Arrow Electronics, Inc.

Good day and welcome to the Arrow Electronics Third Quarter 2023 Earnings Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Anthony Bencivenga, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. I'd like to welcome everyone to the Arrow Electronics Third Quarter 2023 Earnings Conference Call. Joining me on the call today is our President and Chief Executive Officer, Sean Cairns, and our Chief Financial Officer, Raj Agrawal. During this call, we'll 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 described in our most recent 10-K and 10-Q filings with the SEC. We undertake no obligation to update or publicly revise any of the forward-looking statements as a result of new information or future events. As a reminder, some of the figures we will discuss on today's call are non-GAAP measures, which are not intended to be a substitute for our GAAP results. We've reconciled these non-GAAP measures to the most directly comparable GAAP financial measures in this quarter's associated earnings release or Form 10-Q. 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've also posted a slide presentation to accompany our prepared remarks and encourage you to reference these slides during this webcast. Following our prepared remarks today, we'll be available to take your questions. I'll now hand the call over to our President and CEO, Sean Cairns.

thanks anthony and thank you all for joining us and for your interest in arrow electronics today i'd like to discuss our q3 performance provide some color regarding the market overall and then close with a couple thoughts as we look to the future i'll then turn things over to raj for more detail on our financials as well as our outlook for the fourth quarter despite continued market softness i'm pleased to announce that we delivered sales results for the third quarter in line with our expectations and earnings per share well above them. Now, included in our results are two items worth noting, one a benefit and one a charge to our P&L. Raj will describe these in more detail, but even when normalizing for these items, our non-GAAP earnings per share were at the high end of our guidance. As I discussed last quarter, we're experiencing a cyclical correction in our global components business and a very mixed IT spending environment in our enterprise computing solutions business. But as I also mentioned, we've seen corrections like this before, are confident in our resilience and ability to successfully navigate them, and remain optimistic regarding the longer-term outlooks, both in electronics and information technology. In the meantime, we continue to stay very close to our suppliers and customers and are taking all the right steps to emerge even stronger as market conditions improve. In our global components business, market conditions remain challenging. evident through softer demand across several verticals and elevated inventory levels throughout the ecosystem. Having said that, we again see signs that point to the underlying health of the business. Lead times have now largely normalized and will contribute to the service of our delinquent backlog and improved visibility to future demand signals. Book to bill ratios, though below parity, are holding steady and the pricing environment remains relatively stable. In addition, given what we can control, we remain steadfast in our focus on the initiatives that continue to benefit our structural margin health. Demand creation activity was strong in Q3, demonstrating our continued commitment to the role and value of our engineering investments. We made steady progress in the market for interconnect, passive, and electromechanical technologies, and a creative segment proving a little more resilient through the cycle. And we saw continued adoption of our supply chain services offering. As a proof point, our results and guidance for global components indicate operating margins roughly 100 basis points better than what we experienced during the cyclical downturn in 2019. Now, from a regional perspective, sales were soft across the board. However, we did see some pockets of relative strength. In the Americas, we were pleased with the increased traction in design-related activity as we continue to help our customers design in components for their next generation products. Over in Europe, our focus on interconnect passive and electromechanical components appears to be paying off as we saw some improvement in IP&E booking activity during the quarter. And in Asia, while it's too soon to call for a broader recovery, we were encouraged by relative momentum in transportation. networking and communications, and to a lesser degree, computing. As we look to the near term and global components, we're confident in the stability of our supplier technology portfolio, the strength of our customer relationships, and our ability to generate cash as we continue to navigate correction territory. Now, turning to our global ECS business, we were pleased with the relative strength we saw in infrastructure software, cybersecurity, and cloud adoption, all consistent with our strategy. This contributed to overall gross billings growth on a year-over-year basis. On the other hand, large enterprise IT spending remained lumpy as customers proceed cautiously given a more uncertain macro environment, creating headwinds for our high-end compute and storage offerings. In EMEA, we benefited from our broad exposure to the mid-market, the strength of our software and cloud portfolio, and the consistent execution of our European team. And in North America, we saw strength in the public sector and yet are still in transition to a model that better resembles both our line card and customer mix in EMEA. Given only modest investment to support this transition and an improving demand environment, we expect to see better performance in 2024. Despite the volume shortfall, operating margins were solid, and given typical seasonality, we expect them to be quite healthy again in Q4. Before I turn things over to Raj, just a couple thoughts. First, I'd like to reinforce that we remain optimistic regarding our long-term growth prospects and are taking this opportunity to further align around them. I have every confidence in our strategy and ability to execute and believe that we will be well positioned for a better market environment as demand conditions improve. And then I'd also like to take a moment and recognize our Arrow employees around the globe. Despite the challenges of an uncertain and sometimes chaotic world, they continue to serve our suppliers and customers with perseverance and dedication. Their well-being will always be paramount to our success, and I thank them for their continued commitment to Arrow and all of its stakeholders. With that, I'll hand things over to Raj.