-- First-Quarter Earnings Per Share of
$4.60; Non-GAAP Earnings Per Share of $4.60 --
-- Revenue and EPS Exceeding Midpoint of
Guidance --
Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter
2023 sales of $8.74 billion, a decrease of 4 percent year over
year, and a decrease of 2 percent year over year on a constant
currency basis1. First-quarter net income was $274 million, or
$4.60 per share on a diluted basis, compared with net income of
$365 million, or $5.31 per share on a diluted basis, in the first
quarter of 2022. Non-GAAP net income1 was $274 million, or $4.60
per share on a diluted basis, in the first quarter of 2023,
compared with non-GAAP net income of $373 million, or $5.43 per
share on a diluted basis, in the first quarter of 2022. In the
first quarter of 2023, changes in foreign currencies reduced sales
by $203 million, and reduced earnings per share on a diluted basis
by $0.13, compared to the first quarter of 2022.
“The company delivered solid first-quarter results with revenue
and earnings per share beating the midpoint of our guidance,” said
Sean Kerins, Arrow's president and chief executive officer. “Our
dedicated team performed well in a challenging environment for both
our suppliers and customers.”
Global components first-quarter sales of $6.86 billion reflected
a decrease of 5 percent year over year, and a decrease of 3 percent
year over year on a constant currency basis. Asia-Pacific
components first-quarter sales decreased 19 percent year over year.
Americas components first-quarter sales decreased 5 percent year
over year. Europe components first-quarter sales increased 17
percent year over year, and increased 23 percent year over year on
a constant currency basis. Global components first-quarter
operating income was $418 million, and first-quarter non-GAAP
operating income was $424 million.
“We are pleased with the overall performance of the global
components business given the current market conditions, led by
strength in the EMEA region. We were encouraged by the momentum of
our design engagement in several of our markets,” said Mr.
Kerins.
Global enterprise computing solutions (ECS) first-quarter sales
of $1.88 billion were flat year over year and reflected an increase
of 3 percent year over year on a constant currency basis. Europe
enterprise computing solutions first-quarter sales increased 7
percent year over year and increased 13 percent year over year on a
constant currency basis. Americas enterprise computing solutions
first-quarter sales decreased 5 percent year over year. Global
enterprise computing solutions first-quarter operating income was
$81 million, and first-quarter non-GAAP operating income was $82
million.
“Our ECS business continues to perform in line with the overall
market for enterprise IT, with better momentum in Europe, and a
softer backdrop in the Americas. Additionally, we’re pleased to see
signs of an improving supply environment,” said Mr. Kerins.
“Enhancing shareholder value remains a top priority,” said Raj
Agrawal, senior vice president and chief financial officer. “Our
strong financial returns and the effective management of our
balance sheet have enabled us to return cash to shareholders by
repurchasing $300 million of shares during the first quarter.
Returning cash to shareholders through our stock repurchase plan
remains one of our priorities. As of the end of the first quarter,
our remaining repurchase authorization stands at approximately $1
billion.”
1 A reconciliation of non-GAAP financial
measures to GAAP financial measures is presented in the
reconciliation tables included herein.
SECOND-QUARTER 2023 OUTLOOK
- Consolidated sales of $8.42 billion to $9.02 billion, with
global components sales of $6.64 billion to $7.04 billion, and
global enterprise computing solutions sales of $1.78 billion to
$1.98 billion
- Net income per share on a diluted basis of $4.10 to $4.30, and
non-GAAP net income per share on a diluted basis of $4.25 to
$4.45
- Average tax rate of approximately 23.5 percent compared to the
long-term range of 23 to 25 percent
- Average diluted shares outstanding of 57.95 million
- Interest expense of approximately $90 million
- Changes in foreign currencies expected to increase
year-over-year growth in sales by $12 million, not expected to have
a significant impact on earnings per share on a diluted basis
compared to the second quarter of 2022
- Changes in foreign currencies expected to increase
quarter-over-quarter growth in sales by $54 million and earnings
per share on a diluted basis by $0.04 compared to the first quarter
of 2023
- On a constant currency basis, our second-quarter sales guidance
implies a sequential growth rate range of down 4 percent to up 2
percent for global components and down 6 percent to up 4 percent
for global enterprise computing solutions, when compared to the
first quarter of 2023
Second-Quarter 2023 GAAP to
non-GAAP Outlook Reconciliation
NON-GAAP SALES RECONCILIATION
Quarter Ended
Quarter Ended
(in billions)
July 1, 2023
July 2, 2022
% Change
July 1, 2023
April 1, 2023
% Change
Global components sales, GAAP
$6.64 - 7.04
$
7.46
(11%) - (6%)
$6.64 - 7.04
$
6.86
(3%) - 3%
Impact of changes in foreign
currencies
—
0.01
—
0.04
Global components sales, constant
currency
$6.64 - 7.04
$
7.47
(11%) - (6%)
$6.64 - 7.04
$
6.90
(4%) - 2%
Global ECS sales, GAAP
$1.78 - 1.98
$
2.00
(11%) - (1%)
$1.78 - 1.98
$
1.88
(5%) - 5%
Impact of changes in foreign
currencies
—
0.01
—
0.02
Global ECS sales, constant currency
$1.78 - 1.98
$
2.01
(11%) - (1%)
$1.78 - 1.98
$
1.90
(6%) - 4%
NON-GAAP EARNINGS
RECONCILIATION
Reported GAAP measure
Intangible amortization
expense
Restructuring & integration
charges
Non-GAAP measure
Net income per diluted share
$4.10 to $4.30
$0.10
$0.05
$4.25 to $4.45
CFO Commentary
Please refer to the CFO commentary, which can be found at
investor.arrow.com, as a supplement to the company’s earnings
release. The company uses its website as a tool to disclose
important information about the company and to comply with its
disclosure obligations under Regulation Fair Disclosure.
Conference Call
Information
Arrow Electronics will host a conference call to discuss
first-quarter 2023 financial results on May 4, 2023, at 1:00 PM ET.
Register online at https://conferencingportals.com/event/gniMxNyn
to obtain dial-in information to access the live conference call.
The conference call will also be available via live webcast at
investor.arrow.com. Shortly after the conclusion of the conference
call, a webcast replay will be available at investor.arrow.com.
About Arrow Electronics
Arrow Electronics guides innovation forward for over 210,000
leading technology manufacturers and service providers. With 2022
sales of $37 billion, Arrow develops technology solutions that
improve business and daily life. Learn more at
fiveyearsout.com.
Information Relating to Forward-Looking
Statements
This press release includes “forward-looking” statements, as the
term is defined under the federal securities laws, including but
not limited to statements regarding: Arrow’s future financial
performance, including its outlook on financial results for the
second quarter of fiscal 2023 such as sales, net income per diluted
share, non-GAAP net income per diluted share, average tax rate,
average diluted shares outstanding, interest expense, average
USD-to-Euro exchange rate, impact to sales due to changes in
foreign currencies, intangible amortization expense per diluted
share, restructuring & integration charges per diluted share,
and expectation regarding market demand. These forward-looking
statements are subject to numerous assumptions, risks, and
uncertainties, which could cause actual results or facts to differ
materially from such statements for a variety of reasons,
including, but not limited to: unfavorable economic conditions;
disruptions or inefficiencies in the supply chain, including any
potential adverse effects of the ongoing global COVID-19 pandemic;
political instability; impacts of military conflict, including the
conflict in Ukraine; industry conditions; changes in product
supply, pricing and customer demand; competition; other vagaries in
the global components and the global ECS markets; deteriorating
economic conditions, including economic recession, inflation, tax
rates, foreign currency exchange rates, or the availability of
capital; the effects of natural or man-made catastrophic events;
changes in relationships with key suppliers; increased profit
margin pressure; changes in legal and regulatory matters;
non-compliance with certain regulations, such as export, antitrust,
and anti-corruption laws; foreign tax and other loss contingencies;
and the company's ability to generate cash flow. For a further
discussion of these and other factors that could cause the
company's future results to differ materially from any
forward-looking statements, see the section entitled “Risk Factors”
in the company's most recent Quarterly Report on Form 10-Q and the
company's most recent Annual Report on Form 10-K, as well as in
other filings the company makes with the Securities and Exchange
Commission. Shareholders and other readers are cautioned not to
place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. The company
undertakes no obligation to update publicly or revise any of the
forward-looking statements.
Certain Non-GAAP Financial
Information
In addition to disclosing financial results that are determined
in accordance with accounting principles generally accepted in the
United States (“GAAP”), the company also provides certain non-GAAP
financial information. The company provides non-GAAP sales,
operating income, income before income taxes, provision for income
taxes, consolidated net income, noncontrolling interests, net
income attributable to shareholders, effective tax rate and net
income per share on a diluted basis, which are non-GAAP measures
adjusted for the impact of changes in foreign currencies (referred
to as "changes in foreign currencies" or "on a constant currency
basis") by re-translating prior-period results at current period
foreign exchange rates, identifiable intangible asset amortization,
restructuring, integration, and other charges, and net gains and
losses on investments. Management believes that providing this
additional information is useful to the reader to better assess and
understand the company’s operating performance and future prospects
in the same manner as management, especially when comparing results
with previous periods. Management typically monitors the business
as adjusted for these items, in addition to GAAP results, to
understand and compare operating results across accounting periods,
for internal budgeting purposes, for short- and long-term operating
plans, and to evaluate the company's financial performance.
However, analysis of results on a non-GAAP basis should be used as
a complement to, in conjunction with, and not as a substitute for,
data presented in accordance with GAAP.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands except per share
data)
(Unaudited)
Quarter Ended
April 1, 2023
April 2, 2022
Sales
$
8,736,428
$
9,074,125
Cost of sales
7,622,606
7,866,621
Gross profit
1,113,822
1,207,504
Operating expenses:
Selling, general, and administrative
expenses
642,431
643,925
Depreciation and amortization
46,679
48,305
Restructuring, integration, and other
charges
2,560
4,898
691,670
697,128
Operating income
422,152
510,376
Equity in earnings (losses) of affiliated
companies
(80
)
843
Gain on investments, net
10,311
2,011
Employee benefit plan expense, net
(853
)
(889
)
Interest and other financing expense,
net
(79,658
)
(33,985
)
Income before income taxes
351,872
478,356
Provision for income taxes
76,547
112,360
Consolidated net income
275,325
365,996
Noncontrolling interests
1,575
1,247
Net income attributable to
shareholders
$
273,750
$
364,749
Net income per share:
Basic
$
4.66
$
5.38
Diluted
$
4.60
$
5.31
Weighted-average shares outstanding:
Basic
58,731
67,840
Diluted
59,479
68,749
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par
value)
(Unaudited)
April 1, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
205,554
$
176,915
Accounts receivable, net
10,655,863
12,322,717
Inventories
5,525,782
5,319,369
Other current assets
479,650
521,339
Total current assets
16,866,849
18,340,340
Property, plant, and equipment, at
cost:
Land
5,691
5,691
Buildings and improvements
185,790
184,211
Machinery and equipment
1,602,073
1,583,661
1,793,554
1,773,563
Less: Accumulated depreciation and
amortization
(1,214,103
)
(1,177,107
)
Property, plant, and equipment, net
579,451
596,456
Investments in affiliated companies
59,682
65,112
Intangible assets, net
151,221
159,137
Goodwill
2,036,077
2,027,626
Other assets
583,252
574,511
Total assets
$
20,276,532
$
21,763,182
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
8,976,296
$
10,460,419
Accrued expenses
1,269,536
1,339,302
Short-term borrowings, including current
portion of long-term debt
144,264
589,883
Total current liabilities
10,390,096
12,389,604
Long-term debt
3,719,056
3,182,964
Other liabilities
567,200
579,261
Equity:
Shareholders’ equity:
Common stock, par value $1:
Authorized - 160,000 shares in both 2023
and 2022
Issued - 125,424 shares in both 2023 and
2022
125,424
125,424
Capital in excess of par value
1,203,134
1,208,708
Treasury stock (68,426 and 66,175 shares
in 2023 and 2022, respectively), at cost
(4,925,140
)
(4,637,345
)
Retained earnings
9,488,582
9,214,832
Accumulated other comprehensive loss
(361,468
)
(365,262
)
Total shareholders’ equity
5,530,532
5,546,357
Noncontrolling interests
69,648
64,996
Total equity
5,600,180
5,611,353
Total liabilities and equity
$
20,276,532
$
21,763,182
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In thousands)
(Unaudited)
Quarter Ended
April 1, 2023
April 2, 2022
Cash flows from operating activities:
Consolidated net income
$
275,325
$
365,996
Adjustments to reconcile consolidated net
income to net cash provided by (used for) operations:
Depreciation and amortization
46,679
48,305
Amortization of stock-based
compensation
19,497
17,351
Equity in (earnings) losses of affiliated
companies
80
(843
)
Deferred income taxes
(7,530
)
1,352
Gain on investments, net
(10,311
)
(2,011
)
Other
1,321
686
Change in assets and liabilities:
Accounts receivable, net
1,701,889
430,710
Inventories
(199,521
)
(460,902
)
Accounts payable
(1,504,701
)
(477,825
)
Accrued expenses
(132,316
)
(43,641
)
Other assets and liabilities
33,392
(79,426
)
Net cash provided by (used for) operating
activities
223,804
(200,248
)
Cash flows from investing activities:
Acquisition of property, plant, and
equipment
(20,114
)
(19,270
)
Proceeds from collections of notes
receivable
142
20,169
Proceeds from settlement of net investment
hedge
10,725
—
Net cash provided by (used for) investing
activities
(9,247
)
899
Cash flows from financing activities:
Change in short-term and other
borrowings
(146,050
)
(14,293
)
Proceeds from long-term bank borrowings,
net
34,360
845,000
Net proceeds from note offering
498,600
—
Redemption of notes
(300,000
)
(350,000
)
Proceeds from exercise of stock
options
5,934
11,302
Repurchases of common stock
(303,801
)
(264,431
)
Net cash provided by (used for) financing
activities
(210,957
)
227,578
Effect of exchange rate changes on
cash
25,039
(7,632
)
Net increase in cash and cash
equivalents
28,639
20,597
Cash and cash equivalents at beginning of
period
176,915
222,194
Cash and cash equivalents at end of
period
$
205,554
$
242,791
ARROW ELECTRONICS, INC.
NON-GAAP SALES RECONCILIATION
(In thousands)
(Unaudited)
Quarter Ended
April 1, 2023
April 2, 2022
% Change
Consolidated sales, as reported
$
8,736,428
$
9,074,125
(3.7
)%
Impact of changes in foreign
currencies
—
(202,778
)
Consolidated sales, constant currency
$
8,736,428
$
8,871,347
(1.5
)%
Global components sales, as reported
$
6,855,793
$
7,199,075
(4.8
)%
Impact of changes in foreign
currencies
—
(145,993
)
Global components sales, constant
currency
$
6,855,793
$
7,053,082
(2.8
)%
Americas components sales, as reported
$
2,233,453
$
2,340,543
(4.6
)%
Impact of changes in foreign
currencies
—
(1,694
)
Americas components sales, constant
currency
$
2,233,453
$
2,338,849
(4.5
)%
Asia components sales, as reported
$
2,376,195
$
2,931,529
(18.9
)%
Impact of changes in foreign
currencies
—
(46,502
)
Asia components sales, constant
currency
$
2,376,195
$
2,885,027
(17.6
)%
Europe components sales, as reported
$
2,246,145
$
1,927,003
16.6
%
Impact of changes in foreign
currencies
—
(97,797
)
Europe components sales, constant
currency
$
2,246,145
$
1,829,206
22.8
%
Global ECS sales, as reported
$
1,880,635
$
1,875,050
0.3
%
Impact of changes in foreign
currencies
—
(56,785
)
Global ECS sales, constant currency
$
1,880,635
$
1,818,265
3.4
%
Americas ECS sales, as reported
$
998,114
$
1,047,849
(4.7
)%
Impact of changes in foreign
currencies
—
(8,569
)
Americas ECS sales, constant currency
$
998,114
$
1,039,280
(4.0
)%
Europe ECS sales, as reported
$
882,521
$
827,201
6.7
%
Impact of changes in foreign
currencies
—
(48,216
)
Europe ECS sales, constant currency
$
882,521
$
778,985
13.3
%
ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS
RECONCILIATION
(In thousands except per share
data)
(Unaudited)
Three months ended April 1,
2023
Reported GAAP measure
Intangible amortization
expense
Restructuring & Integration
charges
Other(1)
Non-GAAP measure
Operating income
$
422,152
$
7,980
$
2,560
$
—
$
432,692
Income before income taxes
351,872
7,980
2,560
(10,311
)
352,101
Provision for income taxes
76,547
2,010
720
(2,471
)
76,806
Consolidated net income
275,325
5,970
1,840
(7,840
)
275,295
Noncontrolling interests
1,575
134
—
—
1,709
Net income attributable to
shareholders
$
273,750
$
5,836
$
1,840
$
(7,840
)
$
273,586
Net income per diluted share (2)
$
4.60
$
0.10
$
0.03
$
(0.13
)
$
4.60
Effective tax rate (3)
21.8
%
21.8
%
Three months ended April 2,
2022
Reported GAAP measure
Intangible amortization
expense
Restructuring & Integration
charges
Other(1)
Non-GAAP measure
Operating income
$
510,376
$
9,018
$
4,898
$
—
$
524,292
Income before income taxes
478,356
9,018
4,898
(2,011
)
490,261
Provision for income taxes
112,360
2,310
1,205
(486
)
115,389
Consolidated net income
365,996
6,708
3,693
(1,525
)
374,872
Noncontrolling interests
1,247
140
—
—
1,387
Net income attributable to
shareholders
$
364,749
$
6,568
$
3,693
$
(1,525
)
$
373,485
Net income per diluted share (2)
$
5.31
$
0.10
$
0.05
$
(0.02
)
$
5.43
Effective tax rate (3)
23.5
%
23.5
%
(1) Other includes gain on investments,
net.
(2) The sum of the components for diluted
EPS, as adjusted may not agree to totals, as presented, due to
rounding.
(3) The items as shown in this table,
represent the reconciling items for the tax rate as reported by
GAAP measure and as a non-GAAP measure.
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Quarter Ended
April 1, 2023
April 2, 2022
Sales:
Global components
$
6,855,793
$
7,199,075
Global ECS
1,880,635
1,875,050
Consolidated
$
8,736,428
$
9,074,125
Operating income (loss):
Global components
$
417,539
$
499,342
Global ECS
81,099
85,798
Corporate (a)
(76,486
)
(74,764
)
Consolidated
$
422,152
$
510,376
(a)
Corporate operating income (loss) includes
restructuring, integration, and other charges of $2.6 million for
the first quarter of 2023 and $4.9 million for the first quarter of
2022.
NON-GAAP SEGMENT
RECONCILIATION
Quarter Ended
April 1, 2023
April 2, 2022
Global components operating income, as
reported
$
417,539
$
499,342
Intangible assets amortization expense
6,745
6,873
Global components non-GAAP operating
income
$
424,284
$
506,215
Global ECS operating income, as
reported
$
81,099
$
85,798
Intangible assets amortization expense
1,235
2,145
Global ECS non-GAAP operating income
$
82,334
$
87,943
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version on businesswire.com: https://www.businesswire.com/news/home/20230504005243/en/
Investors: Anthony Bencivenga, Vice President, Investor
Relations 303-566-7456
Media: John Hourigan, Vice President, Public Affairs and
Corporate Marketing 303-824-4586
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