before we get into Farnell's results, I would like to highlight that Rebecca Obregon has been recently named President of Farnell. In her time at Avnet, Rebecca has demonstrated the ability to develop and execute strategy and drive cultural alignment, not only with our employees, but with our customers and suppliers globally. I'm confident that her experience, relationships, and collaborative approach will drive important synergies to accelerate Farnell's profitable growth. Farnell is not immune to overall market softness, and the fourth quarter sales were down sequentially and year on year, similar to the sales trends in our EMEA EC business. Sales were lower sequentially, mostly due to lower demand for semiconductors. Gross margins at Farnell have stabilized and with the previously announced cost reductions, which are proceeding as planned, we expect margins to improve over the course of fiscal year 2025. We continue to expect Farnell's high service offerings to enhance the synergistic collaboration between Farnell and Avnet. The combination allows us to serve our customers from new product introduction to mass production as one Avnet. Avnet is positioned as one of the only broad-line global distributors that also has a global high-service distribution business. As a key player in the global technology supply chain, we continue to leverage our value proposition in other areas, such as demand creation, IP&E, and embedded computing. I've already mentioned our demand creation engineering capabilities. IP&E continues to be a key focus for our team, and in Q4 we saw a nice increase in this area, particularly in Asia, much of which is related to the build-out of data centers. In addition to IP&E and demand creation, we're also focused on driving value for our embedded solutions offerings. OEMs are increasingly looking to move from chip-down manufacturing to using modular compute solutions into their products. Because of this trend, we recently announced the launch of the TRIA brand for our business unit that designs and manufactures embedded compute modules and systems. The new distinct brand will improve our ability to compete with other standalone brands in the embedded solutions business. The market opportunity we targeted through TRIA is just another example of how we have adapted to the changing needs of our customers and the technology offering of our suppliers over the past 103 years. So stay tuned for future updates on our progress in embedded space. To conclude, I continue to feel optimistic about the long-term trends in the demand for technology and the pervasiveness of electronics in so many applications today and in the future. This includes those driven by AI adoption as companies explore innovative ways to leverage its capabilities in both the data center and ultimately edge computing applications. We are participating in the AI growth trends through sales of components into data centers as well as providing supply chain services surrounding the data center. This participation is expected to grow over the next several quarters and should positively impact sales across several verticals. I'm excited that AdNet's position at the Center of the Technology Supply Chain will allow us to continue to deliver increasing value to our customers and supplier partners. As we enter fiscal year 25, the prevailing belief is that the market correction seems to be in its last stages. Our Asia region appears to have bottomed, and we're awaiting signs for a similar bottoming or reflection point to manifest in the Americas and Europe. Until then, we will continue to navigate through this market and control what we can control in anticipation of a brighter demand environment in the quarters to come. Now, with that, I'll turn it over to Ken to dive deeper into our fourth quarter results.