Arrow Electronics, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Arrow Electronics fourth quarter and full year 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to call over to your speaker today, Steve O'Brien, Vice President in Investor Relations. Please go ahead.

Thanks, Denise. Good day, and welcome to Arrow Electronics' fourth quarter and year-end 2020 earnings conference call. With us on the call today are Mike Long, Chairman, President, and Chief Executive Officer, Sean Cairns, Chief Operating Officer, and Chris Stansbury, Senior Vice President and Chief Financial Officer. During this call, we will make forward-looking statements, including statements about our business outlook, strategies, and future financial results, which are based on our predictions and expectations as of today. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors in our most recent 10-K and 10-Q filings with the SEC. We undertake no obligation to update publicly or revise any of the forward-looking statements. As a reminder, some of the figures we will discuss on today's call are non-GAAP. We have reconciled those to the most directly comparable GAAP financial measures in our earnings relief. These non-GAAP measures are not intended to be a substitute for our GAAP results. You can access our earnings release at investor.arrow.com along with the CFO commentary, the non-GAAP earnings reconciliation, and a replay of this call. We will begin with a few minutes of prepared remarks, which will then be followed by a question and answer period. I will now hand the call to our Chairman, President, and CEO, Mike Long.

Thanks, Steve, and thanks to all of you for joining us today. When I spoke to you in late April of 2020, right after our first quarter, there was much we didn't know about how the coming months would unfold. which is why it's incredible to be here today talking about record quarterly sales and earnings in the fourth quarter of the year. Not to mention, in 2020, we generated record operating cash flow, reduced debt by a record amount, and returned a record cash to the shareholders of the year. It's a true testament of our strength. But not only did we do that, but in a very short period of time, we had almost 15,000 people that had to go from office work to work from home. And this is a true testament of the hard work and the dedication of our team. Every day our customers have a choice. We're proud they continue to choose Arrow. Customers place their trust in Arrow's engineering, design, and supply chain services. They rely on us to ensure their products are designed to be efficiently manufactured and well received in the marketplace. Our suppliers are critical to our success. They continue to choose arrows to sell, market, and design their components into some of the most innovative and important products coming to market. While our reputation speaks for itself, our consistency comes from putting our people first. Once again, I'd like to thank our team for continuing to deliver for customers and to move technology forward in a year of extreme challenges. While some of these same obstacles we've had in the past, we've seen major device upgrades and major upgrade cycles followed by strong sales. The foundation of our business has never been stronger. While business conditions in our industry are dynamic, we're cautiously optimistic that the demand environments for Americas and Europe can return to growth. Customers are ramping up prior production levels across many industries, and the inventory correction that occurred prior to the pandemic means that some components are in short supply. Orders and backlog are up in all regions. In line with this, our America's Customer Settlement Survey showed an increase in the percentage of customers that have an inventory shortage and a decrease in customers with an excess of inventory. Turning to our enterprise computing solutions business, we're pleased to deliver operating income growth on a year-over-year basis. Operating income growth continues to be the truest measurement of performance for this business, And in addition, operating margin reached its highest level since the fourth quarter of 2017. While we were pleased with our enterprise computing solutions results, we see strong potential for further improvements in 2021. First, the markets we serve remain challenged by lockdowns and continued restrictions to related on-site work. In the meantime, widespread work-from-home policies continue to drive security and cloud solutions. In the past, we've seen major upgrades, followed by strong infrastructure spending to support them. We see further benefits to enterprise security from a recovery by specialty bars and MSP customers who serve some of the industries that have both mostly been impacted by the pandemic. Our customers who service the hospitality, retail, restaurant, and even the medical industries have been hampered by an inability to work onsite at their end customers. We derive value from complexity, so helping these customers design and sell secure multi-site hybrid cloud data solutions should benefit our volumes and profits compared to our business in 2021. Before closing, I thought I'd share a few words of our company's longstanding commitment to developing business leaders and proactive succession planning. We recently announced the appointment of Sean Cairns as Arrow's new Chief Operating Officer. Sean has been a valued member of our team since 2007. His leadership and proven track record at Arrow make him the ideal executive to now lead both businesses in advanced innovation across our global sales, marketing, and operations. We're confident in his ability to help Arrow capture value and growth from the increasing convergence of semiconductor electronic component industries with the information and operational technology industries. With that, I'll now hand the call over to Chris to provide more details on our fourth quarter results and our expectations for the first quarter.