First quarter sales of $6.3 billion and diluted
EPS of $2.25
Adjusted diluted EPS of $1.61 exceeded
guidance
Electronic Components operating margin of 4.6%
increased 38 basis points year over year
Avnet, Inc. (Nasdaq: AVT) today announced results for its first
quarter ended September 30, 2023.
Commenting on the Company’s financial results, Avnet Chief
Executive Officer Phil Gallagher stated, “We delivered
better-than-expected results in the first quarter thanks to the
strong performance of our Electronic Components business. Our
team’s continued execution and flexibility are resonating with both
our customer and supplier partners, especially in today’s market
conditions. We remain focused on the things we can control, and are
confident that our resiliency and adaptability will keep us on our
path to driving profitable growth and value for all of our
stakeholders in the long term.”
Fiscal First Quarter Key Financial Highlights:
- Sales of $6.3 billion decreased 6.1% year over year from $6.8
billion.
- On a constant currency basis, sales decreased 7.8% year over
year and decreased 2.9% sequentially.
- Diluted earnings per share of $2.25, compared with $1.93 in the
prior year quarter.
- Adjusted diluted earnings per share of $1.61, compared with
$2.00 in the prior year quarter.
- A gain on legal settlement benefitted GAAP diluted earnings per
share by $0.71 for the quarter.
- Operating income margin of 4.0%, decreased 29 basis points year
over year.
- Adjusted operating income margin of 4.1%, decreased 22 basis
points year over year.
- Electronic Components operating income margin of 4.6%,
increased 38 basis points year over year.
- Farnell operating income margin of 4.2% decreased 389 basis
points sequentially.
- Returned $28.3 million to shareholders in dividends during the
quarter.
- Returned $27.0 million to shareholders in the quarter from
share repurchases.
Key Financial Metrics
($ in millions, except per share data)
First Quarter Results (GAAP)
Sep – 23
Sep – 22
Change Y/Y
Jun – 23
Change Q/Q
Sales
$
6,335.6
$
6,750.1
(6.1
)%
$
6,554.6
(3.3
)%
Operating Income
$
253.8
$
290.5
(12.7
)%
$
283.7
(10.5
)%
Operating Income Margin
4.0
%
4.3
%
(29
)bps
4.3
%
(32
)bps
Diluted Earnings Per Share (EPS)
$
2.25
$
1.93
16.6
%
$
1.68
33.9
%
First Quarter Results
(Non-GAAP)(1)
Sep – 23
Sep – 22
Change Y/Y
Jun – 23
Change Q/Q
Adjusted Operating Income
$
261.7
$
293.3
(10.8
)%
$
312.6
(16.3
)%
Adjusted Operating Income Margin
4.1
%
4.4
%
(22
)bps
4.8
%
(64
)bps
Adjusted Diluted Earnings Per Share
(EPS)
$
1.61
$
2.00
(19.5
)%
$
2.06
(21.8
)%
Segment and Geographical Mix
Sep – 23
Sep – 22
Change Y/Y
Jun – 23
Change Q/Q
Electronic Components (EC) Sales
$
5,914.4
$
6,324.2
(6.5
)%
$
6,109.2
(3.2
)%
EC Operating Income Margin
4.6
%
4.2
%
38
bps
5.1
%
(47
)bps
Farnell Sales
$
421.2
$
425.9
(1.1
)%
$
445.4
(5.4
)%
Farnell Operating Income Margin
4.2
%
12.1
%
(792
)bps
8.1
%
(389
)bps
Americas Sales
$
1,573.5
$
1,678.9
(6.3
)%
$
1,732.7
(9.2
)%
EMEA Sales
$
2,308.0
$
2,129.5
8.4
%
$
2,450.6
(5.8
)%
Asia Sales
$
2,454.1
$
2,941.7
(16.6
)%
$
2,371.3
3.5
%
_______________
(1)
A reconciliation of non-GAAP financial
measures to GAAP financial measures is presented in the “Non-GAAP
Financial Information” section of this press release.
Outlook for the Second Quarter of Fiscal 2024 Ending on
December 30, 2023
Guidance Range
Midpoint
Sales
$6.00B – $6.30B
$6.15B
Adjusted Diluted EPS
$1.35 – $1.45
$1.40
The above guidance is based upon current market conditions and
implies a sequential sales decline of 1% to 5% and assumes a
seasonal decline in sales from the western regions primarily due to
holidays.
The above guidance also excludes restructuring, integration and
other expenses, amortization of intangibles, and certain income tax
adjustments. The above guidance assumes similar interest expense to
the fourth quarter and an effective tax rate of between 22% and
26%. The above guidance assumes 92 million average diluted shares
outstanding and average currency exchange rates as shown in the
table below:
Q2 Fiscal
2024
Q1 Fiscal
Q2 Fiscal
Guidance
2024
2023
Euro to U.S. Dollar
$1.06
$1.09
$1.02
GBP to U.S. Dollar
$1.22
$1.27
$1.17
Today’s Conference Call and Webcast Details
Avnet will host a conference call and webcast today at 1:30 p.m.
PT / 4:30 p.m. ET to discuss its financial results, provide a
business update and answer questions.
- Live conference call: 877-407-8112 (domestic) or 201-689-8840
(international)
- Conference call replay available through November 8, 2023:
877-660-6853 or 201-612-7415 and using Conference ID: 13741421
- Live and archived webcast can be accessed via Avnet’s Investor
Relations web page at: https://ir.avnet.com
Forward-Looking Statements
This document contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
with respect to the financial condition, results of operations, and
business of the Company. You can find many of these statements by
looking for words like “believes,” “projected,” “plans,” “expects,”
“anticipates,” “should,” “will,” “may,” “estimates,” or similar
expressions. These forward-looking statements are subject to
numerous assumptions, risks, and uncertainties. The following
important factors, in addition to those discussed elsewhere in the
Company’s Annual Report on Form 10-K for the fiscal year ended July
1, 2023 and subsequent Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, could affect the Company’s future results of
operations, and could cause those results or other outcomes to
differ materially from those expressed or implied in the
forward-looking statements: geopolitical events and military
conflicts; pandemics and other health-related crises; competitive
pressures among distributors of electronic components; an industry
down-cycle in semiconductors, including supply shortages;
relationships with key suppliers and allocations of products by
suppliers, including increased non-cancellable/non-returnable
orders; accounts receivable defaults; risks relating to the
Company’s international sales and operations, including risks
relating to repatriating cash, foreign currency fluctuations,
inflation, duties and taxes, sanctions and trade restrictions, and
compliance with international and U.S. laws; risks relating to
acquisitions, divestitures, and investments; adverse effects on the
Company’s supply chain, operations of its distribution centers,
shipping costs, third-party service providers, customers, and
suppliers, including as a result of issues caused by military
conflicts, terrorist attacks, natural and weather-related
disasters, pandemics and health-related crises, warehouse
modernization, and relocation efforts; risks related to cyber
security attacks, other privacy and security incidents, and
information systems failures, including related to current or
future implementations, integrations, and upgrades; general
economic and business conditions (domestic, foreign, and global)
affecting the Company’s operations and financial performance and,
indirectly, the Company’s credit ratings, debt covenant compliance,
liquidity, and access to financing; constraints on employee
retention and hiring; and legislative or regulatory changes.
Any forward-looking statement speaks only as of the date on
which that statement is made. Except as required by law, the
Company assumes no obligation to update any forward-looking
statement to reflect events or circumstances that occur after the
date on which the statement is made.
About Avnet
As a leading global technology distributor and solutions
provider, Avnet has served customers’ evolving needs for more than
a century. Decade after decade, Avnet helps its customers and
suppliers around the world realize the transformative possibilities
of technology. Learn more about Avnet at www.avnet.com.
(AVT_IR)
AVNET, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(UNAUDITED)
First Quarters Ended
September 30,
October 1,
2023
2022
(Thousands, except per share
data)
Sales
$
6,335,648
$
6,750,133
Cost of sales
5,587,542
5,981,960
Gross profit
748,106
768,173
Selling, general and administrative
expenses
487,286
477,636
Restructuring, integration and other
expenses
7,051
—
Operating income
253,769
290,537
Other income, net
5,960
323
Interest and other financing expenses,
net
(70,796
)
(45,098
)
Gain on legal settlements and other
86,499
—
Income before taxes
275,432
245,762
Income tax expense
66,164
61,501
Net income
$
209,268
$
184,261
Earnings per share:
Basic
$
2.29
$
1.96
Diluted
$
2.25
$
1.93
Shares used to compute earnings per
share:
Basic
91,495
94,051
Diluted
93,178
95,636
Cash dividends paid per common share
$
0.31
$
0.29
AVNET, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
September 30,
July 1,
2023
2023
(Thousands)
ASSETS
Current assets:
Cash and cash equivalents
$
278,679
$
288,230
Receivables
4,679,691
4,763,788
Inventories
5,755,051
5,465,031
Prepaid and other current assets
197,720
233,804
Total current assets
10,911,141
10,750,853
Property, plant and equipment, net
470,971
441,557
Goodwill
759,848
780,629
Operating lease assets
220,657
221,698
Other assets
283,845
282,422
Total assets
$
12,646,462
$
12,477,159
LIABILITIES AND SHAREHOLDERS’
EQUITY
Current liabilities:
Short-term debt
$
68,601
$
70,636
Accounts payable
3,445,711
3,373,820
Accrued expenses and other
722,409
753,130
Short-term operating lease liabilities
53,657
51,792
Total current liabilities
4,290,378
4,249,378
Long-term debt
3,101,903
2,988,029
Long-term operating lease liabilities
186,745
190,621
Other liabilities
244,853
297,462
Total liabilities
7,823,879
7,725,490
Shareholders’ equity
4,822,583
4,751,669
Total liabilities and shareholders’
equity
$
12,646,462
$
12,477,159
AVNET, INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
First Quarters Ended
September 30, 2023
October 1, 2022
(Thousands)
Cash flows from operating activities:
Net income
$
209,268
$
184,261
Non-cash and other reconciling items:
Depreciation
20,639
19,640
Amortization
878
2,755
Amortization of operating lease assets
13,271
13,141
Deferred income taxes
5,575
(7,296
)
Stock-based compensation
9,355
8,924
Other, net
(20,171
)
8,224
Changes in (net of effects from businesses
acquired and divested):
Receivables
30,190
(419,852
)
Inventories
(371,604
)
(559,044
)
Accounts payable
111,489
120,938
Accrued expenses and other, net
(50,184
)
(16,840
)
Net cash flows used for operating
activities
(41,294
)
(645,149
)
Cash flows from financing activities:
Borrowings (repayments) under accounts
receivable securitization, net
(92,100
)
152,200
Borrowings under senior unsecured credit
facility, net
243,613
701,987
Repayments under bank credit facilities
and other debt, net
(133
)
(85,432
)
Repurchases of common stock
(24,324
)
(152,408
)
Dividends paid on common stock
(28,320
)
(26,998
)
Other, net
1,414
(964
)
Net cash flows provided by financing
activities
100,150
588,385
Cash flows from investing activities:
Purchases of property, plant and
equipment
(76,089
)
(28,208
)
Other, net
300
7,303
Net cash flows used for investing
activities
(75,789
)
(20,905
)
Effect of currency exchange rate changes
on cash and cash equivalents
7,382
4,857
Cash and cash equivalents:
— decrease
(9,551
)
(72,812
)
— at beginning of period
288,230
153,693
— at end of period
$
278,679
$
80,881
Non-GAAP Financial
Information
In addition to disclosing financial results that are determined
in accordance with generally accepted accounting principles in the
United States (“GAAP”), the Company also discloses certain non-GAAP
financial information including (i) adjusted operating income, (ii)
adjusted operating expenses, (iii) adjusted other income (expense),
(iv) adjusted income before income taxes, (v) adjusted income tax
expense (benefit), and (vi) adjusted diluted earnings per
share.
There are also references to the impact of foreign currency in
the discussion of the Company’s results of operations. When the
U.S. Dollar strengthens and the stronger exchange rates of the
current year are used to translate the results of operations of
Avnet’s subsidiaries denominated in foreign currencies, the
resulting impact is a decrease in U.S. Dollars of reported results.
Conversely, when the U.S. Dollar weakens and the weaker exchange
rates of the current year are used to translate the results of
operations of Avnet’s subsidiaries denominated in foreign
currencies, the resulting impact is an increase in U.S. Dollars of
reported results. In the discussion of the Company’s results of
operations, results excluding this impact are referred to as
“constant currency.” Management believes sales in constant currency
is a useful measure for evaluating current period performance as
compared with prior periods and for understanding underlying
trends. In order to determine the translation impact of changes in
foreign currency exchange rates on sales, income or expense items
for subsidiaries reporting in currencies other than the U.S.
Dollar, the Company adjusts the average exchange rates used in
current periods to be consistent with the average exchange rates in
effect during the comparative period.
Management believes that operating income and operating expenses
adjusted for restructuring, integration and other expenses, and
amortization of acquired intangible assets and other, are useful
measures to help investors better assess and understand the
Company’s operating performance. This is especially the case when
comparing results with previous periods or forecasting performance
for future periods, primarily because management views the excluded
items to be outside of Avnet’s normal operating results or non-cash
in nature. Management analyzes operating income and operating
expenses without the impact of these items as an indicator of
ongoing margin performance and underlying trends in the business.
Management also uses these non-GAAP measures to establish
operational goals and, in most cases, for measuring performance for
compensation purposes. Management measures operating income for its
reportable segments excluding restructuring, integration and other
expenses, and amortization of acquired intangible assets and
other.
Additional non-GAAP metrics management uses is adjusted
operating income margin, which is defined as adjusted operating
income (as defined above) divided by sales.
Management also believes income tax expense (benefit), net
income and diluted earnings per share adjusted for the impact of
the items described above, gain on legal settlements and other, and
certain items impacting other income (expense) and income tax
expense (benefit) are useful to investors because they provide a
measure of the Company’s net profitability on a more comparable
basis to historical periods and provide a more meaningful basis for
forecasting future performance. Adjustments to income tax expense
(benefit) and the effective income tax rate include the effect of
changes in tax laws, certain changes in valuation allowances and
unrecognized tax benefits, income tax audit settlements and
adjustments to effective tax rate based upon the expected long-term
adjusted effective tax rate. Additionally, because of management’s
focus on generating shareholder value, of which net profitability
is a primary driver, management believes net income and diluted
earnings per share excluding the impact of these items provides an
important measure of the Company’s net profitability for the
investing public.
Any analysis of results and outlook on a non-GAAP basis should
be used as a complement to, and in conjunction with, results
presented in accordance with GAAP.
Fiscal 2024
First Quarter
September 30, 2023
($ in thousands, except per
share amounts)
GAAP selling, general and administrative
expenses
$
487,286
Amortization of intangible assets and
other
(878
)
Adjusted operating expenses
486,408
GAAP operating income
$
253,769
Restructuring, integration and other
expenses
7,051
Amortization of intangible assets and
other
878
Adjusted operating income
261,698
GAAP income before income taxes
$
275,432
Restructuring, integration and other
expenses
7,051
Amortization of intangible assets and
other
878
Gain on legal settlements and other
(86,499
)
Adjusted income before income taxes
196,862
GAAP income tax expense
$
66,164
Restructuring, integration and other
expenses
1,703
Amortization of intangible assets and
other
203
Gain on legal settlements and other
(20,434
)
Income tax expense items, net
(390
)
Adjusted income tax expense
47,246
GAAP net income
$
209,268
Restructuring, integration and other
expenses (net of tax)
5,348
Amortization of intangible assets and
other (net of tax)
675
Gain on legal settlements and other (net
of tax)
(66,065
)
Income tax expense items, net
390
Adjusted net income
149,616
GAAP diluted earnings per share
$
2.25
Restructuring, integration and other
expenses (net of tax)
0.06
Amortization of intangible assets and
other (net of tax)
0.01
Gain on legal settlements and other (net
of tax)
(0.71
)
Income tax expense items, net
0.00
Adjusted diluted EPS
1.61
Quarters Ended
Fiscal Year
July 1,
April 1,
December 31,
October 1,
2023*
2023*
2023
2022
2022
($ in thousands, except per
share amounts)
GAAP selling, general and administrative
expenses
$
1,967,305
$
506,322
$
498,219
$
485,127
$
477,636
Amortization of intangible assets and
other
(6,053
)
(878
)
(876
)
(1,541
)
(2,759
)
Adjusted operating expenses
1,961,252
505,444
497,343
483,586
474,877
GAAP operating income
$
1,186,800
$
283,662
$
313,629
$
298,973
$
290,537
Restructuring, integration and other
expenses
28,038
28,038
—
—
—
Amortization of intangible assets and
other
6,053
878
876
1,541
2,759
Adjusted operating income
1,220,891
312,578
314,505
300,514
293,296
GAAP income before income taxes
$
982,876
$
190,393
$
243,587
$
303,134
$
245,762
Restructuring, integration and other
expenses
28,038
28,038
—
—
—
Amortization of intangible assets and
other
6,053
878
876
1,541
2,759
Gain on legal settlements and other
(37,037
)
24,669
—
(61,705
)
—
Adjusted income before income taxes
979,931
243,978
244,463
242,970
248,521
GAAP income tax expense
$
212,048
$
35,138
$
56,161
$
59,248
$
61,501
Restructuring, integration and other
expenses
6,007
6,007
—
—
—
Amortization of intangible assets and
other
1,360
207
203
345
605
Gain on legal settlements and other
(8,711
)
5,828
—
(14,539
)
—
Income tax expense items, net
16,453
5,583
3,529
12,287
(4,946
)
Adjusted income tax expense
227,157
52,763
59,893
57,341
57,160
GAAP net income
$
770,828
$
155,255
$
187,426
$
243,886
$
184,261
Restructuring, integration and other
expenses (net of tax)
22,031
22,031
—
—
—
Amortization of intangible assets and
other (net of tax)
4,693
671
673
1,196
2,154
Gain on legal settlements and other (net
of tax)
(28,326
)
18,841
—
(47,166
)
—
Income tax expense items, net
(16,453
)
(5,583
)
(3,529
)
(12,287
)
4,946
Adjusted net income
752,774
191,215
184,570
185,629
191,361
GAAP diluted earnings per share
$
8.26
$
1.68
$
2.03
$
2.63
$
1.93
Restructuring, integration and other
expenses (net of tax)
0.24
0.24
—
—
—
Amortization of intangible assets and
other (net of tax)
0.05
0.01
0.01
0.01
0.02
Gain on legal settlements and other (net
of tax)
(0.31
)
0.20
—
(0.51
)
—
Income tax expense items, net
(0.18
)
(0.06
)
(0.04
)
(0.13
)
0.05
Adjusted diluted EPS
8.06
2.06
2.00
2.00
2.00
_______________
* May not foot/cross foot due to
rounding.
Sales in Constant Currency
The following table presents reported sales growth rates and
sales growth rates in constant currency for the first quarter of
fiscal 2024 compared to the first quarter of fiscal 2023.
Quarter Ended
September 30, 2023
Sales
Sales
Year-Year %
Sequential %
Sales
Change in
Sales
Change in
Year-Year
Constant
Sequential
Constant
% Change
Currency
% Change
Currency
Avnet
(6.1
)%
(7.8
)%
(3.3
)%
(2.9
)%
Avnet by region
Americas
(6.3
)%
(6.3
)%
(9.2
)%
(9.2
)%
EMEA
8.4
1.9
(5.8
)
(5.5
)
Asia
(16.6
)
(15.8
)
3.5
4.4
Avnet by segment
EC
(6.5
)%
(8.1
)%
(3.2
)%
(2.7
)%
Farnell
(1.1
)
(3.8
)
(5.4
)
(5.4
)
Historical Segment Financial Information
Fiscal 2024
First Quarter
September 30,
2023*
(in millions)
Sales:
Electronic Components
$
5,914.4
Farnell
421.2
Avnet sales
$
6,335.6
Operating income:
Electronic Components
$
272.8
Farnell
17.7
290.5
Corporate expenses
(28.7
)
Restructuring, integration and other
expenses
(7.1
)
Amortization of acquired intangible assets
and other
(0.9
)
Avnet operating income
$
253.8
Sales by geographic area:
Americas
$
1,573.5
EMEA
2,308.0
Asia
2,454.1
Avnet sales
$
6,335.6
_______________
* May not foot due to rounding.
Quarters Ended
Fiscal
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Year
July 1,
April 1,
December 31,
October 1,
2023*
2023*
2023
2022
2022
(in millions)
Sales:
Electronic Components
$
24,802.6
$
6,109.2
$
6,059.6
$
6,309.5
$
6,324.2
Farnell
1,734.3
445.4
455.0
408.0
425.9
Avnet sales
$
26,536.9
$
6,554.6
$
6,514.6
$
6,717.5
$
6,750.1
Operating income:
Electronic Components
$
1,179.6
$
310.4
$
305.2
$
296.7
$
267.3
Farnell
165.5
36.1
40.9
36.9
51.6
1,345.1
346.5
346.1
333.6
318.9
Corporate expenses
(124.2
)
(33.9
)
(31.6
)
(33.1
)
(25.6
)
Restructuring, integration and other
expenses
(28.0
)
(28.0
)
—
—
—
Amortization of acquired intangible assets
and other
(6.1
)
(0.9
)
(0.9
)
(1.5
)
(2.8
)
Avnet operating income
$
1,186.8
$
283.7
$
313.6
$
299.0
$
290.5
Sales by geographic area:
Americas
$
6,807.7
$
1,732.7
$
1,714.9
$
1,681.2
$
1,678.9
EMEA
9,229.4
2,450.6
2,393.4
2,255.9
2,129.5
Asia
10,499.8
2,371.3
2,406.3
2,780.4
2,941.7
Avnet sales
$
26,536.9
$
6,554.6
$
6,514.6
$
6,717.5
$
6,750.1
_______________
* May not foot/cross foot due to
rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101622745/en/
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