Arrow Electronics, Inc.

Good day and welcome to the Arrow Electronics First Quarter 2025 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brad Winvigler, Arrow's Treasurer and Vice President of Investor Relations. Please go ahead.

Thank you, Operator. I'd like to welcome everyone to the Arrow Electronics First Quarter 2025 Earnings Conference Call. Joining me on the call today is our President and Chief Executive Officer, Sean Cairns. our Chief Financial Officer, Raj Agarwal, our President of Global Components, Rick Marano, and our President of Global Enterprise Computing Solutions, Eric Nowak. During this call, we'll make forward-looking statements, including statements about our business outlook, strategies, plans, 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 due to the risk factors and other factors described in this quarter's associated earnings release, and our most recent annual report on Form 10-K and other filings with the SEC. We undertake no obligation to update publicly or 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. You can access our earnings release at investor.aero.com. along with a replay of this call. We've also posted a slide presentation to this website to accompany our prepared remarks and encourage you to reference these slides during the webcast. Following our prepared remarks today, Sean and Raj will be available to take your questions. I'll now hand the call over to our President and CEO, Sean Cairns.

Thank you, Brad, and thank you all for joining us. Today, I'd like to discuss our first quarter performance, provide some commentary on the broader market environment, and then close with some thoughts as we look to the balance of the year. I'll then turn things over to Raj for more detail on our financials, as well as our outlook for the second quarter. For the first quarter, I'm pleased to report both consolidated and segment sales, as well as earnings per share that exceeded the high end of our guidance ranges. The overachievement was a function of several factors. Most notably, in global components, we saw improving trends across the broader market, including healthy momentum in EMEA. Our enterprise computing solutions business delivered year-over-year billings growth with solid operating leverage. And we continue to benefit from both our value-added offerings and our ongoing expense management initiatives. Now taking a closer look at our global components business, our first quarter results were highlighted by stronger sales than anticipated with all three regions performing ahead of typical seasonality. In addition to the momentum we cited in EMEA, we saw sequential improvement in our industrial markets on a global basis, alongside resilience and transportation, especially in the West. Both verticals represent a significant portion of our overall mix. We also enjoyed sequential growth in the market for IP&E, underscoring our continued initiative to specialize our go-to-market efforts in this attractive segment. Lastly, our value-added offerings, namely supply chain management and integration services, were once again accretive to our operating results. Now for some color commentary on a regional basis. Our results in the Americas were highlighted by a return to sequential growth in both the industrial and transportation segments. In Asia, we saw improving momentum across a number of verticals, including compute and consumer markets. And given first quarter Lunar New Year celebrations, we were pleased to see sales results ahead of seasonal expectations. And then finally, Our performance in EMEA was marked by strong sales activity in our industrial, transportation, and aerospace and defense verticals. Taking a closer look at the market more broadly, our leading indicators continue to trend positively. Our book-to-bill ratios improved throughout the quarter and now sit at or above parity in all three regions. Even with steady and manageable lead times, our backlog is growing again and should contribute to improving visibility, and notably, Industry-wide intelligence continues to indicate customer inventory levels in areas of the market are trending for replenishment. Considering these and other factors, our guidance reflects our belief that demand trends are at a cyclical turning point and the business is beginning to return to more normal and seasonal patterns, creating a foundation for the future. As we move into the second quarter and consistent with the earlier stages of cyclical improvement, we do anticipate stronger trends in Asia and across the larger OEM customer base. Finally, rapidly evolving trade policies are clearly top of mind throughout the electronics industry. While we continue to both assess and mitigate the impacts of tariffs to our business, our top priority lies with our suppliers and customers. Leveraging our global supply chain network and related services offerings, whether aimed at improving their supply chain visibility or guiding them through effective component level selection, sourcing, and staging options, we are well poised to help them navigate an uncertain trade landscape. Specific to the impact of tariffs on near-term demand trends, we've not yet seen changes in customer behavior in the form of order acceleration to any material degree. While the tariff environment remains highly fluid and until the dust fully settles, longer-term implications are more difficult to predict. Now turning to our global ECS business. In the first quarter, we again delivered year-over-year growth in billings, gross profit, and operating income. Generally speaking, what we experienced in the fourth quarter of 2024 continued into the early stages of 2025. Our top-line momentum was characterized by continued strength in cloud and infrastructure software, along with an uptick in hybrid cloud technologies. Regionally, our performance in EMEA was broad-based, with growth across all of our enterprise technology categories. And in North America, we saw improving activity levels in the enterprise data center, along with continued acceleration of our cloud portfolio. Most importantly, our ECS backlog grew in the first quarter by more than 50% year over year. We believe this reflects our ongoing alignment to the higher growth demand trends across enterprise IT, many of which are now being served on an as-a-service basis. This continues to contribute to the growth of our recurring revenue volumes now approaching one-third of our total billings mix last quarter we highlighted several factors that gave us a level of optimism regarding our full year outlook these include recent supplier and customer base expansion wins along with the continued adoption of our aerospace digital platform given that context our second quarter outlook reflects continued momentum in both regions poised again for year-over-year growth in billings gross profit and operating income when normalized. In closing, we're encouraged by the positive momentum we see in both of our operating segments. We believe it's the result of modestly improving demand trends in our relentless pursuit of our growth priorities. While we recognize the current broader economic and geopolitical landscape contributes to uncertainty, we remain focused on the factors within our control, those that we believe will keep the business on an improving trajectory. Lastly, I'm grateful for and impressed by the resilience of all of our Arrow teams and employees across the globe. They continue to lead us through the most pronounced cyclical correction in recent memory, and they do so with determination and dedication each and every day. With that, I'll hand things over to Raj.