Avnet, Inc.

Greetings and welcome to the AFNET third quarter fiscal year 2025 earnings conference call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Joe Burke, Vice President, Investor Relations.

Joe, please go ahead. Thank you, Operator. I'd like to welcome everyone to Avnet's third quarter fiscal year 2025 earnings conference call. This morning, Avnet released financial results for the third quarter fiscal year 2025, and the release is available on the Investor Relations section of Avnet'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 risks, 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, 10-Q and 10-K, 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?

Thank you, Joe, and thank you, everyone, for joining us on our third quarter fiscal year 2025 earnings call. I am pleased we delivered financial results ahead of our expectations for the third quarter. We achieved sales of $5.3 billion, near to the high end of our guidance, and adjusted DPS of 84 cents above guidance. We also generated $141 million of cash flow from operations in the quarter. Our results were driven by slightly better than expected performance in Asia and Farnell, offset by expected ongoing weaknesses in the West, with York presenting the most challenging market conditions. Semiconductor and IP&E lead times and pricing continue to be stable for most technologies. Our global book-to-bill ratio continues to improve, with the Asian region achieving parity in the quarter and with the Americas and EMEA approaching parity. I would note that the IP&E book-to-bill ratio across the company continues to improve above parity. Our backlog continues to be lower due to a combination of shorter lead times and customers still in the destocking mode. Cancellations have remained at normal levels. Customers continue to work through their elevated inventories. While our inventory is down marginally after accounting for foreign currency, I want to emphasize that inventory on hand, which is comprised of a diverse supplier mix, is a strategic asset and an important part of the value proposition we bring to our customers. And we stand at the ready to provide our customers with the product they need as the destocking process runs its course. At the same time, we expect to continue to optimize our inventory composition and reduce core inventory levels where needed in the coming quarters. Turning to our electronic components results. At the top line, our electronic component sales decline on a sequential basis and on a year-on-year basis due to the economic backdrop and certain geopolitical factors. On the other hand, Asia was the only region with year-on-year sales growth. In EMEA, we continue to experience weak demand across the region. In the quarter, the industrial end market increased slightly while other verticals were down sequentially. The aerospace and defense end market was the only vertical that showed growth on a year-on-year basis. In the Americas, we saw sequential growth in the transportation and compute end markets while other verticals were down sequentially. All verticals, with the exception of compute, were down on a year-on-year basis. We did not see any meaningful increase in shipments in advance of the anticipated tariff increases. Results for our Asia region were better than expected, even after allowing for the seasonal declines attributed to the Lunar New Year. Sales for Asia were down 8.5% sequentially. However, sales increased 13% year-on-year, representing the third consecutive quarter of year-on-year growth. While sales for all verticals were down sequentially as expected, We saw year-on-year growth in the industrial, communication, transportation, and markets. Similar to last quarter, we experienced a slight benefit in Asia from customers ordering due to the uncertainty of potential regulatory changes in the U.S. Demand creation revenues as a percentage of total revenues remain stable. Our demand creation wins increased as our field application engineers continue to find ways to create solutions for our customers, even in these challenging markets. One bright spot to mention is Abacus. Our specialty IP&E business in EMEA recorded solid increases in demand creation revenues and gross profit dollars. Now, turning to Fresnel. We are encouraged by the progress Fresnel is making as sales increased 6% sequentially and operating income increased to 3% for the quarter. We continue to be challenged given the macro environment in Europe where a large portion of their sales are derived. While our team still has a lot of work to do, I expect that we will see steady improvements at Farnell. We will continue to execute against our strategy and focus on those growth opportunities we can control, including leveraging existing Avnet core customer and supplier relationships, thus our branding of the Power of One. Now, regarding recently announced tariffs, we understand that this topic is front and center for all Avnet stakeholders. I want to take a moment to talk about what we are doing to mitigate the impact of tariffs on our customers and our own financials. First, I would start by saying the current environment regarding tariffs is dynamic, and our remarks today are based on what we know at this time. As we've mentioned before, when tariffs on goods originating from China went into effect in 2018, we implemented changes to our systems and processes to minimize the impact of tariffs where we could and pass through tariffs to our customers as seamlessly as possible. In response to recently enacted tariffs earlier this month, our team has been making the necessary adjustments to our systems and processes to capture and mitigate the widening scope of those that are currently applicable. Some of our solutions to minimize the impact include leveraging our global logistics and services footprint, collaborating with suppliers so we can minimize impact on our customers, and offering alternative country-of-origin products and solutions that are not subject to tariffs. To conclude, we are experiencing one of the most challenging and uncertain times that I've witnessed in my 40-plus years in distribution. Supply chains today are very complex, and as I like to say, complexity is our friend. At Adnet, our job, and a big part of our value proposition, is to minimize the complexity so our suppliers and customers can achieve their goals in the most cost-effective way possible. We at Adnet have a long history of adapting to evolving technologies, market cycles, geopolitics, and shifts in regulations. I am confident we will weather these current challenges and emerge stronger. I want to thank our team for their dedication and perseverance in helping us to achieve our goals. It is during times like these that our efforts demonstrate to all of our stakeholders the value that we provide at the center of the technology supply chain. With that, I'll turn it over to Ken to dive deeper into our third quarter results.

Ken? Thank you, Phil, and good morning, everyone. We appreciate your interest in Avnet and for joining our third quarter earnings call. Our sales for the third quarter were approximately $5.3 billion, near the high end of our guidance range, and down 6% both year-over-year and on a sequential basis. Relative to expectations, sales in Asia and for now were higher than expected, while the Americas and EMEA sales were slightly lower than expected. Regionally, on a year-over-year basis, sales increased 13% in Asia, but declined 24% in EMEA and 9% in the Americas. From an operating group perspective, electronic components sales declined 6% year-over-year and decreased 7% sequentially. Barnell sales declined 10% year-over-year but increased 6% sequentially. For the third quarter, gross margin of 11.1% was 78 basis points lower year-over-year but 54 basis points higher sequentially, in part due to a seasonal mixed shift to the west. The same seasonal mixed shift impacted EC gross margin, which was higher sequentially but down year-over-year. Gross margins for each EC region remain relatively consistent on a sequential basis. Farnell gross margin was also down year-over-year but up sequentially, largely due to an increased mix of on-the-board components. Farnell gross margin at the product category level, including on-the-board components, continues to be stable. Turning to operating expenses, we continue to manage expenses well and take costs out where necessary. SG&A expenses were $435 million in the quarter, down $32 million, or 7% year-over-year, and down $1 million sequentially. Operating expenses for the quarter included a $9 million benefit from the gain on the sale and leaseback of the facility. As a percentage of gross profit dollars, SG&A expenses were slightly higher sequentially at 74%. Foreign currency positively impacted operating expenses by approximately $4 million sequentially and $7 million year-over-year. For the third quarter, we reported adjusted operating income of $153 million, and our adjusted operating margin was 2.9%. By operating group, electronic components operating income was $172 million, and EC operating margin was 3.5%. The year-over-year decline in EC operating margin was primarily due to the sales makeshift to Asia. Farnell operating margin was 3%, up approximately 200 basis points quarter over quarter, reflecting improved sales and gross margin. It is early days, but we are encouraged by this improvement. We believe the Farnell business has stabilized and is seeing modest improvement in the number and size of customer orders. Farnell operating expenses were down $12 million year over year, but up $3 million sequentially on higher sales. Cornell continues to execute against its cost reduction program, but a majority of the planned actions have been completed exiting the third quarter. Turning to expenses below operating income, third quarter interest expense of $61 million decreased by $12 million year-over-year and decreased $1 million sequentially due to lower average borrowings. This lower interest expense positively impacted adjusted diluted earnings per share by 11 cents year-over-year. Our adjusted effective income tax rate was 23% in the quarter as expected. Adjusted diluted earnings per share of $0.84 exceeded the high end of our guidance for the quarter and included an approximately $0.08 benefit from the gain on sale and leaseback of the facility during the quarter. Turning to the balance sheet and liquidity, during the quarter, working capital remained flat sequentially and included a slight increase in reported inventories of $18 million, a $326 million decrease in receivables, and a $307 million decrease in payables. Sequential increases in foreign currency exchange rates added $93 million to working capital, including $75 million to reported inventories. Excluding the impact of changes in foreign currency exchange rates, inventories decreased by $57 million compared to last quarter. We remain focused on reducing inventory levels where elevated, noting that we also want to make investments where needed. Our return on working capital was stable with last quarter. We generated $141 million of cash from operations in the quarter, $585 million fiscal year to date, and $859 million over the past four quarters. We expect to generate positive operating cash flows next quarter. Year to date, our debt is lower by $260 million. We ended the quarter with a gross leverage of 3.2 times, and we had approximately $1.2 billion of available committed borrowing capacity. During the quarter, net cash used for CapEx was $27 million within our expected quarterly levels of approximately $25 million to $35 million. CapEx is expected to be between $55 million to $65 million next quarter due to the planned purchase of an office building. In the third quarter, we paid our quarterly dividends of $0.33 per share, or $28 million. We also repurchased approximately $101 million of the shares, bringing the year-to-date repurchase total to $251 million. We are ahead of our goal to reduce shares outstanding by at least 5% this fiscal year. Additionally, we have more than $400 million left on our current share repurchase authorization. Book value per share increased to approximately $56 a share, or a sequential increase of $1 per share, primarily due to changes in foreign currency exchange rates. With regard to our capital allocation, we continue to prioritize our existing business needs, including working capital and CapEx. We remain committed to our roadmap of delivering a reliable and increasing dividend and balancing debt paydown with share repurchases as our shares continue to be undervalued by the market. Turning to guidance, for the fourth quarter of fiscal 2025, we are guiding sales in the range of $5.15 billion to $5.45 billion and diluted earnings per share in the range of $0.65 to $0.75. Our fourth quarter guidance assumes flat sales compared to last quarter at the midpoint, driven in part by favorable foreign exchange rates, primarily in EMEA. Our overall sales guidance in constant currency assumes lower sales in EMEA and flattish sales in Asia and the Americas. This guidance also assumes similar interest expense compared to the third quarter, an effective tax rate of between 21% and 25%, and 86 million shares outstanding on diluted basis. Our team has made a significant effort to adjust our processes for this latest round of tariffs. For additional context, we currently estimate that between 7% to 10% of our annual America sales is from products that originate from China. We continue to work with our suppliers and customers to mitigate the impact of tariffs where possible. In summary, our third quarter performance was better than expected despite the challenging market conditions. Our team continues to focus on generating operating cash flow, and over the past year, we have been able to balance the paydown of debt with returning cash to shareholders through share repurchases and dividends. Before turning to questions, I want to echo Phil's comments in thanking our team for continuing to focus on the things that we can control. We will continue to work closely with our suppliers and customers to mitigate the impact of current and any future tariffs to the extent possible. Our global scale and the diversification of our distribution center locations, the supplier technologies we provide, and the vertical markets we serve gives us the ability to reduce complexities and better serve our customers. With that, I will turn it over to the operator to open it up for questions. Operator?

Thank you. We'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star 1 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 move your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we poll for questions. Our first question today is coming from Joe Cortace from Wells Fargo. Your line is now live.

Yeah, thanks for taking the questions. I wanted to kind of understand the puts and takes on the revenue guide for the June quarter. It's a bit weaker than some of your suppliers that have already guided for the quarter, you know, implying that their revenue would be up low or mid or even, in some cases, high single digits sequentially. So I wanted to kind of understand the difference there. And then maybe as a follow-up to that, you know, How do we think about your inventory expectations, given that you're guiding for flattish growth and some of your suppliers are guiding for growth?

Yeah, Joe, thanks. I guess what I would say is I think we've taken the same approach that we have over the past several quarters to kind of come up with a guide. So I don't think we view it as conservative. We don't view it as necessarily aggressive as well. And I think, you know, the real story is the West, in Europe in particular, right, I think in kind of Europe, You know, looking at a sequential down, you know, 5% plus. You know, so I think if you look at the guidance range, you know, if you look at the high end of that guidance range, you could get to those, you know, low single-digit growth sequentially. But that's all going to be probably coming from Asia, right? Asia is where we have the strength now, and the West is kind of weak. You know, and so when you get the upside in sales in Asia, it's lower-calorie sales. And so that's kind of, you know, how we're thinking about things. You know, and I know we'll get into some questions on tariffs and things like that. You know, hey, I think we're going to make some more progress. You know, $57 million reduction in inventory and constant currency. We'll make some more progress, you know, this quarter. I would say, you know, $100 million kind of plus is what we're looking at. So, you know, we need to kind of work that side of things and think there's more opportunity there to relieve the inventory. So that's kind of what we're seeing right now.

Okay. And then as a follow-up, you know, on tariffs, I mean, you kind of touched upon it in the prepared remarks, you know, opportunities for your supply chain services for your customers. And can you talk about that? And, you know, what does that look like? And can you remind us of any just kind of the details from the financial profiles of that business?

Yeah, I mean, I think – You know, I think it's an opportunity to help our customers across all of our service offers, including supply chain and service. I wouldn't say it's unique to that. You know, I guess how we look at it is this is where our global scale and geographic footprint helps us. You know, again, we talked about 7% to 10% of our Americas. you know, business being country of origin, China, you know, and even some of that goes to Mexico or Canada, which wouldn't be subject to tariffs. So, you know, look, it's complicated, but I think our footprint is going to serve us well to help customers, you know, reduce that complexity. But, you know, at the end of the day... stuff coming from China into the U.S. is going to be subject to tariffs, right? We can't stop that. We can try to get different country origins and mitigate the best we can, you know, and we're working through that right now. So we do see – this is another example. I think we refer to it as just more complexity, which serves us better to help our customers. deal with that. But it's challenging right now in terms of everyone's running around with their heads cut off. But the team's doing a great job trying to adjust real time to what's coming out. And we don't listen to the news. We're more focused on what the government actually issues. But it's coming at us pretty fast. But we think we're lockstep with what the changes are, and we're implementing things as quickly as we can.

Yeah, Joe, I'll just jump in on that. Thanks, Ken. And we're super proud of the team here. We've got a tremendous amount of experience with this. It's not new. I think we reemphasized that in the script. It's going back to, what, 17, 18. So it's just a little bit more complex than that, obviously, with what's going on. But we have the processes in place. We've got the logistics centers options. We've got the FTZ set up. And the word really – Because are you going to pass it on? That's going to be the next question. The answer is yes. And we are doing that and have done that in the past. But the real thing we try to do is mitigate up front altogether, right? So the key is mitigation. So that's why we very intentionally put the complexity in the script. Complexity is fine. That's what we deal with, okay? And that's our job is to make things simpler, if you will, or streamline for our customers and suppliers. On the guidance, I'm going to reemphasize what Ken mentioned. We don't stress the team. We don't make up numbers. We roll it up, bottoms up. We have some conversations with the field, regional presidents. Here's what we believe is our best estimate. And I think the guidance this quarter is particularly complex given the the tariffs, given the geopolitical uncertainty, that there was no reason to go and stretch that out. If we do better, we do better. Great. But we're very confident with the guide, okay, as we have been in the past, and it's what we're seeing today, and that's what we're reporting. Thanks for the details. You got it, Joe.

Thank you. As a reminder, that's star one to be placed in the question queue. Our next question is coming from William Stein from Truacy.

Hi, can you all hear me?

Sure can, Will.

Oh, great. I cut out for a minute there. Thanks for taking my questions. First, on Farnell, you did a bit better there than we expected in the quarter, both revenue, but especially in margins. Can you elaborate a little bit on what went on in the quarter and what your longer-term expectations are for that business, please?

Sure can, Will. Yeah, so the word I would use, and we're not celebrating by any stretch, but the word I would use on Fresnel is we're encouraged. We put a plan in place with the new leader, Rebecca, and team, and are executing to the plan both in OPEX reductions as well as SKU expansion and streaming the processes and driving more efficiency. What's encouraging... You're right. In the operating margin, our goal there, Will, as we stated, is I want to see continuous improvement quarter and quarter, work our way back into double-digit. For what period of time exactly, tough to call, but we definitely want to see that we went from where we were to one to three to let's get to five to six right on down the line. And that's the charter for now, and it really moves our needle, as you know, from an EPS standpoint, when, not if, but when we do that. i'll give you let me give you some encouraging um comments here uh uh will that happen throughout the quarter across the board um we saw customer line items continue to increase in shipments in all three regions okay so that's a i don't know that's you know canary in the coal mine or what as we talk about you know but it was a good sign it wasn't any one region but in asia pac We're up close to double-digit in Europe in line items. The activity is up in the teens and almost 10% in the Americas. So across the board, we saw increased line item activity. The order values may not be tracking quite at the same rate, but the volume is going up, and we continue to see that as we get into April and the book to build positive. So it's kind of steady as she goes with Fresnel. We believe, as you know, passionately in the success for Fresnel and the impact it can have on AdNet, Inc., and we'll continue to leverage AdNet and Fresnel as that power one thing we continue to market out to the suppliers and customers.

Thanks for that. The next thing I'd like to linger on for a minute is inventory. There's always this sort of – push and pull, at least in the discussion. I think you tend to always cite that, you know, investors push you to keep that number low. I think that's fair. But you today and in the past have talked about this as being sort of strategic and highly valuable to both customers and suppliers. So I wonder, first, would you consider establishing a higher sort of go forward target level for inventories. Like maybe this is the right level for, you know, longer term level. And if not, if you're trying to get them down, I am sort of surprised that even on a, you know, FX adjusted or constant currency basis, you'd revenue down 6% in the quarter. You talk about trying to get this number down, yet it was only down about 1%. on constant currency. So sort of which approach is right? Are you targeting higher levels longer term? And if not, why didn't it come down faster? Thank you.

So you're talking in total, Abner, then? Okay. First, I thought you'd talk about for now. Okay. Let me take a shot at that and pass it over to Ken. As we've stated in the past, Will, if We've supported this as well as our customers. Inventory is not a bad thing, okay, so in distribution. And what we shoot for, we are going to continue to shoot to bring inventory down more. We have to do that. But I want to emphasize that. The inventory is not up across the board. I've mentioned this before. Most of our inventory in SKUs by commodity are fine, and actually we need to invest more. But there's a handful, let's just say a line, that we have more inventory than we probably had anticipated, and we need to work that down. And some of that was also strategic. We called that out a few earnings calls ago, a couple calls in a row, that we had a few strategic opportunities to increase our inventory and get some better returns for that, and we did it. And it's good inventory. And, again, we've got the returns on it. So I think there's a constant balancing act. I mean, at the end of the day, what we shoot for is the right returns, okay? And we need to get the right return on working capital and ROC number. That's ultimately the metric, okay? And if we get more inventory and we get higher margins and we get a greater return, that's fine. Right now, we're just a little bit over inventory. We want to continue to bring it down, and that's what we're going to track to do. But we don't want to bring our inventory down to where we're not competitive or where we're not helping the suppliers and customers meet their goals.

I would just say, well, I think it's As the sales go down, it's more challenging to continue to turn the inventory, but we have made a lot of progress in certain areas. Inventory is not one thing. It's lots of things, and there is some progress behind the scenes. So even though you could say optically the $57 million is not a big number relative to the base, we'd say that there was a lot of churn within that that was helpful for the future quarters to come. I think I would echo Phil's comments. There's opportunity here. It doesn't mean we're going to just necessarily bring inventory levels down to a target number just for the target number, right? We want to have it within the context of the business. I think it's a fair statement to say perhaps in some supplier lines or in some opportunities we may need to hold more than historical levels, but maybe there's others where we have more opportunity. We continue to drive that with the team. And, again, we think we'll make additional progress. This quarter clearly slower than we would have anticipated, you know, a year ago and not where we want it to be. But we do think we're making progress, even if it's modest.

Thank you.

Thanks, Will. Thank you. Our next question today is coming from Wamsi Mohan from Bank of America. Your line is now live.

Yes, thank you. I want to be filling in for Rupu today. A few questions around tariffs for me. Have you seen any activity around order patterns and linearity change at all based on the tariff news? And in particular, has there been anything that you can see relative to Poland or maybe activity jumping up in Asia ahead of end products getting shipped into the U.S.? ?

Yeah, hey, Wansi, how you doing? I'll go first, but I can jump in. The overriding answer, not much, okay? And maybe that's It kind of is to us a little bit. We thought we would see more pull-ins ahead of tariffs and things along those lines. We thought we would actually see a onesie in the December quarter before all this started, and that didn't happen either. I mean, modestly, but not much, and we didn't see much in the March quarter. We'll see how that plays out. As we caught out in the script, we saw some modest pull-ins in Asia-Pac, but again, in the grand scheme of things, not that much, really. And like I said, it kind of surprised us a little bit. We thought we would have seen more. At the same time, as Ken pointed out in the script, the impact to us today, coming out of China's you know, 7% to 10%. So it's not, I think sometimes the perception that everything we have is getting hit, and it's really not. It's still a big, you know, still a sizable number, but as a percentage of our, I'll call it, exposable sales to tariffs, it's relatively low.

I think in Asia in particular, you know, in the December quarter, maybe we saw, you know, 5-0, 50 million kind of, let's say, attributed to pull-in benefit. And maybe this quarter it was closer to 100. I think in the guidance we assume something similar. So, you know, we're seeing a little bit of uptick that's contributing to the overall demand, but we're not seeing it be massive swings in demand there. But we continue to monitor it. You know, definitely some uncertainty and definitely some, you know, currency movement in Asia as well as of late. Yeah, that's helpful, Phil.

Thanks, Ken, too. Maybe just to think through this quantifying that you've done, 7% to 10%. As we think about that, I think you said that some of that also goes via Canada and Mexico. So what is the ability for you to kind of shift that? maybe geographical exposure there in working with your customers. That's question one. And two, as you think through, are you expecting... cash flow timing issues relative to when these tariffs go into effect on that exposable piece. Can you just walk us through the dynamic there based on when maybe payments are being made versus what you might be able to recoup?

Yes, so maybe I'll start. I mean, again, you know, we think our flexibility and our footprint, our distribution center footprint in particular is helpful. So we do have not only warehouses in the U.S., but also warehouses in Mexico. The warehouses in the U.S. are designated as foreign trade zones, which means until the product moves out of there, it's not subject to tariffs, so it acts as a buffer there. So high-level numbers, that 7% to 10% that originates from China, 30% of that probably ultimately goes to Mexico or Canada, so it's not subject to tariffs. We've done certain things with our suppliers to become importer of record so we can control the drawbacks and things like that. So I'd say right now, not a significant heavy lift on working capital or cash flow. I think as the tariffs start to multiply, we've got to monitor, right, again. Our goal is to mitigate or minimize the tariffs, but we're going to have to pass it through if we have to pay them. Customers don't want to pay tariffs. They're already paying what they perceive as high prices. So there's always that dynamic, but, again, that's not new to us. We'll continue to work through it. And so we don't see, as of this date, with the tariffs, we were kind of commenting on the script of any meaningful working capital drag or cash flow drag, you know, beyond what we deal with in terms of, you know, sometimes receivables come past due. We work with our customers to collect them. You know, the inventory is still probably the biggest opportunity, much more than the tariffs kind of draw on working capital in terms of cash flow.

And while we're talking – that's why we focus mostly on the China – For Mexico, we think at the end of the day it's going to be less than one, maybe one and a half percent of revenues of products coming in from Mexico.

In the Americas?

In the Americas, yeah.

Okay, that's super helpful. If I could just one quick last one, this might be a little unusual, but in terms of your visibility into looking into AI-driven components or components that end up in AI-based systems, how much visibility do you have into that? And would you say that anything has changed either for the better or worse in that to the extent that you have visibility there?

Yeah. We do have some visibility to that, predominantly in Asia-Pac and within Asia-Pac, Taiwan. So we are seeing some benefit. It's not monstrous for us. Wamsi, a lot of that goes direct, and there's some, like, the number one line out there. We don't happen to have that line, you know, and that goes direct. But we're seeing ancillary products, if you will, around the AI that we're seeing some benefit, and we do have visibility to that, and it's – I could call that – It's 3% to 5% of our business probably in Asia-Pac, somewhere along those lines. Okay.

Okay, great. Thanks for that.

But we do. That's fine. You can hang up. Thanks, Wamsi. But we do believe there's going to be a tale of opportunity coming out of AI on the edge that it's going to for sure benefit what we do, okay, on a more global basis over time.

And I'd also add that the supply chain services, you know, large OEMs, there's opportunity to participate. We're seeing more and more opportunities to get our foot in the door there in that kind of area with supply chain services.

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Phil for any further closing comments.

Yeah, thanks. I want to thank everybody for attending today's earnings call, and I look forward to speaking to you again at our full fiscal year 2025 earnings report in August. Have a great day. Thanks.

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.