Avnet, Inc.

Please stand by. Our presentation will now begin. Welcome to the Avnet Second Quarter Fiscal Year 2025 Earnings Call. I would now like to turn the floor over to Joe Burke, Vice President, Treasury and Investor Relations for Avnet.

Thank you, Operator. I'd like to welcome everyone to the Avnet Second Quarter Fiscal Year 2025 Earnings Conference Call. This morning, ABNET released financial results for the second quarter fiscal year 2025, 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 APNET's most recent Form 10Q and 10K and subsequent filings with the SEC. These forward-looking statements speak only after 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 and 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? Thank you, Joe, and thank you, everyone, for joining us on our second quarter fiscal year 2025 earnings call. Our first earnings call in the new calendar year. Before we begin, I want to take a moment to acknowledge the unimaginable devastation in Los Angeles County and ongoing challenges in North Carolina. Our hearts go out to all those affected by these catastrophes, including our employees, customers, and suppliers, and we are committed to providing support to the communities affected through our Avnet CARES program. As of now, all of our employees in these locations are safe, And to date, there has been no impact on our operations from these tragedies. With that said, let me turn to the second quarter results. In the quarter, we achieved sales of $5.7 billion and adjusted EPS of 87 cents, both above the midpoint of our guidance. Similar to last quarter, our results were primarily driven by stronger than expected performance in Asia. offset by weakness in the West, with Europe presenting the most challenging market conditions. Our team continues to compete well and manage the factors within our control. We are making good progress on optimizing inventory and managing costs, while at the same time making investments in our business and operational capabilities. These efforts by our team helped us to generate over $300 million of cash flow from operations in the quarter. I want to thank our team for their perseverance during the prolonged and challenging cycle. Their efforts position us well for when the market recovers. Taking a look at the market today, and with the exception of a slight uptick in the memory space, semiconductor lead times continue to be stable across technologies. Pricing is mixed, with some decreases in commoditized products and increases from certain suppliers providing more complex technologies who are looking to pass along higher input costs. On the IP&E side, lead times and pricing continue to be stable. Our global book-to-bill ratio remains below parity, with our Asia region showing the strongest and Europe having the weakest book-to-bill ratio. Our backlog continues to be under pressure, due to a combination of shorter lead times, the current demand environment, and customers still being in that destocking mode. However, cancellations have remained at normal levels. From a demand perspective, sales increased sequentially in the aerospace and defense vertical led by the Americas and the comms and transportation verticals led by Asia. Industrial, compute, and consumer verticals were lower on a sequential and year-over-year basis. Even with the muted demand, as customers continue to work through their elevated inventory levels, I am pleased we made the expected progress on reducing inventory. Our team will continue their efforts to optimize the composition and quality of our inventory over the coming quarters. We expect to continue to reduce core inventory levels where needed in the coming quarters, but will balance the reductions with inventory investment opportunities we are seeing in the market. Now, turning our attention to electronic components results. At the top line, electronic components sales increased slightly on a sequential basis and declined on a year-on-year basis. Asia continues to be the bright spot for our EC business, with sales increasing both sequentially and year-on-year. We saw sequential and year-on-year growth in the industrial, communication, and transportation end markets. We saw a slight benefit in Asia from customers ordering due to the uncertainty of potential regulatory changes in the United States. In EMEA, we continue to experience weak demand across the region due to the economic backdrop and certain geopolitical factors, which are all having a dampening effect on the business and consumer confidence. In the region, the aerospace and defense end markets showed moderate growth on a sequential end year-on-year basis. In the Americas, we saw sequential growth in the aerospace and defense end markets and in select industrial and market applications. We did not see any meaningful increases in orders this quarter in advance of the recent tariff increases. Demand creation revenues increased sequentially by 5% as our field application engineers continue to drive the funnel for converting design wins into revenues. Our design registrations and wins also increased sequentially, which is a positive indicator for future demand creation revenues. Now, turning to Farnell, sales were flat sequentially and down year on year. Farnell sales continue to be challenged given the weak macro environment in Europe, where they have the highest percentage of sales. Farnell is also facing some competitive pricing pressures for on-the-board components. I'm confident that we will see slow and steady improvements at Fresnel as we execute against our cost-reduction initiatives and focus on those growth opportunities we have control over, including leveraging existing ad-net customer relationships. To conclude, the current market correction has been one of the most prolonged and uncertain in recent memory, and I want to thank our team for their dedication and competitive spirit. While it is difficult to gauge how long the market correction will continue, there are many reasons why I'm optimistic about the future of AdNet. We have a great supplier line card and a diverse customer base. We have a seasoned and stable leadership team, and we have a solid balance sheet giving us the capacity to weather these challenging market conditions and emerge even stronger. We also see opportunities with supplier partners to grow our share by continuing to demonstrate the value of distribution including tapping into our supply chain services and digital capabilities. Additionally, our continued focus on higher margin offerings, such as embedded solutions, demand creation, and IP&E products, will yield future growth and gross margin benefits. With that, I'll turn it over to Ken to dive deeper into our second quarter results. Thank you, Phil, and good morning, everyone.