Avnet, Inc.

Welcome to the Avnet fourth quarter fiscal year 2025 earnings call. I would now like to send the floor over to Joe Burke, VP, Treasury and Investor Relations for Avnet.

Thank you, Operator. I'd like to welcome everyone to Avnet's fourth quarter fiscal year 2025 earnings conference call. This morning, Avnet released financial results for the fourth quarter and 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 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 the 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?

Thank you, Joe, and thank you, everyone, for joining us on our fourth quarter and fiscal year 2025 earnings call. For the fiscal year, we delivered $22.2 billion in revenues and $3.44 of adjusted diluted earnings per share. Looking back, this was a year of intense focus on managing the things within our control, including competing well in the markets, strengthening our supplier and customer relationships by demonstrating the value ADNIT brings to the technology supply chain, controlling costs while continuing to make investments that enable our long-term strategy, optimizing our working capital and generating healthy cash flows, and continuing to return cash to shareholders through buybacks and a dividend. We also announced a couple of key executive additions this fiscal year, including the appointment of Dave Youngblood, a 25-year industry veteran, as our chief digital officer, and more recently, the promotion of Gilles Bertrand, a 23-year veteran of ADNET, as the new president of our EMEA region. Congratulations, Gilles. Gilles will be succeeding Slobodan Petarvik, better known as Puli, and Mario Orlandi, who have co-led the EMEA region with distinction for many years. They will remain with us for the next several quarters to ensure a smooth transition. Succession planning is critical to any organization, and we have a thoughtful, structured process in place at AVNET. Mario and Pooley did a great job leading the success of our EMEA region over the years and also developing talent for the next generation of leadership. I want to thank them for their many years of tireless dedication. And I want to express my gratitude to our team for their unwavering commitment and hard work in driving us toward our objectives. In challenging markets like we have faced the past couple of years, our collective efforts truly highlight the critical role we play at the heart of the technology supply chain, reinforcing our value to all stakeholders. Now, turning to the recent completed fourth quarter, I am pleased we delivered another quarter of financial results that exceeded our sales and EPS guidance. In the quarter, we achieved sales of $5.6 billion and adjusted operating margins of 2.5%, highlighted by a 4.3% operating margin in our Cornell business. We also generated $139 million of cash flow from operations in the quarter. Sales were better than expected, led by Asia, which delivered 18% year-over-year growth in the quarter. Sequentially, demand increased across most of the markets we served. On a year-to-year basis, demand increased in the compute, transportation, and communication end markets globally. Semi-doctor and IP&E lead times and pricing remained stable for most technologies. Our book-to-bill ratio improved across all regions and for now last quarter. The improvement was led by our Europe and Asia regions, which were both above parity. Bookings also continued to grow in our IP&E business and remain above parity as well. We continue to coordinate closely with suppliers and customers to effectively manage our backlog, which is growing again. New customer orders within lead times, which we refer to as our turns business, also increased across all regions, and it's a positive sign that customer inventories are normalizing. Order cancellations have remained at normal levels. I am pleased with our progress on reducing inventories, although there is still work to do. Even so, we believe we are well positioned today and remain focused on ensuring we have the right inventory at hand, balancing reductions with investment opportunities. We expect to continue to be disciplined in optimizing our inventory as we move through fiscal year 2026. Now, with that, let me turn to the fourth quarter results. At the top line, our electronic components business increased on a sequential basis and year over year. All regions were higher sequentially, and notably, this was our fourth consecutive quarter of year-over-year growth in Asia. Sales in Asia were better than expected, and demand in most end markets increased both year-over-year and sequentially. Similar to last quarter, we experienced a slight benefit from customers ordering due to the uncertainty of potential regulatory changes in the U.S. In the Americas, demand increased sequentially for the communications end market and compute was strongest on a year-on-year basis. We did not see pull-ins in any magnitude, and customer billings for tariffs were not meaningful during the quarter. In EMEA, the market is still mixed with some signs of improvement in certain end markets. In the quarter, most end markets increased sequentially. The communications market was the only vertical that showed growth year-on-year. With that said, we are optimistic that Bookings and EMEA will grow in September as the Europeans return from their typical summer vacation period. From a demand creation standpoint, revenues increased 7% sequentially as our field application engineers continue to engage with our customers and suppliers on design wins and registrations. This strength of our FAEs and technical teams is a key part of our value proposition. Now, turning to Farnell. The team continued to deliver on the strategy that Rebecca Obregon and her leadership team put in place one year ago, right-sizing the cost structure, reorganizing the management team, and leveraging Adena's broader relationships and bolstering our digital and e-commerce capabilities. In the quarter, sales were higher both sequentially and year-on-year with improved operating margin. We are pleased that Fresnel's results have stabilized, but we still have work to do to achieve its full margin potential. We are confident they are well positioned for steady improvement. To conclude, ADNED has momentum as we enter the new fiscal year, despite challenging business conditions over the last two years. And with that, we have a number of reasons to be optimistic about fiscal 2026, beginning with Asia's double-digit growth in fiscal 2025. The region has historically led us out of cycles in the past, and this one should be no different. Stabilization at Parnell. With the right size cost structure and synergies from the power of one initiative, Fresnel is poised for steady growth. We'll build above parity in all regions and in our IP&E business, which is one of our higher margin growth opportunities. We have made significant investments in our digital infrastructure to boost our customer experience and data insights. Demand creation. As semiconductor become more pervasive, the value of AdNet's engineering capabilities will further increase. And finally, lead times have normalized. Our backlog in terms of business are improving, and through it all, gross margins have held up well for each of our EC regions in fiscal 2025 compared to fiscal 2024. I continue to feel optimistic about our value proposition and encouraged by the positive signs that market conditions are beginning to turn in the Americas and the median. of the technology supply chain, we are well-positioned to help solve for the increasing complexity our customers and suppliers face around the world and bring resiliency to the supply chain. With that, I'll turn it over to Ken to dive deeper into our fourth quarter results. Ken?