Avnet, Inc.

Our presentation will now begin. Welcome to the AFNIC first quarter fiscal year 2025 earnings call. I would now like to turn the floor over to Joe Burke, Vice President of Treasury and Investor Relations for AFNIC.

Thanks, Operator. I'd like to welcome everyone to the Avnet first quarter fiscal year 2025 earnings conference call. This morning, Avnet released financial results for the first quarter fiscal year 2025, and release is available on the investor relations section of Avnet's website, along with the 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 FCC. These forward-looking statements speak only as of the date of this presentation, and the company undertakes no obligation to publicly undertake 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 first quarter fiscal year 2025 earnings call. In the quarter, we achieved sales of more than $5.6 billion and adjusted EPS of 92 cents, both above the high end of our guidance. We also generated over $100 million of cash flow from operations in the quarter. Our results were primarily driven by our strong performance in Asia, offset by continued weakness in the West and at Farnell. Our team continues to compete well in this market by working closely with our customers and suppliers, controlling costs and managing working capital. I want to thank them for the dedication during this challenging cycle, and I know their efforts position as well for when the market recovers. That is after lead times and pricing continue to be stable for most technologies, with a slight uptick in lead times and pricing for certain memory and other product families. On the IP&E side, lead times also continue to be stable. Our global book-to-bill ratio showed little sign of improvement and is still below parity, with our Asia region showing the strongest book-to-bill ratio. 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 continues to be lower as a result of shorter lead times and customers being over-inventoried and in destocking mode. Cancellations have remained at normal levels. While inventory increased sequentially, it should be noted almost all of the increase was due to changes in foreign currency exchange rates. We expect to reduce core inventory levels in the coming quarters, but also need to balance the reductions with the near-term opportunities we are seeing in the market. We continue to be open to those opportunities that are good for Avnet, as we have shared previously. You will hear more from Ken on our inventory in just a few minutes. Now with that, let me turn to the first quarter results. At the top line, our electronic components business was essentially flat on a sequential basis and declined on a year-to-year basis. The bright spot for our EC business is that we have turned the corner by returning to year-on-year growth in our Asia-Pac region. Historically, cycle shifts have often started in Asia, with the underlying market recovery also starting in Asia and followed by the West. While it is too early to call with any certainty at this point, we remain optimistic that the return to growth in Asia is a positive sign of things to come in the West. In the Asia region, sales increased 14% sequentially and 6% year-on-year, powered by strength in the server and data center and communications end markets. Additionally, it is notable that we saw sequential and year-on-year growth in each major end market we served. We are cautiously optimistic by the recovery we are seeing in the region, including activity for data center and AI compute projects. In EMEA, demand in the aerospace and defense end market increased sequentially and was flat year on year. The industrial and automotive end markets continued to be soft amid a weak economic backdrop. In the Americas, aerospace and defense was our strongest end market and we saw modest growth year on year. We also saw growth in the compute end market both sequentially and year on year. We do continue to see softness in the industrial and transportation end markets. On the demand creation side, our engineering teams continue to engage with our customers and suppliers on design wins and registrations. While demand creation revenues were down, consistent with our overall sales trend, our engineers continue to drive the funnel, converting design wins into revenues, which will pay off in the coming quarters. Now, turning to Farnell. Sales were down sequentially and year on year. Farnell has been impacted more than expected from the current EMEA macro environment given they have a higher percentage of sales from that region. While we are disappointed with Fresnel's results, I would underscore that we are in a transition period under its recently appointed president, Rebecca Obergine. In just a few months, Rebecca has identified key areas for improvement and actions to be taken over the next couple of quarters. Although the Fresnel business is under pressure due to challenging market conditions, We continue to focus on the things we can control, including executing against our cost reduction initiatives and stabilizing the top line and gross margins. While we have our work cut out for us at Fresnel, I am confident we have the right leadership, strategy, and focus to improve results in the coming quarters. To conclude, as we navigate the current market correction, we continue to demonstrate our strength and resiliency, and I want to thank our team for their dedication and competitive spirit under such challenging conditions. While it is difficult to gauge how long the market correction will continue, there are a number of reasons why I am optimistic about the future. In the past month, while on the road, I was able to spend some time with the leaders of all of our business units, as well as executives of several of our top supplier partners. and we continue to see the benefits and opportunities to grow our IP&E business globally. We also see opportunities for supplier partners to grow our share by continuing to demonstrate the value of distribution, including having our digital automation capabilities to better serve the mass market. Based on the energy sources we follow and the suppliers and customers I speak to regularly, global inventory levels across the supply chain are slowly improving, granted with pockets of oversupply in certain areas. That dynamic, coupled with current lead times, bodes well for improvement in our book-to-build and the build-up of our backlog. These same industry sources are still projecting mid- to high-single-digit growth rates, on average, over the next three calendar years with the highest growth rates in the primary end markets we serve – industrial, aerospace and defense, transportation, and servers and data centers. Further, we currently see two areas of our business that are positive indicators – First is a return to year-on-year growth for our Asia region, with healthy activity in AI-related server and data center projects. Second is the modest increase in our turns business, which is usually a good indicator of future demand. Finally, for more than 103 years, AdNet has proven the ability to adapt to changes in the market, weathering corrections, and coming out stronger to be able to deliver what's next for our customers. At times like this, we thrive on being at the center of the technology supply chain, helping our supplier partners to reach a long tail of customers, and providing end-to-end customer solutions to satisfy their needs wherever they are on their product journey. With that, I'll turn it over to Ken to dive deeper into our first quarter results.

Ken? Thank you, Phil, and good morning, everyone. We appreciate your interest in Avnet and for joining our first quarter earnings call. Our sales for the first quarter were approximately $5.6 billion, above our guidance range and down 12% year-over-year. On a sequential basis, sales were up 1%. Regionally, on a year-over-year basis, sales increased 6% in Asia, but declined 28% in EMEA and 16% in the Americas. From an operating group perspective, electronic component sales declined 11% year-on-year, but increased 1% sequentially. Foreign health sales declined 18% year-over-year and declined 8% sequentially. For the first quarter, gross margin of 10.8% was 97 basis points lower year-over-year and 72 basis points lower sequentially. The year-over-year and sequential decline is primarily driven by the sales mix shift to Asia. DC gross margin was down both sequentially and year-over-year. The declines were primarily due to a higher mix of sales from Asia. Fresnel gross margin was down year-over-year primarily due to a lower mix of on-the-board components and was down sequentially primarily due to the impact of foreign currency. Turn to operating expenses. SG&A expenses were $439 million in the quarter, down $48 million or 10% year-over-year, and down $11 million or 3% sequentially. As a percentage of gross profit dollars, SG&A expenses were higher sequentially at 72%. In the first quarter, we incurred additional restructuring integration on other expenses, primarily for the continuation of expense actions taken at Farnell, which are permanent in nature. Farnell operating expenses were down $17 million year-over-year and $2 million sequentially, and the Farnell expense reduction actions are being realized as previously expected. Overall, first quarter operating expenses were lower than anticipated. As we move through fiscal 2025, we expect expenses will increase modestly when sales improve and the underlying business recovers. For the first quarter, we reported adjusted operating income of $169 million, and our adjusted operating margin was 3%. By operating group, electronic components operating income was $197 million, and EC operating margin was 3.8%. The sequential decline in EC operating margin was primarily due to the seasonal sales mix shift to Asia. For now, operating income was $2 million, and for now, operating income margin decreased to approximately 1%. Farnell's operating margin was negatively impacted sequentially, primarily due to declines in sales and from unfavorable impacts on gross margin due to changes in foreign currency exchange rates. Turning to expenses below operating income, first quarter interest expense of $64 million decreased by $6 million year over year and was flat sequentially. Our adjusted effective income tax rate was 23% in the quarter as expected. Adjusted diluted earnings per share of 92 cents exceeded our expectations for the quarter. Turning to the balance sheet and liquidity, during the quarter, working capital increased $88 million sequentially, all driven by changes in foreign currency exchange rates. In constant currency, working capital decreased by $76 million sequentially. Working capital days decreased three days quarter over quarter to 107 days. Our return on working capital decreased a quarter on the lower operating income. The reported increase in inventories of $145 million was largely driven by changes in foreign currency exchange rates. Additionally, a portion of the inventory increase was related to inventory received during the last couple days of the quarter, which drove a corresponding increase in accounts payable. Inventory days improved three days sequentially to 101 days. Our near-term goal is to get inventory days in the 80s by the end of this fiscal year. We remain focused on reducing inventory levels where elevated, noting that we also want to make investments where needed. We continue to have ongoing conversations with our supplier partners on specific opportunities for inventory increases that we will only consider if there is a benefit to ABNET. Such benefits may include incremental margin, improved terms, additional stock rotation rights, or additional market share. Our approach on these opportunities is focused on achieving win-win outcomes that are mutually beneficial to ABNET and our supplier partners. Our increase in working capital led to an increase in debt of $55 million. We generate $106 million of cash from operations in the quarter. Cash flow from operations was negatively impacted by over $90 million of income tax payments in the quarter, including $44 million for a transition tax payment from the 2017 TCJA. We ended the quarter with a gross leverage of three times, and we had approximately $825 million of available committed borrowing capacity. With regards to our capital allocation, We continue to prioritize our existing business needs. During the quarter, cash used for CapEx was $32 million within our expected quarterly levels of approximately $25 million to $35 million per quarter. We increased our quarterly dividend by approximately 6% to 33 cents per share. Our board expanded our buyback authorization to $600 million as part of our commitment to continue to use positive free cash flow to reduce our share count. In the quarter, we repurchased approximately $100 million worth of shares, which represented more than 2% of shares outstanding. We are on track for our goal to reduce share count by at least 5% this fiscal year, in line with our capital allocation priorities and our commitment to provide consistent and dependable returns to shareholders. Book value per share improved to approximately $56 a share or a sequential increase of $2 per share. Turning to guidance, for the second quarter of fiscal 2025, we are guiding sales on a range of 5.4%, billion to $5.7 billion, and diluted earnings per share in the range of $0.80 to $0.90. Our second quarter guidance assumes current market conditions persist and implies a sequential sales growth of approximately 2% to a sales decline of approximately 4%. This guidance assumes flattish sales in each EC region and assumes Farnell's performance is generally consistent with the first quarter of fiscal 2025. This guidance also assumes similar interest expense compared to the first quarter, an effective tax rate of between 21% and 25%, and 89 million shares outstanding on a diluted basis. In closing, our team continues to execute well against the areas we can control, but we still have plenty of work to do. Given today's rapidly changing market conditions, our team continues to demonstrate our value proposition to our customers and suppliers. We remain confident our approach through this market downturn will benefit ABNA in the long term. With that, I will turn it over to the operator to open it up for questions. 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 1 on the telephone keypad. A confirmation code will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your answer before pressing the star key. One moment, please, as we poll for questions. Our first question comes from the line of Joe Petrucci with Wells Fargo. Please proceed with your question.

Yeah, thanks for taking the questions. I wanted to kind of understand your comment in terms of just, you know, Asia returning to year-over-year growth. I guess I wonder, X, the data center opportunities that you're seeing, I think those were probably fairly nascent a year ago. Are we seeing X data center return a year over year growth in Asia as a kind of leading indicator as well?

Yeah. Hey, Joe. This is Phil. Yeah, we mentioned that in the script a little bit about AI in Asia, but that's not a huge number for us, to be honest with you. We're seeing some upside there. But that's not really what's carrying the day for us over in Asia. We have seen an increase in some consumer, believe it or not, communication, compute, even some aerospace. And the industrials in Asia is not down as much as it is in Europe and the Americas. It's more pronounced in Europe, particularly Europe, than the Americas and then Asia. So I'd say it's a little bit more broad than just data center or the hyperscalers. We don't play a ton there. We do get some power benefits there and some large connector lines and some analog lines. But it's really across the board. Even China has kind of flattened out for us.

Okay, that's helpful. Maybe on the front outside, I mean, I guess as we take a step back and we try to think about the go-forward path here, I mean, structurally, do you think that this business can still kind of return to that double-digit EBIT target? And I guess what does that require? And then maybe just kind of along those lines, you know, I think when you guys gave that target, there was probably some assumption around, like, pricing and the impact of pricing on a go-forward basis, and how does that play out relative to your planning?

Yeah, thanks, Joe. Yeah, let me just reemphasize. Yeah, we're disappointed where we are with Fresnel from where we were to where we are today. We don't think we're alone in some of the high service. We might have accelerated down a little bit more than some others. A couple of things I want to highlight here. First off, to answer your questions, yes, we absolutely believe in the Fresnel model. It wasn't that long ago it was 6% of our revenues and close to 20%, 25% of our operating income, and we believe it can get back to those ranges again. We've announced a new leader in July, as I mentioned in the script, Rebecca Obregon. She's actually over there now with her team. We're looking at some restructuring. As Ken pointed out, we started that about a year or so ago. We have hit the numbers we targeted for restructuring costs. Unfortunately, the market has accelerated down more than we anticipated. And keep in mind, they're even heavier in Europe than they are in the balance of the world, and Europe's having a tougher time than the rest of the market. So they're not immune to that. The activity, what's interesting for now, the activity, if you look at line item activity, that's down, let's call it 8% to 10%, yet the business is down 18%. So the line item activity is not down near as much as the revenue. It says the line item... The value per line item is down a little bit more, but it's almost 2x what the line items are down. So we have a combination of things working out for now. We are restructuring. We're doing another round of restructuring there. We've changed out a bunch of the staff, by the way, as well. We're going to a regional sales model. All the positions that we needed to fill through the quarter are filled. Now we've got to focus on execution.

Okay, and maybe just as a quick follow-up to that, I mean, Yeah. Did things get worse from here before they get better, or do you think we're kind of bouncing on the bottom here?

We think we're bouncing on the bottom. We're hoping to see modest improvement this quarter. And the other thing is you asked about margin, too, at Farnell. Some of it's a double whammy. They've got the onboard components, SEMI, IP&E. That's down more than the tested measurement. And the onboard components tend to run at a higher margin than the balance of the business. So we're kind of double-whammy there. New onboard components down. Test and measurement is holding up okay, but just runs at a lower margin. So I just wanted to throw that in.

Yeah, Joe, this is Ken. Just to add to that, I would say, you know, gross margin profile has been stable now for the past couple quarters from now. We had a little bit of impact from foreign currency, you know, movements and things like that. But I think on a like-for-like product, pricing and overall margins have been pretty stable now for probably three quarters in a row for now. It's really a top line, you know, plus that currency. But the cost actions are Taking traction as intended is just, unfortunately, the top line is dropping faster than the cost actions are benefiting.

I guess last time is just our commitment. So for now, we just expanded further. The AsiaPAC actually expanded into Japan. We're going to do e-commerce site. A new team in Japan expanded. We're just there next. Ken, I was just there with Rebecca two weeks ago. Thanks for that. Appreciate it. Thanks, Joe.

Thank you. Our next question comes from the line of with Bank of America. Please proceed with your question.

hi thank you for taking my questions i have one for phil and one for ken uh phil just in terms of where we are in terms of the market correction i mean what innings do you think we're in uh you know are we at the bottom or do you think there's another couple of quarters quarters of this correction and also uh have you seen any impact from the wt micro future acquisition either any positive trends or negative trends if you could give us your view on that

Yeah, great question. I think we're getting into that crystal ball time now, on the outlook on the market. We said a few quarters ago we thought it would start turning by now, and that obviously hasn't happened across the board, particularly with some of the challenges we're seeing in the West. We think it's another quarter or two. I'm not going to call which quarter because it's really tough to call, but I think it's probably more into early 2025. You know, the books and bills are still negative. Backlog has been eating up a little bit. So I think we're going to grind through December to what we guided, and then I think we'll start to see an uptick maybe latter part of March quarter into the June quarter. It's kind of, at this point, the best I can see at this point in time. I think we've all realized this is just a little bit choppier than we thought, and it's lasted a little bit longer than we thought, but we're managing through it and going to come out better on the other side. The second part of your question was WT Micro. Yeah, no, we don't comment, as you know, publicly or privately, really, on our competition. WT is a great competitor, and Future is a great competitor, and we're still competing with them as one, although they're still pretty much operating separately. But they've definitely got some synergies between the two, and we'll just go compete with them like we have in the past. But nothing earth-shattering on that end.

okay uh as a follow-up ken can i ask you about parnell uh another question on operating margin uh how much was the impact sequentially from fx versus you talked about a worse mix of you know onboard components being lower how much was the mix impact and then when we look at this business what is a reasonable operating margin target for this business do you think that it can you know ever get back to double digit operating margin and what drive what are the drivers for margins or the next couple of quarters?

I think answering your last part of the question first, I think Phil answered that. We do believe to get back to double digits, I think it's going to take a little longer than we thought. We think we have the cost aspects of the business generally dialed in. There's still some more work to do, but we're all over that. And I think in the commentary you see that we are seeing the traction there in terms of OPEX. You know, the reality is, you know, we want to drive sales growth there, return to kind of, you know, historical 400 million plus levels. And when that sales growth returns, it's going to be a higher mix of on-the-board components. So that helps gross margin as well. So I think really just recovery in the overall market. Phil mentioned, you know, some of the competition in that space and the high service aren't immune to this as well. And, you know, the overall transactional margin is holding up. really well there on the board components. It's just a matter of, you know, it mixes down. So we think both of those comes back with some market recovery. You know, from the FX, it was probably, you know, somewhere in the, you know, 150 to 200 basis points kind of impact, you know, this quarter. We don't necessarily anticipate that to return, but, you know, you never know with some of those things. So we're continuing to look at hedging and other things, too, to try to minimize any impact there.

Okay. Thanks for all the details.

Thank you.

Thank you. Our next question comes from the line of Matt Shearing with Stifel. Please proceed with your question.

Oh, yes, thanks. Hello, everyone. Phil, it's a question on the commentary about your guidance for the December quarter, and I think you're looking at sort of flattish sequential growth across the regions. Is that right? Because it seems like EMEA, typically Europe is down sequentially just on selling days, and it sounds like Europe is the weakest market in terms of demand right now. So could you just clarify that?

Yeah, no, thanks, Matt. Good to hear from you. You kind of articulated it about right. And so we're seeing modest, very modest regional uptick in December. And you're right. Typically, Europe is America is not as typical, but in Europe with the holidays extended, they typically are net down in the December quarter over September with a bounce back in March, which recall last year the bounce back in March did not happen in the West. So I think it's a little bit of a different year. And also, Matt, frankly, I mean, We're down pretty low in September. So we're coming in off a low number in September for us in Europe. I'm competing well. I think we all know what's going on in Europe right now. So we're competing well. I'm proud of the team. But we came in pretty low. Lowest it's been in multiple years. So that's why we're optimistic we might be able to be flat to up modestly in Europe. Then America's in danger.

Okay. Got it. Okay. And then on the gross margin, it looks like that 10.8%, that was the lowest number that I see going back a few years. And I know that NICS is working against you, and then you talked a little bit about Premier Parnell. But how should we think about it? It's like gross margins should be flat again on that mix in December. So how should we think about gross margin as we get through the fiscal year? Is it just dependent on mix, or is there pricing or other things in the mix there?

Yeah, Matt, I think you nailed the two biggest drivers on that gross margin, you know, the Asia shift and mix. And obviously, The upside we saw in the quarter came from Asia, you know, and then Farnell is probably the second biggest driver. I'd say within each regional business, you know, there's puts and takes. You know, we're seeing a little bit weaker mix in terms of, you know, some of the bigger customers that might have a little bit better pricing, you know, doing more business than, let's say, the mass market customers just in the overall demand environment. We're seeing the larger customers' demand hold up a little bit better. So there's a little puts and takes there, but I think in general going to next quarter, flat to up slightly on gross margin is kind of how we're thinking about it. Then OPEX would be kind of similar as probably up a little bit there in OPEX from some timing differences and other things like that, but within the kind of normal range. Got it. Okay.

And then just lastly, on the inventory, I know you're targeting a fairly big reduction back to the 80s in inventory days, but you haven't really seen any significant progress where some of your competitors, a lot of the EMS companies, have been cutting inventory. So I guess the question is, why have you been lagging? Is that partly because your customers are still kind of pushing back on our rescheduling orders. I'm just trying to figure out the timing of this inventory.

Yeah, I think I won't comment on the competition, but what I would say is, you know, we're still seeing some of the same dynamics in terms of, you know, customers' inventory levels. You know, what our comment was this quarter is really absent currency. You know, the dollar weakened a little bit here, you know, against the euro in particular, but there was – you know, mostly FX was driving the inventory, and then we had some things happen towards the end of the quarter, you know, and I think in general, you know, we're going to keep doing what we have done past couple quarters prior to this one. Inventory came down nicely. You know, I think when you normalize for some of the The one-offs here, you know, inventory is still directionally going down, absent FX and some of the timing differences, you know. But I guess I'll just emphasize, Matt, you know, hey, we think we've got a path. There's plenty of work to do still, you know, but we are going to try to continue to be – we're seeing some things out there in the market where we can take advantage of them, and that may require some temporary increases, or at least inventory being flattish for another quarter or two while we execute against some of these opportunities. But we think long-term, nothing's changed in terms of our view of where inventory needs to get. It's not everywhere. It's certain specific products that we'll continue to work on, and we've got line of sight to some of those reductions. You know, and I guess what I would just say is, you know, the team is very focused on it. It's the number one or number two topic we bring up whenever we're with the team, and so everyone kind of gets it and we see to drive it. We want to emphasize that we still believe inventory is a good thing, but there is pockets of excess that we need to go execute against, and it's, you know, hurting not only us, our, you know, broader cash flow, but it's also hurting, you know, the returns.

Yeah, Matt, we signaled that, Matt, in the last couple quarters on some special opportunities we had that we thought were good win-wins for both that and the supplier. So it didn't totally surprise us, but we know we need to get it back down into the 80s, and it's going to take some work. And it's really about a half a dozen suppliers that we really need to work down. The rest of the M3s is fine. Got it. Okay, thanks a lot. Thanks, Ben.

Thank you. And as a reminder, if anyone has any questions, you may press Star 1 on your telephone keypad to join the queue. Our next question comes from the line of William Stein with Truist Security. We can proceed with your question. Great.

Thanks. I have a couple. First, Phil, you talked about strength over the next three years. I'm wondering if you expect revenue to turn to year-over-year growth during fiscal 25 towards the end of the year, and maybe even if you have a full year view at this point, do you think we'll wind up seeing sales grow in the current fiscal year?

In our current fiscal year, well, yeah, we're going on two – our current fiscal year is July to June, just to – Last year we anticipated that, and it didn't happen. You know, we're in the same – it's kind of a vuja day instead of deja vu here, Will. So we're kind of in the same boat we were last year. We are anticipating a second-half fiscal increase. I'll leave it at that. I mean, September was pretty low, and we're guiding flat in December. So we are anticipating and modeling, you know, some second-half fiscal year gains like that.

That's helpful. At least one other, if I can. You highlighted the increase in terms business. And I guess what I've discussed with some of your suppliers and the semi-companies I cover is the potential to sort of misinterpret signals when customers come in with, you know, what we call terms business, right? There are a lot of potential reasons for that. I think it's easy to interpret that in an optimistic way and say, well, oh, demand's improving and they're wanting product really quickly. The other way to view that is simply that they've grown accustomed to your having quite a bit of excess inventory and able to deliver in very quick turns. So why should they give you tons of visibility? I wonder... where you think we are in that dynamic. Do you think the shorter lead times in the turns business is more optimistic demand, or is it more of a view that they're relying on you to have the inventory and that, in fact, we're not really seeing a pickup in end demand?

Yeah, I'd love to give an absolute answer on that, but I think your latter point is closer, Will, as we see both the bills still not the parity that you've Unlying message there you could conclude is that customers aren't putting backlog on, right, and pipelining because things are readily available. You know, lead times are stable, I'll say, okay, and lower than they were two years ago for sure. So they're just kind of waiting and delaying, and then all of a sudden something will pop into their MRP, and boom, they need to go buy it to receive these turns. I think it's more of that will than anything because it seems – Some customers don't find Defense Arrow, we already pointed out, but the greater market, like in industrial and whatnot, they're just not pipelining, and a lot of our suppliers are on this call, and we're trying to get customers to give us that outlook because suppliers want the outlook so they know what to build for the future or what would be right back where we were a couple of years ago. So anyway, short of that, we get turns, and that's why we put it in the script. It's modest, Will, but it was a, you know, they were up, so it turns up a little bit, so we put it in the script, but it's not, you know, not where it needs to be.

I appreciate that. If I could have one more follow-up, please. I'm wondering if you can level set us on end market exposure. I think we get that from you all. Once in a blue moon, you disclose end market exposure. Even if you can't give it on a regional basis, can you just remind us what – because when you start throwing out things like, you know, aerospace defense and AI that we know is strong – to remind us that we don't get that on a quarterly basis from you all. So I wonder if you'd be able to discuss that with us for a minute.

Let me give you some rough numbers. We do give you this. So first of all, let's work backwards. AI, we mentioned in the script in Asia PAC a little bit with some of the hyperscalers, and that will start again at the regional data center. So we're seeing some lift there. It's not one of our key verticals right now. I mean, we have some suppliers – And it's, again, particularly in Asia that we've seen some nice increase in business. But, again, it wouldn't be our largest vertical by any stretch. So AI is, you know, still relatively low. You know, industrial, you know, if you look at industrial, it depends, again, it differs by region. But let's call it between 30% and 40%, something in that range of our business. I'll just give you a range from... Asia into Europe. Transportation is one that's probably come up in the last several years, where many years ago, a lot of the channels that participate there would do today. Again, it might be in the 15% to 20% in Europe, but globally, it's somewhere around in the 10% to 15% globally. Defense aero, you know, globally, you know, 5 to 10 probably. In America, it's very strong, right, 20-plus, you know, defense in aerospace. Consumer in the 10 to 15 range. It kind of gives you some, you know, compute and communications. If you tie them together, probably about 30 to 35%. So it really depends on the region, but that's some high-level numbers for you.

Thank you.

Well, I think the key message there, though, Will, is the diversification of our customer base. Okay, I think that's what does help us a bit, you know, is once now, you know, we're really diverse and, of course, diverse by region, so I just want to throw that in as well. Thank you.

Thank you. And there are no further questions at this time. I'll now turn it back over to Phil Gallagher for a closing remark.

Great. Thank you. And I want to thank everyone for attending today's earnings call, and I look forward to speaking to you again at our first quarter fiscal year 2025 earnings report. Thanks a lot. Appreciate it, and have a nice holiday.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.