Q3 2020 Earnings Call

April 27, 2020

[music].

Please standby.

Operator: Please stand by. Our presentation will now begin. Welcome to the Avnet Q4 fiscal year 2020 Earnings Call. I would now like to turn the floor over to Joe Burke, VP, Treasury and Investor Relations for Avnet.

Our presentation will now be get.

Welcome to the Avnets third quarter fiscal year 2020 earnings call.

I would now like to turn the floor over to Joburg, VP Treasury and Investor relations for acne.

Joe Burke: Thank you, Operator. Earlier this afternoon, Avnet released financial results for the third fiscal quarter of 2020. The release is available on the Investor Relations section of the company's website. A copy of the slide presentation that will accompany today's remarks can be found via the link in the earnings release, as well as on the IR section of Avnet's website. Lastly, some of the information contained in the news release and on this conference call contain forward-looking statements that involve risk, uncertainties, and assumptions that are difficult to predict. In particular, the scope and duration of the COVID-19 outbreak and its impact on global economic systems and our operations, employees, customers, and supply chain. Such forward-looking statements are not the guarantee of performance, and the company's actual results could differ materially from those contained in such statements.

Thank you operator.

Earlier. This afternoon Avnet released financial results for the third fiscal quarter of 2020 releases available on the Investor Relations section of the company's website a copy of the slide presentation that will accompany todays remarks can be found by the Lincoln the earnings release as well as on the IR section that.

Net website.

Lastly, some of the information contained in the news release and on this conference call contain forward looking statements and involve risks uncertainties and assumptions that are difficult to predict in particular, the scope in duration of the cobot 19 outbreak and its impact on global economic systems, and our operations employees customers.

Yes and supply chain.

Such forward looking statements are not the guarantee performance in the company's actual results could differ materially from those contained in such statements.

Joe Burke: Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent Form 10-Q and 10-K, and subsequent filings with the SEC. These forward-looking statements speak only as of the date of this presentation, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this presentation. Today's call will be led by Bill Amelio, Avnet CEO, and Tom Liguori, Avnet CFO. Also, Phil Gallagher, Global President of Electronic Components, joins us to participate in the Q&A session. With that, let me turn the call over to Bill Amelio. Bill?

Several factors that could cause or contribute to such differences are described in detail ineptness. Most recent form 10-Q, and 10-K and subsequent filings with the FCC.

These forward looking statements speak only as of the date of this presentation and the company undertakes no obligation to publicly update any forward looking statements where supply new information regarding the circumstances. After the date of this presentation.

Today's call will be led by Bill Emilio Avnets, CEO and Tom Legree Avnets CFO also Phil Gallagher Global President electronic components joins us to participate in the queue in a session.

With that let me turn the call over to Bill Emilio Bill.

Bill Amelio: Thank you, Joe. Thanks to everyone for joining us on our Q3 fiscal year 2020 earnings call. As we're all well aware, the whole world is dealing with the challenges brought on to us by COVID-19, and Avnet is no different. Today we'll walk you through the impact it has on our business. Our Q3 revenues and EPS were down sequentially and year-over-year. Softer demand, particularly in Asia, impacted our quarterly results as well as softer pricing and increased costs related to the impact of COVID-19 on our logistics operations. That said, revenues in our Americas and EMEA regions increased sequentially in Q3, which reflects normal seasonality as well as our focus on keeping the business running as effectively as possible over the past few months.

Thank you Joe and thanks, everyone for joining us on our third quarter fiscal year 2020 earnings call.

As we will all well aware the whole world is dealing with the challenge is brought onto us by covert 90 and Avnet. It's no different today will walk you through the impact it has on our business.

Our third quarter revenues and heap, yes were down sequentially and year over year softer demand, particularly in Asia impacted our quarterly result, as well as softer pricing and increased costs related to the impact and totaled 19 on our logistics operations.

That said revenues in our Americas EMEA regions increased sequentially in the third quarter, which reflects normal seasonality as well as our focus on keeping the business running effectively as possible over the past few months.

Bill Amelio: We met the low end of our original guidance for the quarter, which Tom will talk about a bit later in the call. Last quarter, on our second quarter earnings call, we told you that despite the ongoing industry correction, we were starting to see some good signs of stabilization across key geographies. At that time, COVID-19 was still in the early days and confined to Asia. During the Q3, as COVID-19's reach widened, we acted quickly to conserve cash and manage our debt prudently. As a result, our focus on working capital management enabled us to generate positive operating cash flow. Looking at our electronic component business, revenues and operating margins were down both sequentially and year-over-year in the March quarter.

We met the low end of our original guidance for the quarter, which Tom will talk about a bit later in the call.

Last quarter on our second quarter.

Quarter earnings call. We told you that despite the ongoing issue correction, we're starting to see some good signs of stabilization across key geographies at that time covert 19 was still in the early days and confined to Asia during the third quarter as covert ninetys reach widely reacting quickly to conserve cash image.

These are debt prudently as a result, our focus on working capital management enabled us to generate positive operating cash flow.

Looking at our electronic component business revenues and operating margins were down both sequentially and year over year in the March quarter. The most notable reagent impacted with Asia. We saw orders decline early in the quarter due to the seasonal effect of the Chinese new year and was further affected by covert 90.

Bill Amelio: The most notable region impacted was Asia, which saw orders decline early in the quarter due to the seasonal effect of the Chinese New Year and was further affected by COVID-19. That said, we did not experience any material disruptions or upstream supply chain or incoming goods from suppliers. For the most part, our distribution centers remained operational as we implemented our business continuity plans to ensure worker safety first and foremost, and then to mitigate any business impacts. In certain areas, we had some minor disruptions due to travel restrictions and other related issues. Shipments to our customers continued, but we experienced longer lead times for new orders in certain regions and some delays due to the challenges that freight porters had with volumes and border crossing checks. There was no meaningful impact on bookings. Our book-to-bill ratio at the end of the Q3 was well above parity.

That said, we did not experience any material disruption to our upstream supply chain or incoming goods from suppliers for the most part our distribution centers remain operational as we implemented our business continuity plan to ensure a worker safety first and foremost and then to mitigate any business impact.

Yes.

He served areas, we had some minor disruptions due to travel restrictions and other related issues shipments to our customers continued but we experienced longer lead times when new orders in certain regions and some delays due to the challenges that freight forwarders had with volumes and border crossings.

Yes.

There was no meaningful impact on bookings our book to Bill ratio at the end of the third quarter was well above Kerry we kept a close eye on the rate of bookings and backlog to ensure the integrity and transparency of our supply chain.

Bill Amelio: We kept a close eye on the rate of bookings and backlog to ensure the integrity and transparency of our supply chain. We continue to work diligently to confirm the orders our customers had were firm so we could provide the best possible visibility to our supplier partners, allowing them to allocate their resources appropriately. In terms of vertical market segments, as most of you know, we saw weakness in auto as plants in the United States and Europe shut down due to COVID-19. While transportation was strong in the beginning of the quarter, we saw a trend down at the end of the quarter. Throughout the quarter and even today, we see continued strength in our defense and aerospace businesses, as well as medical and various parts of industrial, particularly where they are seen as essential.

Allowing them to allocate their resources appropriately.

In terms of vertical market segments as most of you know we saw weaknesses auto plants in the United States in Europe shut down due to cover 90.

Transportation with strong in the beginning of the quarter, we saw a trend down at the end of the quarter.

Rafa quarter, even today, we see continue strength in a defense and aerospace businesses.

As well as medical in various parts of industrial, particularly where they are seen as essential.

Bill Amelio: Although not a vertical segment necessarily, we did see strength and steadiness in our EMS segment. Overall, some operations in our Electronic Components business appear to be operating as business as usual during the quarter. However, it is clear that COVID-19 created a high level of uncertainty, with some recent reports referring to the possibility of advanced buying and pull-ins leading to panic buying. With that in mind, we are preparing for all scenarios, including potential challenges in the next couple of quarters. Tom will provide more detail on that later. Turning to Farnell, both sales and operating income margins in the third quarter were up slightly sequentially. Farnell started shipping from its new distribution center in Europe, but progress to ramp up the new facility will be slower than initially planned due to COVID-19.

Although not a vertical segment necessarily we did see strength in stating it in our M.F. segment.

Overall, some operations in our electronic component business appeared to be operating as business as usual during the quarter. However, it is clear that coven 19 create a high level of uncertainty with some recent reports referring to the possibility of advanced buying and pulled and leading to panic by.

What's that mine, we're preparing for all scenarios, including potential challenges. The next couple corridors <unk> provide more detail on that later.

Turning to far now.

So sales and operating income marches in the third quarter up slightly sequentially.

For now started shifting from its new distribution center in Europe for progress to wrap up the new facility will be slower than initially planned due to cope with 19.

Bill Amelio: During the quarter, we continue to execute our five-pronged plan that we put in place to improve Farnell's competitiveness in the high service model and promote long-term success. The five parts of our plan are listed here on slide six. We saw signs of progress from our plan in the beginning of the quarter. However, once the lockdown started in European countries like Italy and the UK, Farnell slowed down as well. Turning to IoT, investors expressed interest in our ability to scale our IoT offerings. Our new IoT partner program will allow us to do just that. Although the operating environment has changed, we signed up a number of IoT partners in the quarter, and we will update you on additional IoT developments in the months ahead.

[noise] during the quarter, we continued to execute a five pong plan that we put in place to improve foreign else competitiveness in the high service model and from the long term success.

The five parts of our plan are listed here on slight sex.

It's all signs of progress Marplan in the beginning of the quarter. However wants to lock down and started in the European countries like Italy, and the U.K. for an l. slowed down as well.

Turning dial tea.

That's what was expressed interest in our ability to scale R.I.O.T. offerings.

Or new I.O.T. partner program will allow us to do just that.

Although the operating environment, it's changed we signed up a number of I.O.T. partners in the quarter and we'll update you on additional biopsy developments in the months ahead.

Despite the current operating environment, we continue to work on our five strategic priorities as outlined on this slide.

Bill Amelio: Despite the current operating environment, we continue to work on our five strategic priorities as outlined on this slide: amplifying our core distribution business, scaling our high-margin businesses, extending our digital capabilities, leveraging our ecosystem for growth, and driving continuous operational improvement. To be clear, while we are still executing on the long-term goals that we laid out previously, we have adapted our near-term priorities to respond to the COVID-19 pandemic. Overall, considering the challenges of COVID-19 and its impact on global commerce, we believe our Q3 results demonstrate the following.

Applying our core distribution, the scaling or high margin businesses, extending or digital capabilities, leveraging our ecosystem for growth and driving continuous operational improved to be clear. While we are still executing on the long term goals that we laid out previously.

We have adapted are near term priorities to respond to the cobin 19 pandemic.

Overall can sit on your challenge coping 90, and its impact on global Commerce, We believe our third quarter results demonstrate the following.

Bill Amelio: First, our commitment to ensuring our employees' health and safety while keeping our business running as efficiently as possible, the resilience of our business model and the strength of our countercyclical balance sheet, our flexibility to adapt quickly to changing market conditions, allowing us to maintain quality service levels for our customers and ongoing value for our supplier partners, our success in activating our business continuity plans, and lastly, our company's strength overall and our ability to withstand challenges and navigate market turmoil. The last point reminds us of Avnet's longevity and why our company has been able to bring technology to market for 99 years. I'm so proud of our employees across the entire company and what they've been able to do working together to collaborate with our customers and partners in the fight against COVID-19.

Burst, our commitment to ensuring or employees health and safety, while keeping our business running as efficiently as possible.

Zillions of our business model and the strength of our counter cyclical balance sheet.

Or flexibility to adapt quickly to changing mark conditions, allowing us to maintain quality service levels for our customers and ongoing value for supplier partners.

Our success Inactivating, our business continuity plans and lastly, our company's shrimp overall ability to expand challenges and navigate market turmoil.

The last point reminds us of Avnets longevity, and wire company, it's been able to bring technology to market for 99 years.

I'm, so proud of our employees across the entire copy and what they've been able to do working together to collaborate with our customers and partners in the fight against covert 90.

Bill Amelio: In our press release, you will see specific examples of ways we are leveraging Avnet's end-to-end ecosystem to accelerate our customers' abilities to provide lifesaving medical solutions and increase the overall supply of medical equipment. Of course, at the forefront of it all, we are doing everything we can to ensure the safety and health of all of our employees. As we look to the macro forces at play and consider the range of economic forecasts, there is unanimous agreement that the global GDP will contract substantially in 2020. The IMF forecasts that the global economy will contract 3% in 2020 and contract in the mid to high single digits in most of the developed countries we serve. Some estimates that the annualized US GDP will fall as much as 40% in the current quarter from a year ago.

Press release.

You will see specific examples of ways, we are leveraging avnets end to end ecosystem to accelerate our customers abilities to provide lifesaving medical solutions and increase the overall supply of medical quit.

Of course at the forefront of it all we were doing everything weekends ensure the safety and health of all of our employees.

As we look to the macro forces that play and consider the range of economic forecast.

And then of US agreement to the global G.D.P. will contract substantially in 2020.

The I.M.F. forecast that the global economy or can track, 3% be 2020.

<unk> in the mid to high single digits in most of the developed countries we sir.

Some estimates that the in your lives U.S.G.D.P. will fall as much as 40% in the current quarter from a year ago.

Bill Amelio: As we know, unemployment has increased at an alarming rate, with 26 million people currently unemployed in the United States. This reflects a level of job loss that is the worst our country has seen since the Great Depression. With these factors in mind and as we look ahead, we acknowledge that the macroeconomic environment will likely have a meaningful impact on our fiscal Q4 financial results across geographies and across our business units. While no one knows exactly what the extent of the global recession will be or how long the health crisis will last, we are all taking numerous steps to prepare for a significant downturn. Tom will explain in detail the actions we are taking to ensure financial stability for Avnet during the current uncertain times that we face. In closing, we are encouraged by our performance in the Q3.

As we know.

Unemployment is increased a warming rate with 26 million people currently unemployed and United States. This reflects a level job lot. It is the worst our country has seen since the great depression.

But these factors in mind and as we look ahead, we acknowledge that the macro economic environment will likely have a meaningful impact on our fiscal fourth quarter financial result across geography and across our business shoots.

Well no one knows exactly what the extent of the global recession will be well how long the health crisis will last.

We were all taking numerous steps to prepare for a significant downtown TAMO explained in detail. The actions. We are taking doing short financial stability drabness during the current uncertain times that we face.

Closing, we were encouraged by our performance in the third court. Despite recent uncertainty one key point to remember is that Avnet plays a critical part in the supply chain for our customers and our suppliers they depend on us and many electronic products will get made without us.

Bill Amelio: Despite recent uncertainty, one key point to remember is that Avnet plays a critical part in the supply chain for our customers and our suppliers. They depend on us. Many electronic products won't get made without us. While we continue to respond to the COVID-19 pandemic and adapt our business for the challenges ahead and the opportunities, we remain confident in our long-term strategy. With that, I'll turn the call over to Tom to report on our financials for the quarter. Tom?

Well, we continue to respond to the coven, 19th condemn again adapt our business for the challenges ahead and the opportunities.

Remain confident you know a long term strategy with that alternative call over to Tom's a report on her financials for the quarter Tom.

Tom Liguori: Thank you, Bill. Good afternoon, everyone. I hope everyone and their families are healthy and safe. Let me start by adding onto what Bill said about how we play a critical role in the supply chain. We supply Electronic Components globally, operating in 100-plus countries. We stock inventory and ship components to customers as they are needed. We are a one-stop shop for our customers' procurement staff, and by using our strong balance sheet, we provide inventory and receivables financing to our customers. All of these continue today, and they will for years to come.

Thank you Bill good afternoon, everyone.

I hope everyone and their families are healthy insane.

Let me start by adding onto it they'll said about how they play a critical role in the supply chain.

We supply electronic opponents globally.

Operating in 100 plus countries.

<unk> components to customers as they are needed.

We are one stop shop for our customers procurement staff.

And by using restaurant balance sheet, you provide inventory receivables financing to our customers.

All of these continue today and they will for years to come.

Tom Liguori: Therefore, as we manage through the COVID-19 crisis, our financial priorities are centered on retaining the critical internal resources and capabilities required to be an integral player in the electronic supply chain, maintaining a strong and healthy balance sheet so that we can continue to provide financing to our customers, and ensuring the necessary liquidity and financial flexibility to run our operations no matter the economic environment. As we review our third quarter financial performance, I will discuss these priorities and our actions to support each. Turning to slide 11, our revenues for the third quarter were $4.3 billion, and adjusted EPS was $0.38. Both our revenues and adjusted EPS were within the original guidance ranges provided during our last earnings call.

[noise] differ as we managed through the corporate 19 crisis or.

For national priorities are centered on <unk>.

We can't even the critical internal resources and capabilities required to be an integral player in the electronics supply chain.

Maintaining a strong and healthy balance sheet. So that we can continue to provide financial to our customers.

And ensuring that necessarily liquidity and financial flexibility.

Runner operations no matter the economic environment.

As we review or a third quarter financial performance I will discuss these priorities interactions to support each.

Turning to slide 11.

Revenues for the third quarter or 4.3 billion and adjust the D.T.S. was 38 cents.

Both our revenues and adjusted E.T.S. were within the original guidance range is provided during our last earnings call.

Tom Liguori: While we pre-announced that we would most likely fall short of guidance, our teams were able to keep our global distribution centers operating throughout the quarter and continue to support our customer needs. A lower tax rate and interest expense contributed to the EPS performance. The lower tax rate was part of our longer-term effort to work with operations and improve the geographic income mix of our business from a tax as well as cost perspective. Gross margin of 12% was higher than last quarter, primarily due to a lower mix of revenues from Asia. We expected our Asia revenues to decline in the third quarter as a result of Chinese New Year, though COVID-19 played a part as well. Asia became the first region impacted by the pandemic.

Well, we Preannounce W. would most likely falls short of guidance.

Or teams were able to keep our global distribution centres operating throughout the corridor.

Can you to support our customer needs.

They lower tax rate an interest expense contributed to the U.P.S. performance.

The lower tax rate was part of our long term effort to work with operations.

And improve the geographic income mix of our business from attacks as well as cost perspective.

[noise] gross margin of 12% was higher than last quarter, primarily due to a lower mix of revenues from Asia.

Respected or Asia revenues to decline in the third quarter as a result of Chinese new year.

So cold at 19 played a part as well.

It became the first region impacted by the pandemic.

Tom Liguori: Adjusted operating expenses of $449 million were higher, both sequentially and over the prior year quarter, as we incurred additional costs to manage through COVID-19. This included costs and inefficiencies for new health and safety work procedures at our distribution centers, new shift patterns, as well as higher freight costs. These cost increases overshadowed lower costs in areas like travel and conferences. While it is difficult to put a precise number on the net additional costs related to COVID-19, we estimate the impact to be roughly $10 million. Our adjusted tax rate was 12.8% and benefited from a favorable mix of income. Interest expense was lower due to our improved debt position. Regarding the Texas Instruments transition, our revenues from TI in the Q3 were $401 million plus sequentially and a $50 million decline from a year ago.

Adjusted operating expenses of 449 million were hired those sequentially and over the prior your recorder.

As we encourage additional costs to manage to cope with 19.

[noise] dis include his cost in any fish and she's two new health and safety work procedures. It on a distribution centers.

<unk> shift patterns as well as higher freight cost.

These costs increase is overshadowed lower class in areas like travel and conferences.

Well it it's difficult to put a precise number on the net additional costs related to cope with 19.

Estimate the impact to be roughly 10 million.

[noise] adjusted tax rate was 12.8% and benefited from a favorable mixup income.

Interest expense was lower due to our improve debt position.

Regarding the Texas instruments transition revenues from T.I.. The third quarter were 401 billion plastic <unk> and the 50 million decline from a year ago.

Tom Liguori: We expect to see a decline in TI revenues as we continue through the calendar year. As a result of macroeconomic impacts of COVID-19, we performed an interim test of goodwill and recorded a charge of $160 million, which includes goodwill and intangible asset impairment related to electronic components acquisitions and equity investments. The $160 million charge includes a $15 million impairment in equity investments, which is included in other expense. There were no impairments to our Farnell segment. On slide 12, we show revenues by segment and region. Electronic Components revenues of $4 billion declined 5.5% sequentially, primarily due to lower revenues in Asia as a result of the Chinese New Year and COVID-19. Sequentially, Americas and EMEA revenues increased, which reflects typical seasonality. Electronic Components operating margins were 2.1%, down slightly from 2.2% sequentially due to the lower sales volume.

We expect to see a decline and T.I. revenues has we continue through the calendar year.

Has a result of macro economic impacts a cooler at 19.

We performed an interim tests of goodwill.

Recorded a charge of 160 million, which includes goodwill an intangible asset impairment <unk> related to electronic components acquisitions in equity investments.

The 160 million chart includes a 15 million impairment.

Equity investments, which is included in other expense.

There were no impairments to our for now segment.

[noise] slide 12, so revenues by segment and region.

Electronic components revenues of 4 billion declined 5.5% sequentially.

Rarely do to lower revenues in Asia has also the Chinese new year included 19.

Sequentially America's into me or revenues increased which reflects typical seasonality.

Electronic opponents operating margins were 2.1%.

Down slightly from 2.2% sequentially.

The lower sales volume.

Tom Liguori: Farnell revenues for the quarter totaled $335 million, up 1.2% sequentially. The Farnell team achieved a 7% operating margin, showing progress in operating margin improvement. Farnell began the March quarter with fairly strong demand. Though demand trailed off in March, it appears to be weakening in April due to COVID-19 impacts. Turning to cash flows and balance sheet on slide 13, we continue to have a healthy balance sheet with sufficient liquidity to support our global business operations and the working capital needs of our customers. We ended the quarter with a cash balance of $403 million and debt of $1.6 billion. Our gross debt leverage ratio was 2.8, and our net debt leverage ratio was 2.1. Our net book value per share was $37, a $2 decrease sequentially due to the impairment charge we previously discussed. Tangible book value per share remained relatively constant at $29.

Cornell revenues for the quarter total 335 million.

1.2% sequentially.

The for now came to cheat to seven per cent operating margin showing progress and operating margin improvement.

[noise] Cornell began to March quarter was fairly strong demand.

The demand trailed off in March it appears to be weakening in April duty coping 19 impacts.

Turning to cash flows and balance sheet on slide 13.

We continue to have a healthy balance sheet 'cause sufficiently couldn't you just support our global business operations and the working capital needs of our customers.

We ended the quarter with a cash balance of 403 alien.

And get a 1.6 billion.

Grossed out laboratory she was 2.8.

You know net that leverage ratio was 2.1.

[noise] or net booked value per share was $37.

A two dollar decrease sequentially due to the impairment charge, we previously discussed.

Tangible book value per share remained relatively constant at $29.

Tom Liguori: Recently, investors have asked us about our inventory and the quality of receivables, both key parts of our tangible book value. As of March quarter end, we had $4 billion of working capital, including $3 billion of accounts receivable and $2.7 billion of inventory. We regularly review these valuations. As of quarter end, our receivable aging remains healthy and similar to Q2. In EMEA and Asia, we have credit insurance programs that provide some risk mitigation for receivables in those markets. Historically, during a downturn, we may experience some slowdown in the timeliness of customer payments. We have not incurred significant reserves or write-downs in receivables. I attribute that to the quality of our experienced credit team. The same goes with inventory.

[noise] recently investors have asked says about or <unk> and the quality of receivables.

Both key parts of our tangible book value.

As of March quarter end, we had 4 billion of working capital.

Including 3 billion of accounts receivable and 2.7 billion of inventory.

Regularly beauty and valuations.

Has a quarter end receivable aging remains healthy in assembling a key too.

Enemy in Asia, we have credit insurance programs that provide some risk mitigation for receivables in those markets.

Historically during the downturn, we may experience some slowdown in the timeliness of customer payments.

We have not encouraged significant reserves are right towns in receivables.

Tribute that to the quality of our experience credit tea.

Same goes with them and Tori.

Tom Liguori: Our global teams focus daily on managing inventory, and we have various contractual arrangements with suppliers should our inventories become aged, obsolete, or affected by changes in market prices. We ensure a healthy Avnet balance sheet by maintaining our disciplined working capital liquidity on slide 14. Our liquidity position remains strong. All of our businesses are focused on managing working capital and generating cash. During calendar year 2019, we put in place improved processes, reporting, accountability, automated tools, and metrics to focus on cash generations. These actions reaped benefits in 2019 with the generation of $948 million of cash flow from operations. The processes and systems we put in place during the last year are serving as well today as we manage our liquidity throughout the pandemic and downturn. In the Q3, we generated $98 million of cash flow from operations.

A global teams focus daily on managing inventory.

We have various contractual arrangements with suppliers sure their inventories become aged.

Obsolete are affected by changes a market prices.

We ensure a healthy having their balance sheet, maintaining a disciplined working capital.

<unk> 14.

Liquidity position remains strong.

I Love our businesses are focused on managing working capital in generating cash.

During calendar year 2019, you put in place improved processes reporting countability automated tools and metrics to focus on cash generations.

<unk> benefits in 2019 with the generation up 948 million of cash flow from operations.

The processing systems, we put in place during the last year or serving as well today has humanitarian liquidity throughout the pandemic and downturn.

In the third quarter regenerated 98 million of cash flow from operations.

Tom Liguori: This is the sixth straight quarter of positive cash flow from operations. We used the cash to pay down $92 million of debt and returned $58 million to shareholders. Going forward, we want to remind you that we have a countercyclical balance sheet, meaning that when revenues decline, we collect receivables and reduce inventory purchases, both of which contribute to positive cash flow. We expect that to continue, and when revenues improve in the future, we would expect to use some of that cash to accommodate the additional working capital. Turning to slide 15, as a management team along with our board, we evaluated several possible economic scenarios for the future in order to identify and implement any actions required to restore liquidity. As a result, we have taken the following actions. We continue to focus our businesses on managing inventories, receivables, and generating cash.

This is the six straight quarter of positive cash flow from operations.

We usually catch to pay down 92 million a debt.

Returned 58 million to shareholders.

Going forward, we want to remind you that we have a counter cyclical balance sheet.

Meaning that when revenues decline, we collect receivables, we juicy inventory purchases.

Both of which contribute to positive cash flow.

We expect that to.

And when revenues improving the future we would expect to use some of that cash to accommodate the additional working capital.

Turning just 515 has a management team along with our board.

We evaluated several possible economic scenarios for the future.

In order to identifying implement any ashes required.

Throw liquidity.

The results we have taken the following options.

We continue to focus our businesses on managing inventories receivables generating cash.

Tom Liguori: We suspended our share buyback program in early March as a result of the economic uncertainties. We also paused our M&A activities and curtailed non-essential outside services and hires. We are implementing actions to manage our debt. For background, our debt maturity is spread out as shown on slide 14. We have a $300 million note due in June, which we will redeem at the end of April. The next note does not mature until December 2021, which means we do not have another debt maturity due for the next 21 months. In addition, we have open lines of credit of $1.6 billion. Our receivable securitization line matures at the end of this summer, and we intend to renew it, and it is supported by our US receivables.

Suspended our share buyback program in early March has a result of the economic uncertainties.

We also pause time, how many activities <unk>.

Curtailed nonessential outside services and tires.

We are implementing actions to manage our debt for background I get materials are spread out as shown on slide 14.

We have a 300 million dollar note do in June, which we will redeem at the end of April.

The next know does not mature until December 2021.

Which means we do not have another debt maturity do for the next 21 months.

In addition, we have open lines of credit as 1.6 billion.

Receivable securitization line matures at the end of this summer.

And we intend to renew it [noise].

And it is supported by or U.S. receivables.

Tom Liguori: Overall, our liquidity includes $2 billion of cash and credit facilities to fund near-to-medium-term operation. Our debt maturity dates are spread out over time. Turning to business outlook on slide 16, despite COVID-19, we continue to serve the needs of our employees, suppliers, customers, and business partners. We are confident in our liquidity position. Like many companies, we are unable to predict to what extent the global COVID-19 pandemic may adversely impact our businesses for the next Q. Therefore, we are not providing guidance for Q4. The color we can provide for Q4 is greater China is operational. The region appears to be recovering from the COVID-19 outbreak. Some uncertainty remains in parts of Southeast Asia, India, and Japan. We expect a drop-off in EMEA revenues. Farnell has experienced a fairly sizable downturn in revenues.

Overall.

Acquitted includes $2 billion of cash in credit facilities.

<unk> two medium term operation.

And our debt maturity dates are spread out over time.

Turning to business outlook on slide 16.

Despite covert 19.

We continue to sort of the needs of our employees suppliers customers in business partners.

We are confident you know liquidity position.

Like many companies, we aren't able to <unk> to what extent the global <unk> 19, pandemic adversely impact or businesses for the next quarter.

Therefore, we are not providing guidance for the fourth quarter.

The color we can provide for the fourth quarter is.

Later, China is operational in the region appears to be recovering from the Coovick 19 outbreak.

Some uncertainty remains in parts of Southeast Asia, India in Japan.

We expect to drop off in me revenues.

<unk> experienced <unk> fairly as a downturn and wrap needs.

Tom Liguori: The Americas region is cautious given the continued COVID-19 cases along with government restrictions. However, we see strength in aerospace, defense, and medical markets. We expect to continue to incur higher operating expenses as we manage through the government-imposed travel and commerce restrictions. These are uncertain times, but Avnet took proactive steps in Q3 to stabilize our near-term performance and secure our liquidity. We will continue to do so in the months ahead as we navigate the COVID-19 crisis. As Bill said, Avnet has served customers and suppliers for 99 years, and next year is our centennial anniversary, which is a huge milestone. As a management team, we are focused on keeping Avnet healthy and strong for years to come. With that, let's open the line for Q&A. Operator?

The America's region is cautious given that continues covert 19 cases, along with government restrictions. However, we see strength in aerospace defense in medical markets.

We expect to continue to incur higher operating expenses has we managed through the government oppose travel and commerce restrictions.

These are uncertain times, but after that took proactive steps and the third quarter to stabilize or near term performance.

Liquidity.

We will continue to do so in the months ahead that'd be navigate to cope with 19 crisis.

<unk>.

Isn't that has served customers and suppliers for 99 years next year is aren't centennial anniversary, which is a huge milestone.

The management team your focus on keeping avnet healthy and strong for years sitcom.

With that let's open the line for two in a.

Operator.

Mm.

Thank you so much ladies and gentlemen, we will now be conducting a question and answer session.

Joe Burke: Thank you so much. Ladies and gentlemen, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Adam Tinball of Raymond James. Please proceed with your questions.

Operator: Thank you so much. Ladies and gentlemen, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Adam Tindall of Raymond James. Please proceed with your questions.

I would like to ask that question. Please press star one on your telephone keypad.

A confirmation of tone will indicate your line isn't a question cue.

May pressed starts you if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star case <unk>.

One moment, please while we Paul for your questions.

The first questions come from the line of Adam 10 below Raymond James Please per se, but your questions.

Bill Amelio: Okay. Thanks. Good afternoon, and I appreciate all the color by region, and I want to ask about forward trends into June. I was a little bit confused by the commentary that book-to-bill was above parity at the end of Q3, but the mix by region sounds like a lot of negative data points. First, maybe you could touch on where book-to-bill is now at the end of April. As we think about June quarter, I'm not asking for forward guidance here, but maybe you could just touch on what you're currently seeing in terms of a sequential decline. Just for perspective, your largest semiconductor customer was alluding to a low double-digit sequential decline into June, and I'm wondering if that's kind of the level that you're at least currently seeing. Thanks.

Adam Tindle: Okay. Thanks. Good afternoon, and I appreciate all the color by region, and I want to ask about forward trends into June. I was a little bit confused by the commentary that book-to-bill was above parity at the end of Q3, but the mix by region sounds like a lot of negative data points. First, maybe you could touch on where book-to-bill is now at the end of April. As we think about June quarter, I'm not asking for forward guidance here, but maybe you could just touch on what you're currently seeing in terms of a sequential decline. Just for perspective, your largest semiconductor customer was alluding to a low double-digit sequential decline into June, and I'm wondering if that's kind of the level that you're at least currently seeing. Thanks.

Okay. Thanks, good afternoon, and <unk> all the color by rejoining than I want to ask about Ah four trends into June I was a little bit confused by the commentary that book to Bill was above 30 at the end up to three but the mixed by region sounds like a lot of mobile to go to quit so the first maybe you could touch on were booked ability.

Now at the end of April and as we think about.

Corridor, not excellent purport gardens, near but that you could just touch on what you're currently being in terms of a sequential decline just for perspective, your larger semiconductor customer was alluding to load double digit sequential declined. It did you ever get I'm wondering if that kind of the level that you are at least currently seeing.

Okay, and I'll do the booked a bill question and all that have been comments all your little color on the sequential moves with respect to the revenue on book the Bill we're definitely over parity in every region.

Tom Liguori: Okay, Adam. I'll do the book-to-bill question, and I'll have Tom and Phil give a little color on the sequential moves with respect to the revenue. On book-to-bill, we're definitely over parity in every region, and we've also normalized that by given the fact that billings are down. We looked backwards at previous quarter and previous years' billings and said, what are we standing against bookings? What are we standing against that if we normalize the higher position? We're still above one. There's no question that we see some level of robustness with respect to book-to-bill. With that, I'll have Tom and Phil chime in on the revenues.

Bill Amelio: Okay, Adam. I'll do the book-to-bill question, and I'll have Tom and Phil give a little color on the sequential moves with respect to the revenue. On book-to-bill, we're definitely over parity in every region, and we've also normalized that by given the fact that billings are down. We looked backwards at previous quarter and previous years' billings and said, what are we standing against bookings? What are we standing against that if we normalize the higher position? We're still above one. There's no question that we see some level of robustness with respect to book-to-bill. With that, I'll have Tom and Phil chime in on the revenues.

We've also normalized that by given the fact that buildings are down we look back words at previous quarter in previous years.

Billings and said what are we stand against the bookings instead, what are we spending is that if we normalize the higher position and we're still above one. So there's no question that we see some level robustness with respect to book to deal with that I'll have a Tom and Phil chime in on the revenues.

[noise], Hi, [noise] Adam.

Phil Gallagher: Hi, Adam, how are you today? We're not giving guidance. A lot really depends on COVID-19-related events, timing of return to work, changes in restrictions. It is still April, so a lot can change between now and then. The ranges you threw out are reasonable. However, we're not sure exactly what will transpire in May and June. I have looked at the models that are out there. I would bring to everybody's attention that our break-even from an EPS perspective is in the $3.7 to 3.8 billion range. If we were at that range, that's about a $500 million reduction from March quarter, and at a 12% gross margin, that's about $60 million that we'd be making up, and that's the commentary on the break-even. That said, where we'll be at the end of June, it is difficult to say.

Tom Liguori: Hi, Adam, how are you today? We're not giving guidance. A lot really depends on COVID-19-related events, timing of return to work, changes in restrictions. It is still April, so a lot can change between now and then. The ranges you threw out are reasonable. However, we're not sure exactly what will transpire in May and June. I have looked at the models that are out there. I would bring to everybody's attention that our break-even from an EPS perspective is in the $3.7 to 3.8 billion range. If we were at that range, that's about a $500 million reduction from March quarter, and at a 12% gross margin, that's about $60 million that we'd be making up, and that's the commentary on the break-even. That said, where we'll be at the end of June, it is difficult to say.

Oh you today.

You know, we're not giving guidance and a lot. It really depends on Coovick 19 related events timing of return to were changes in restrictions and.

You know it is still April so a lot can change between now and then you know the Rangers, you threw out or or reasonable, but however, [noise] you know we're not sure exactly.

Transpire in May and June I have looked at the models that are out there.

Would bring to everybody's attention that.

You know or break even from any P.S. perspective.

His in the 3.7 to 3.8 billion dollar range. So if we were at that range to spend a 500 million dollar reduction from March quarter [noise].

As a 12%.

Chris <unk> $60 million that we'd be making up in this the commentary on the break even you know that said.

We will be at the end of June it is difficult to say, what what we really like is overseen with the upper in performance or for now the operating performance and potential of V.C.

Phil Gallagher: What we really like is what we're seeing with the operating performance of Farnell, the operating performance and potential of EC, that we still have our projects in place for OpEx. Our cash generation seems to be working well. All I would reiterate before turning over to Phil is that Asia remains to be stable, but we all have seen recent changes in restrictions in Singapore, India, Japan, and elsewhere. The one data point in the near term that is concerning to us is that Farnell is the one that's seeing a fairly sizable downturn of revenues, which is part of our break-even commentary. With that, Phil?

Tom Liguori: What we really like is what we're seeing with the operating performance of Farnell, the operating performance and potential of EC, that we still have our projects in place for OpEx. Our cash generation seems to be working well. All I would reiterate before turning over to Phil is that Asia remains to be stable, but we all have seen recent changes in restrictions in Singapore, India, Japan, and elsewhere. The one data point in the near term that is concerning to us is that Farnell is the one that's seeing a fairly sizable downturn of revenues, which is part of our break-even commentary. With that, Phil?

That we still have our project <unk> <unk>.

<unk> it seems to be working well Oh, they would reiterate before turning over to fill in is that you know he do.

Remains to be stable, but we did we all have seen.

Recent changes in restrictions in Singapore, India, Japan, and elsewhere <unk>. The one data point that in in your turn that is you know concerning says is that for now is the N.S.C. is fairly sizable downturn and.

Revenues, which is part of our break even commentary.

But that Phil.

[Analyst]: Yeah. Thanks, Tom. Thanks, Adam. I'll just add a little bit more, because I think Bill and Tom covered it really well. On the backlog, to Bill's point in your booking question, we have a rigorous management process managing that backlog, okay? As the book-to-bill point out, we're above parity. We're also very cautious to be sure that all the inventory coming in is going to go back out. We're working with it's, like I said, rigorous and day-to-day with our customers and our suppliers, and we're sitting right in the middle of it. As far as the outlook, again, we're not giving an outlook, Asia seems to be, as Tom and Bill both pointed out, we're 100% operational across the Asia pack. We're back in the offices in Taiwan on a limited schedule.

Phil Gallagher: Yeah. Thanks, Tom. Thanks, Adam. I'll just add a little bit more, because I think Bill and Tom covered it really well. On the backlog, to Bill's point in your booking question, we have a rigorous management process managing that backlog, okay? As the book-to-bill point out, we're above parity. We're also very cautious to be sure that all the inventory coming in is going to go back out. We're working with it's, like I said, rigorous and day-to-day with our customers and our suppliers, and we're sitting right in the middle of it. As far as the outlook, again, we're not giving an outlook, Asia seems to be, as Tom and Bill both pointed out, we're 100% operational across the Asia pack. We're back in the offices in Taiwan on a limited schedule.

Yeah, Thanks to our thanks, Tom Thanks, Adam.

A little bit lines, I think building so covered it really well you know on the backlog the bills point in the book.

Booking question, where we have a rigorous management process managing that backlog. Okay is the bulk of bills is when that were but parody you also very cautious to be sure to all the inventory coming in is going to go back out. So we're we're working with it's you said rigorous.

Day to day with our customers inner city ours were were sitting right in the middle of it as far as.

Okay, you're going to not give it and that wasn't you know.

[noise] Asia is seems to be used comment Billboard pointed out you know, we're we're we're 100% operational crossed asiapac.

Over back in the offices in Taiwan on a <unk> on a limited schedule demands seems to be coming back decent person Asian held up you know at least through April which is really positive. The Americans as bill pointed out on Tom did into specific <unk>, we're cautiously optimistic America's were.

[Analyst]: The demand seems to be coming back decent for us in Asia and held up at least through April, which is really positive. The Americas, as Bill pointed out, and Tom did in describing it, we're cautiously optimistic Americas. It's not where we want it to be, but it's not as far down as we thought. Europe is the one that's probably got the bigger impact. It's just been shut down for so long, and the automotive is such a big part of the European marketplace. As the countries start to open up, that's what we're managing. It's between Italy and Austria. Germany's talked about coming back. The question will be, how fast do they bring back manufacturing, okay? With the full month of May and June left, we're hopeful they'll turn that back on as quickly as possible. That's really about it, Phil.

Phil Gallagher: The demand seems to be coming back decent for us in Asia and held up at least through April, which is really positive. The Americas, as Bill pointed out, and Tom did in describing it, we're cautiously optimistic Americas. It's not where we want it to be, but it's not as far down as we thought. Europe is the one that's probably got the bigger impact. It's just been shut down for so long, and the automotive is such a big part of the European marketplace. As the countries start to open up, that's what we're managing. It's between Italy and Austria. Germany's talked about coming back. The question will be, how fast do they bring back manufacturing, okay? With the full month of May and June left, we're hopeful they'll turn that back on as quickly as possible. That's really about it, Phil.

We're not it's not where we wanted to be but it's it's not as far now as we thought and then Europe is the one if I got the bigger impact or as has been shut down though for so long and the automotive is such a big part of the European marketplace, but.

As the country start to open up at four <unk>, managing you know between Italy, and Oscar did Germany's topple coming back the question will be how fast they bring back manufacturing, okay and with a full month amaze you. You know we're we're we're hopeful that will turn it back when as quickly as possible, but that's really about it.

So <unk> pointed out defensive strong medical strong parts of industrial are are are still doing doing well.

[Analyst]: As Tom pointed out, defense is strong, medical is strong, parts of industrial are still doing well, and we know where we got some of the gaps with the automotive transportation.

Phil Gallagher: As Tom pointed out, defense is strong, medical is strong, parts of industrial are still doing well, and we know where we got some of the gaps with the automotive transportation.

We know where we got some of the gaps with the auto mode of transportation.

Phil Gallagher: Got it. Very helpful. Just as a follow-up, maybe one for Tom, and just because the stock is basically trading at tangible books, the market obviously has a negative view on the intangibles in Avnet. I think you did mention Farnell is a large portion of the goodwill, and there was no impairments related to Farnell in the Q3. Moving forward, I know you mentioned expecting a fairly sizable downturn in revenue in Farnell. Can you just talk about the gating factors to the impairment test in that segment and your view on those as the market seems to be expecting another impairment? Thanks.

Adam Tindle: Got it. Very helpful. Just as a follow-up, maybe one for Tom, and just because the stock is basically trading at tangible books, the market obviously has a negative view on the intangibles in Avnet. I think you did mention Farnell is a large portion of the goodwill, and there was no impairments related to Farnell in the Q3. Moving forward, I know you mentioned expecting a fairly sizable downturn in revenue in Farnell. Can you just talk about the gating factors to the impairment test in that segment and your view on those as the market seems to be expecting another impairment? Thanks.

Got a very helpful and just as a follow up maybe one for calm and and just because of stock is basically trading at tangible book. So [noise] orchid, obviously has a negative view on the intangibles enough that I think you did mention you know barnello isn't large portion of the goodwill and there was no impairments related to see we're far no in the quarter.

So moving forward.

Mentioned expecting a fairly sizable downturn in revenue in far no can you just talk about the gaiting factors to the impairment tests and that segment and your view on those as the market seems to be expecting another impairment. Thanks.

[noise] Yeah <unk>. Thanks, Adam for that we're we're not expecting another experiment that said right. We don't know where Kobe 19, we'll go the testing that we did Cornell actually has a fair amount of headroom.

[Analyst]: Yeah. Thanks, Adam, for that. We're not expecting another impairment, that said, right? We don't know where COVID-19 will go. The testing that we did, Farnell actually has a fair amount of headroom still available even with our current projections. I would think about it in terms of if our operating margins were 9% or 10% or lower long-term, then Farnell would come up for possible impairment. We saw good progress this last quarter. It was only four quarters ago we were at 12% operating margins, so that's very encouraging to us. Right now, we see a fair amount of headroom for Farnell and impairment. Yeah, you're right. Avnet has always traded at 1.1x net book value. Net book value today is $37. We did the test. We tried to be conservative.

Tom Liguori: Yeah. Thanks, Adam, for that. We're not expecting another impairment, that said, right? We don't know where COVID-19 will go. The testing that we did, Farnell actually has a fair amount of headroom still available even with our current projections. I would think about it in terms of if our operating margins were 9% or 10% or lower long-term, then Farnell would come up for possible impairment. We saw good progress this last quarter. It was only four quarters ago we were at 12% operating margins, so that's very encouraging to us. Right now, we see a fair amount of headroom for Farnell and impairment. Yeah, you're right. Avnet has always traded at 1.1x net book value. Net book value today is $37. We did the test. We tried to be conservative.

Still available even with our current projections I would think about it in terms of it for operating margins were nine or 10% or lower long-term then for now would come up for possible impairment you know we saw a good <unk>.

Dresses last quarter.

It was only four quarters.

Per cent operating margin. So that's that's that's very encouraging to us. So you know right now we see a fair amount of headroom for for now and impairment and yeah, you're right you know as bad as those traded at 1.1 that book value.

37.

We we did the test we tried to be conservative.

You know there were smaller things that were impaired, but you know I think we ended up in a.

[Analyst]: There were a number of smaller things that were impaired, but I think we ended up in a good position given all of the uncertainty out there. As you can imagine, these are fully vetted with auditors, and I know many companies are going through the same type of exercise. Does that help, Adam?

Tom Liguori: There were a number of smaller things that were impaired, but I think we ended up in a good position given all of the uncertainty out there. As you can imagine, these are fully vetted with auditors, and I know many companies are going through the same type of exercise. Does that help, Adam?

In in a good position given all of the you know you uncertainty out there and as you can imagine users you know if we've added with auditors and then he many companies are going through the same type of exercise that how bad.

Phil Gallagher: It does. One last clarification. I know you mentioned some capital allocation priority changes. I think you're maintaining the dividend. Correct me if I'm wrong, and tell me what that says about your feelings about cash flow in the next quarter and beyond. Thanks.

Adam Tindle: It does. One last clarification. I know you mentioned some capital allocation priority changes. I think you're maintaining the dividend. Correct me if I'm wrong, and tell me what that says about your feelings about cash flow in the next quarter and beyond. Thanks.

It it does <unk> I in one left clarification I know you mentioned some capital location priority changes I think you're maintaining the dividend correct me if I'm wrong and tell me what that says about your feelings about cash flow in the next quarter and beyond that.

[Analyst]: Yeah. We're going to make a decision on the dividend in May. The dividend is not a huge, large cash outlay. It's around $21 million a quarter. That said, let's see where the macro environment is in a few quarters down the road. I'm sorry. Now, a few weeks down the road to get to mid-May, but we'll make a decision on that. Again, it's not a large outlay.

Tom Liguori: Yeah. We're going to make a decision on the dividend in May. The dividend is not a huge, large cash outlay. It's around $21 million a quarter. That said, let's see where the macro environment is in a few quarters down the road. I'm sorry. Now, a few weeks down the road to get to mid-May, but we'll make a decision on that. Again, it's not a large outlay.

Yeah, we're gonna make a decision on the dividend in May you know the dividend is is not a huge large cash outlay. It's about 21 million a quarter you know that said, let's see where the macro environment is a few quarters down to the I'm sorry, [laughter] now a few weeks down the road too.

You get to mid make up it'll make a decision on that again, it's not a large out definitely.

Tom Liguori: Yeah. I'd add to that. I'd add to that, Adam. Look, we paused the buyback, which is a much bigger outlay, and we think the dividend sends a solid message, Phil, that what we feel about the confidence of the company. As Tom points out, though, if COVID goes further south, all options are still on the table, but at this juncture, we don't see that to be a threat.

Bill Amelio: Yeah. I'd add to that. I'd add to that, Adam. Look, we paused the buyback, which is a much bigger outlay, and we think the dividend sends a solid message, Phil, that what we feel about the confidence of the company. As Tom points out, though, if COVID goes further south, all options are still on the table, but at this juncture, we don't see that to be a threat.

Okay, I I do that I I'd add to that M- look, we possibly buy back which is a much bigger outweigh and we think the dividend sends us all message, though that we what we what we feel about the cost of the company and it was drawn points out, though it's cool that goes.

Further south that you know Oh options are still on the table, but <unk> at this juncture, we don't see that it'd be a threat.

Phil Gallagher: That's helpful. Thanks, Phil. Thank you, Adam.

Adam Tindle: That's helpful. Thanks, Phil. Thank you, Adam.

That's helpful. Thanks, though.

Thank you out.

Joe Burke: Our next question has come from the line of Rupalu Bhattacharya of Bank of America. Please proceed with your questions.

Operator: Our next question has come from the line of Rupalu Bhattacharya of Bank of America. Please proceed with your questions.

The next question, it's come from the line or Ruplu box of Sharia of Bank of America. Please proceed with your questions.

[Analyst]: Hi. Thanks for taking my questions. I think, Tom, you said that the additional cost associated with COVID-19 was about $10 million in the quarter. How should we think about those additional costs trending in the Q4? In general, how should we think about OpEx as a % of sales? Are there any incremental cost actions you can take to lower OpEx? Thanks.

Ruplu Bhattacharyax: Hi. Thanks for taking my questions. I think, Tom, you said that the additional cost associated with COVID-19 was about $10 million in the quarter. How should we think about those additional costs trending in the Q4? In general, how should we think about OpEx as a % of sales? Are there any incremental cost actions you can take to lower OpEx? Thanks.

Hi, Thanks for taking my questions I think Tom you said that that caused additional cost associated with covert 19 was about 10 million in the corner, how should we think about those additional costs trending and in the fourth quarter and and in general how should we think about Opic's has a per cent of sales are there any incremental costs.

Actions, you can take to Ah lower opic's. Thanks.

Bill Amelio: Sure. Thanks, Rupalu. First of all, that $10 million is related to things like freight, which is a near-term issue for us, personal protective gear. All of our distribution centers, they've done a great job of operating, continue to operate, but they're working within social distancing, work rules, cleaning, disinfecting. This Q4, we would expect most of those to continue, probably start to subside through the quarter, meaning things like freight costs, we fully anticipate to start returning to normal. I think as our distribution centers get familiar with working with the new rules, their productivity will go up. For the Q4, I would plan on it being at the same level or slightly below our Q3. Seeing OpEx as a percent of revenue, you have to forecast revenue, so let's leave that to aside. We historically talked about an OpEx in the mid-$430 million.

Tom Liguori: Sure. Thanks, Rupalu. First of all, that $10 million is related to things like freight, which is a near-term issue for us, personal protective gear. All of our distribution centers, they've done a great job of operating, continue to operate, but they're working within social distancing, work rules, cleaning, disinfecting. This Q4, we would expect most of those to continue, probably start to subside through the quarter, meaning things like freight costs, we fully anticipate to start returning to normal. I think as our distribution centers get familiar with working with the new rules, their productivity will go up. For the Q4, I would plan on it being at the same level or slightly below our Q3. Seeing OpEx as a percent of revenue, you have to forecast revenue, so let's leave that to aside. We historically talked about an OpEx in the mid-$430 million.

Sure thing truthfully [noise] first of all that 10 million is is related to things like for trade, which is a near term issue for us personal protective gear you know all of our distribution centers.

In a great job of operating continued operate but they're they're working within social distancing work rules cleaning disinfecting. So this june quarter, we would expect most of those to continue probably start to subside through the quarter.

Meaning things like.

You know freight costs, we fully anticipated start returning to normal and I think as or distribution centres get.

Layer was working with the new rules, they're productivity, we'll go out for the June or I would plan on it being the same level or slightly.

Hello are March quarter, you know it seeing up acts as a percent of revenue you have to forecast revenue. So let's leave that aside research we've talked about in up asking the made 430 million.

Bill Amelio: Assuming that revenues stay within a reasonable range, I think that's what's a good number to go with going forward. On our OpEx, we continue to work with the $245 million cost reduction plan that's going well. We've talked about the defined projects in that to fully achieve that. Right now, we're about $190 million of the 245 achieved. We believe we'll end up at $245 million of savings or probably more. The one thing I would say is that those are going to take a little longer, meaning in the 3 to 6-month longer timeframe. The reason is that some of those savings are based on moving various functions either to a lower-cost country or an outsource-type mode. With our new work restrictions and people working at home, the knowledge transfer takes a little longer. Near-term, June's going to be very similar to March.

Tom Liguori: Assuming that revenues stay within a reasonable range, I think that's what's a good number to go with going forward. On our OpEx, we continue to work with the $245 million cost reduction plan that's going well. We've talked about the defined projects in that to fully achieve that. Right now, we're about $190 million of the 245 achieved. We believe we'll end up at $245 million of savings or probably more. The one thing I would say is that those are going to take a little longer, meaning in the 3 to 6-month longer timeframe. The reason is that some of those savings are based on moving various functions either to a lower-cost country or an outsource-type mode. With our new work restrictions and people working at home, the knowledge transfer takes a little longer. Near-term, June's going to be very similar to March.

I'm, assuming that revenue stay within a reasonable range you know I think that's what's a good number to go with going forward on or Opic's, we continue to work with the 245 million.

Ah cost reduction plan that that spelling well you know we've talked about that defined projects in that to fully achieved that right. Now. We're there's 190 million at the 245 achieved we we believe will end up at 245 or a million of savings are probably more.

The one thing I would say is that those are those are going to take a little longer meaning in the three to six months longer time frame. The reason is that some of those savings.

Are based on you know moving various functions, either two or a lower costs country or or announced source type mode and without you work restrictions on people working at home the knowledge transfer takes a a little longer but up so near term you know tunes going to be very similar to March.

Once we get the the channel costs associated with coping 19 normalize will be in the before 30 million for 35, 20 to 35 million per quarter and over the next 18 to 24 months, you'll see the rest of that 245.

Bill Amelio: Once we get the additional costs associated with COVID-19 normalized, we'll be in the mid-$430 million, $435 million, $435 million per quarter. Over the next 18 to 24 months, you'll see the rest of that $245 million plan come to fruition.

Tom Liguori: Once we get the additional costs associated with COVID-19 normalized, we'll be in the mid-$430 million, $435 million, $435 million per quarter. Over the next 18 to 24 months, you'll see the rest of that $245 million plan come to fruition.

Planned come to fruition.

[Analyst]: Okay. Thanks for the details on that, Tom. Just for my follow-up, you talked about the countercyclical balance sheet. If I look back to fiscal 2009, I think you guys generated about $1 billion in free cash flow. Any idea if that kind of that level of free cash flow makes sense for the fiscal year? In terms of your uses of cash, you paid down some delevered this quarter. Should we expect that delevering to continue as we go forward in the next couple of quarters? Thanks.

Ruplu Bhattacharyax: Okay. Thanks for the details on that, Tom. Just for my follow-up, you talked about the countercyclical balance sheet. If I look back to fiscal 2009, I think you guys generated about $1 billion in free cash flow. Any idea if that kind of that level of free cash flow makes sense for the fiscal year? In terms of your uses of cash, you paid down some delevered this quarter. Should we expect that delevering to continue as we go forward in the next couple of quarters? Thanks.

Thanks for the details on that just from my follow up you know you talked about the counter cyclical balance sheet. If I look back to fiscal 2009, I think you guys generated about a billion dollars and free cash flow.

You know.

Any any idea if if that kind of that level of free cash flow makes sense for the fiscal year and and in terms of your uses of cash you know you paid down some.

You'll ever this quarter should be effect that delivering to to continue a if you go forward I in the next couple of quarters. Thanks.

[noise] sure so as far as some cash flow and compare it to 2008 2009.

Bill Amelio: Sure. As far as cash flow and comparing it to 2008, 2009, the model is very similar. I think in 2008, 2009, our revenues declined 20% to 30%. It was quite substantial. At that level of decline, yes, we would generate hundreds of millions, if not $1 billion, of cash flow. I'm sorry. What was the second part of the question?

Tom Liguori: Sure. As far as cash flow and comparing it to 2008, 2009, the model is very similar. I think in 2008, 2009, our revenues declined 20% to 30%. It was quite substantial. At that level of decline, yes, we would generate hundreds of millions, if not $1 billion, of cash flow. I'm sorry. What was the second part of the question?

The model similar so I think it 2008, 2009 or revenues decline, 20% to 30% it's quite substantial.

That level of decline, yes, we would generate hundreds of millions just not a billion dollars.

Cash flow I'm, sorry, what was the second part of the question.

[Analyst]: In terms of delevering, the balance sheet would be?

Ruplu Bhattacharyax: In terms of delevering, the balance sheet would be?

And I in terms of delivering the balance on it that he lever yeah.

Bill Amelio: Oh, debt delevering.

[Analyst]: Yeah.

Tom Liguori: Yeah. Yeah. Right now, our focus is on the balance sheet and really liquidity. I would anticipate in June, our debt to be the same or lower. One thing to keep in mind, to the extent we generate a lot of cash because of a slowdown in macro, a good part of it will go back into the business once the recovery comes. Thank you, Rupalu.

Bill Amelio: Yeah. Right now, our focus is on the balance sheet and really liquidity. I would anticipate in June, our debt to be the same or lower. One thing to keep in mind, to the extent we generate a lot of cash because of a slowdown in macro, a good part of it will go back into the business once the recovery comes. Thank you, Rupalu.

Yeah. So right now our focus is on the balance sheet and it really liquidity. So I would anticipate in June or debt to be the same or or lower and you know one thing to keep in mind.

To the extent, we generate a lot of cash because they slow down and macro good part of it will go back into the business. Once recovery comes thank you <unk> <unk>.

[Analyst]: Thank you. Thanks for the details.

Ruplu Bhattacharyax: Thank you. Thanks for the details.

Thank you thanks for the details.

As a friendly reminder, we ask that you. Please let me yourself to one question on one follow up question.

Joe Burke: As a friendly reminder, we ask that you please limit yourself to 1 question and 1 follow-up question. Our next question has come from the line of Will Stein of SunTrust. Please proceed with your questions.

Operator: As a friendly reminder, we ask that you please limit yourself to 1 question and 1 follow-up question. Our next question has come from the line of Will Stein of SunTrust. Please proceed with your questions.

Or next question, it's come from the line of well Stein Sun Trust. Please proceed with your questions.

Phil Gallagher: Great. Thanks for taking my question. Many companies and Avnet falling in this category of posting reasonable results for Q1 and highlighting reasonably strong bookings, sort of withdrawing an outlook or not providing an outlook for Q2. As it stands now, when you look at that backlog and you think about revenue for Q2, is the concern more that you think perhaps some of the orders could get canceled or pushed, or is the concern instead that you feel comfortable with the backlog but the pace of turn's business would be slower than typically? Then as the follow-up that's related to this, I think typical revenue is up a couple percentage points sequentially. Is there any chance you think revenue could be flat in the quarter?

Will Stein: Great. Thanks for taking my question. Many companies and Avnet falling in this category of posting reasonable results for Q1 and highlighting reasonably strong bookings, sort of withdrawing an outlook or not providing an outlook for Q2. As it stands now, when you look at that backlog and you think about revenue for Q2, is the concern more that you think perhaps some of the orders could get canceled or pushed, or is the concern instead that you feel comfortable with the backlog but the pace of turn's business would be slower than typically? Then as the follow-up that's related to this, I think typical revenue is up a couple percentage points sequentially. Is there any chance you think revenue could be flat in the quarter?

Right. Thanks for taking my question many companies and <unk>.

In this category or posting <unk>.

Oh.

Reasonable results for Q1, and highlighting reasonably strong booking.

But sort of withdrawing an outlook or not providing you know look for key to as it stands now when you. When you look at that backlog <unk> and you think about revenue for cute who is the concern more that you think perhaps some of the orders could get cancelled are pushed or is that.

Concern instead that you feel comfortable with the backlog but.

Ace of turns business would be slower than typically and then as the follow up that's related to this I think typical revenue was up a couple percentage point sequentially is there any chance you think revenue could be flat recorder.

Yeah. It is why packing their well, let me give it a shot.

Tom Liguori: Yeah. There's a lot packed in there. Well, let me give it a shot, and then I'll have my teammates take a shot at it as well. Let's first start with the idea that how good's the backlog? Phil mentioned that in the previous question. We put a rigorous management system in place.

Bill Amelio: Yeah. There's a lot packed in there. Well, let me give it a shot, and then I'll have my teammates take a shot at it as well. Let's first start with the idea that how good's the backlog? Phil mentioned that in the previous question. We put a rigorous management system in place.

I have my teenage take a shot at it as well.

It's first start with the idea that how good the backlog don't mention that in a previous why should we put a regular management system in place, we're actually able to look at any individual customers and know what they're looking patterns are and be able to Germany and their ability batteries would be able to remember the discrepancy between bookings in billings any given quarters.

Tom Liguori: We're actually able to look at any individual customer and know what their booking patterns are and be able to determine and their billing patterns and be able to determine the discrepancy between bookings and billings in a given quarter, as well as going back previous quarters and previous years to see if all of a sudden there's an anomaly there that we can see where the outliers are and question customers on whether or not they're true bookings or, in fact, they are in fact doing some additional bookings that we then would say put stricter terms in place.

Bill Amelio: We're actually able to look at any individual customer and know what their booking patterns are and be able to determine and their billing patterns and be able to determine the discrepancy between bookings and billings in a given quarter, as well as going back previous quarters and previous years to see if all of a sudden there's an anomaly there that we can see where the outliers are and question customers on whether or not they're true bookings or, in fact, they are in fact doing some additional bookings that we then would say put stricter terms in place.

I was going back previous quarters in previous years to see if all of a centers I don't normally there that we can.

See where the outliers are in question customers on whether or not they're true true bookings or in fact, there are back during some additional bookies that we that would say <unk> stricter terms in place so.

Tom Liguori: I think that's helping us make sure it's really in a good position because, as you can imagine, some of our suppliers who are concerned with filling their factories when they're only running at 40%, they want to make sure the orders they get are really good orders and are going to go to actual demand to customers or, in some cases, life-saving devices for customers. That's critically important to all of us in the supply chain. With respect to what we think about how the orders look, then, there is a concern that if the COVID gets worse, we could see things happening like what happened in automotive where the production actually stopped. All of a sudden, we'll see end-user demand kind of get curtailed pretty quickly. That happened almost overnight, if you recall, with what happened with the automotive sector.

Bill Amelio: I think that's helping us make sure it's really in a good position because, as you can imagine, some of our suppliers who are concerned with filling their factories when they're only running at 40%, they want to make sure the orders they get are really good orders and are going to go to actual demand to customers or, in some cases, life-saving devices for customers. That's critically important to all of us in the supply chain. With respect to what we think about how the orders look, then, there is a concern that if the COVID gets worse, we could see things happening like what happened in automotive where the production actually stopped. All of a sudden, we'll see end-user demand kind of get curtailed pretty quickly. That happened almost overnight, if you recall, with what happened with the automotive sector.

So I think that's helping us.

Sure. It's it's really good position because as you can imagine some of our suppliers more concerned with.

Their factories, when they're only running or 40% they want to make sure the orders they get a really good orders in an are going to go to actual demand to customers or in some cases like saving devices for customers. So that's critically important to all of us in the supply chain.

With respect to what we think about how the orders look then there is a concern that <unk> if that cove. It gets worse, we could see things happening like what happened automotive word production actually stops and then all but so we'll see and user demand kinda could get curtailed pretty quickly and that happen almost overnight recall it.

Automotive sector.

Tom Liguori: That could happen in the industrial and some of the other sectors that we're in, communication, consumer, etc. That's really what the concern is with respect to what's going to happen in the uncertainty with respect to demand in the future. At this given juncture, our book-to-bills look solid. Pass it to Tom.

Bill Amelio: That could happen in the industrial and some of the other sectors that we're in, communication, consumer, etc. That's really what the concern is with respect to what's going to happen in the uncertainty with respect to demand in the future. At this given juncture, our book-to-bills look solid. Pass it to Tom.

Happen in the industrial ones on the other sectors that rent communication consumer et cetera. So that's really what the concern is with respect to what's going to happen any uncertainty with respect to demand in the future at this given juncture are booked the bills look solid.

<unk>.

[noise] thinks they'll I.

Bill Amelio: Thanks, Phil. I would just add, Will, that today is 27 April. There's a big difference between today and 27 March and maybe in a different situation, 27 May. It could be much better. It could be much worse. That's really what we're saying by not giving guidance.

Tom Liguori: Thanks, Phil. I would just add, Will, that today is 27 April. There's a big difference between today and 27 March and maybe in a different situation, 27 May. It could be much better. It could be much worse. That's really what we're saying by not giving guidance.

Sad real that she is April 27th is a big difference between today in March 27th and D.V. is a different situation may 27th they could be much better could be much worse and and so that's really.

We're saying by not guidance.

<unk>, Yeah, Bill kill anything there Ya go ahead.

Tom Liguori: Thank you.

Will Stein: Thank you.

Phil Gallagher: Yeah, Bill, I don't have much to add.

Tom Liguori: Yeah, Bill, I don't have much to add. Phil, anything to add?

Tom Liguori: Phil, anything to add?

Phil Gallagher: No, yeah. You know.

Tom Liguori: No, go ahead, Tom.

Phil Gallagher: Yeah, Tom, I would just say that I think, again, I think you guys said it well. It's the question. We're using, frankly we talk about accountability in the backlog, accountability to the customers. It's really we're getting talking to all our constituents about being responsible, okay? We need to be good, responsible partners with our suppliers as they some of them some of them have some limited capacity, as you guys all know, and to be sure that the products that we're asking for, based on our customer's backlog, they really need, okay? We're working upstream with our suppliers and downstream every day, okay, with our customers. We're just saying, Hey, everybody just needs to be responsible right now. This is something none of us have seen before.

Yeah, I would just say I think I got her you guys said, it well and and it's the question and and we're we're using frankly, we thought about accountability in the backlog accountability.

Really.

We're getting.

Talk dollar condition about being responsible okay and you know we're we're we need to be good responsible partners with our suppliers as they some of them. Some of them have some limited capacity as you guys. All no yeah and to be sort of the products that they were asking for based on our customers backlog, they really neat, okay and a week, so working upstream of our suppliers and.

Onscreen every day, okay with our customers and.

So just say everybody seems to be responsible right. Now this is something like none of us have have seen before.

You know I would add to that well, let Phil said you know, we're having we flew calls with each of the businesses fills reading them up. It's it's it's very impressive and comforting to look at what the sales and supply chain people are doing.

Bill Amelio: I would add to that, Phil, what Phil said. We're having weekly calls with each of the businesses. Phil's reading them up. It's very impressive and comforting to look at what the sales and supply chain people are doing in each one of our businesses, of staying in contact with their customers, checking what you brought up. Is that order real, or could that go away in May and June? Adjusting our expertise to ensure our cash flow. One of them joked that this message will transpire in five seconds, come back to the Mission Possible, which I thought was very humorous, that's really what it is. It's every day, we're getting new orders, new changes are made, new demand signals, and just an uncertain time. Know this, that everybody's on top of it managing.

In each one of our businesses have seen in contact with the customers.

Checking what you brought up you know is that order real work with that go with me in June and adjusting our purposes to ensure our cash flow. So it. It you know one of them joked that this <unk> this message well transpire and five seconds back to the <unk>.

Possible show, which I have a very humorous, but that's really what it but it is it's every day.

Borders new changes are made your demands signals and just an uncertain time, but you know this that everybody's on top of it managing and.

Bill Amelio: Regardless, we believe we'll have a good cash story and keep the company liquid and keep our balance sheet strong. Thanks, Will.

You know <unk>, we we believe will have a good <unk> and keep the company liquid and keep a balance sheet strong.

Thanks will <unk>.

Tom Liguori: Thanks.

Will Stein: Thanks.

[noise] or next question is coming from the line of mass Sharon, let's stay home place per se with your question.

Joe Burke: Our next question has come from the line of Matt Sheeran of Stifel. Please proceed with your question.

Operator: Our next question has come from the line of Matt Sheeran of Stifel. Please proceed with your question.

Phil Gallagher: Yes. Thank you. I wanted to ask about the Texas Instruments revenue run rate. It sounds like that $400 million was higher than you had expected. I think you expected it to be down from last quarter. Could you give us an update on how you see that transitioning over the next two to three quarters? I know also, Phil, you've talked about backfilling that lost revenue with other suppliers and other share gains. Can you update us on that? Is this current environment making it more difficult to win incremental business now?

Matt Sheeran: Yes. Thank you. I wanted to ask about the Texas Instruments revenue run rate. It sounds like that $400 million was higher than you had expected. I think you expected it to be down from last quarter. Could you give us an update on how you see that transitioning over the next two to three quarters? I know also, Phil, you've talked about backfilling that lost revenue with other suppliers and other share gains. Can you update us on that? Is this current environment making it more difficult to win incremental business now?

Yes. Thank you I I wanted to ask about the Texas instruments revenue run rate. It sounds like that 400 million was was higher than you had expected I I think you expect to there could be down from last quarter. So could you give us an update on and how you see that transitioning over the next two to three.

Corridors.

And I know also feel you've talked about backfilling that that lost revenue with other suppliers and other share gains can you update I sign that and is this current environ, making it more difficult I'm too windy incremental business now.

Tom Liguori: Yeah. I'll start with that one, Matt. With respect to TI, there's, of course, a lot of questions about the timing of the transition. Here's what you can expect. Still, we're on track for seeing it completed by 31 December. Although, as you pointed out, we would expect to see a little bit more of a decline, most likely some impact with COVID-19. It was essentially flat sequentially. We continue with our plan on how we're going to replace that revenue with, in fact, richer margin other suppliers' products. We're doing pin-to-pin replacement wherever possible. We've got some share shifts going on between supplier lines where customers want to make sure they stay balanced with their distributors. Of course, demand creation, which takes a little bit longer to get a design win that leads into revenue.

Bill Amelio: Yeah. I'll start with that one, Matt. With respect to TI, there's, of course, a lot of questions about the timing of the transition. Here's what you can expect. Still, we're on track for seeing it completed by 31 December. Although, as you pointed out, we would expect to see a little bit more of a decline, most likely some impact with COVID-19. It was essentially flat sequentially. We continue with our plan on how we're going to replace that revenue with, in fact, richer margin other suppliers' products. We're doing pin-to-pin replacement wherever possible. We've got some share shifts going on between supplier lines where customers want to make sure they stay balanced with their distributors. Of course, demand creation, which takes a little bit longer to get a design win that leads into revenue.

Yeah, I'll I'll I'll start with that one that.

What did you back the T.I. digits of course, a lot of questions about the time you got the transition. So here's what you can expect is still more on tracks for C. completed by December 31st Although as you pointed out we would have expected see a little bit more of a decline most likely to some some impact would covert 19. So it was essentially flat sequentially, but we.

Continue with our plan on how we're going to be take or replace that revenue with an exact richer margin <unk> other suppliers products <unk>, we're going to depend replacement wherever possible.

<unk> going on between supplier lines or customers want to make sure they say balance whether distributors and of course, the anchorage, which takes a little bit longer to get into the design when that leads into revenue, but those three are active in place and we have a really tight management system across the world and make sure we can maximize on results associated with that.

Tom Liguori: Those three are active in place, and we have a really tight management system across the world to make sure we can maximize on the results associated with that. Phil, you want to add something else to that?

Bill Amelio: Those three are active in place, and we have a really tight management system across the world to make sure we can maximize on the results associated with that. Phil, you want to add something else to that?

Don't really want to add something else that.

Phil Gallagher: Yeah. Great job, Bill. Thanks. Matt, good to hear from you. Thanks for the question. Yeah. Hey, this is another one of those rigorous processes we have in place where we meet regularly with the regions down to the country level. We know every single customer, every single part, and the GP dollar generation by customer by part. That's the detail of what we're doing. Phil just pointed out it's pin-for-pin, new generation designs, and share shift, okay, internal to the customer. We have a tracking process. I'd say right now, we're satisfied. Never pleased, right? We're satisfied with where we are in the process against the timeline to replace that business. I'll be candid with you. Yeah. I think we were probably pleasantly surprised that the decline really hasn't come sequentially.

Great job a bill thanks, and that's good good to hear from you. Thanks for the question. Yeah. This this is a another one of those rigorous <unk> we have in place we're meet regularly with the regents down to the country level. We know every single accustomed to every single are in the G.P. dollar generation by customer by part.

That's the that's the detail what we're doing and Bill just one is infant then new generation designs and I'm sure shift okay internal the customer with the tracking process and I'd say right. Now. We're we're we're satisfied number please right, but we're satisfied with with where we are in the process against the time.

Replace that business I'll be cat, Yeah, I think we're probably pleasantly surprised that the the coin really hasn't come sequentially. We were Saddam is the point planning on it you know but into account a year, but I think it's a tribute to Frank if I could put a bugging for all sales and marketing team in or custom.

Phil Gallagher: We are, to Tom and Phil's point, planning on it by the end of the calendar year. I think it's a tribute to frankly, if I could put a plug in for our sales and marketing team and our customer engagement, customers obviously aren't really looking to move that business too fast. I think it's a compliment to the team. We will be planning on it by the end of December.

Engagement customers, obviously aren't aren't really looking to move that business too fast and.

Implemented a team, but we will be planning on them by the end of December.

Joe Burke: Are you expecting that to be down in line with the overall business or a little bit more because that might happen or just no visibility?

Matt Sheeran: Are you expecting that to be down in line with the overall business or a little bit more because that might happen or just no visibility?

Are you expecting that to be down in line with the overall business or a little bit more because that might happen or just no visibility.

Well, that's definitely says Oh go ahead, though.

Phil Gallagher: Well, we're going to plan that separately. Oh, go ahead, Phil.

Bill Amelio: I was going to say at this juncture, I would plan it linearly to the end of the year. You can never tell if it's going to extend or not, I mean, because it's not as we're seeing it, it's not an easy thing to move it quickly. Our plan is that every quarter, we reassess it, but we're essentially putting a line in place that says it's going to be gone by the end of the year.

<unk> at this juncture I would planet linearly through the end of the year, but you know you can never tell if it's not expand or not I mean, because it's it's not as as you as we're seeing it's not an easy thing to move quickly, but we're our plan is that every quarter reassessment, but were essentially putting the line in place and said, it's going to be gone by the end of the year.

Phil Gallagher: Yeah. Okay. Thank you. Right, Phil. Financially, that's how we're modeling it. Yep.

Okay. Thank you threat built so financially that's ever bottling yep.

Joe Burke: Okay. Thanks, Phil. Just on my follow-up regarding gross margin, which was up nicely to 12%, and obviously, MICS helped you a lot there, particularly with Premier Farnell, flat, and Asia down. It looks like that's going to work against you pretty significantly this quarter. Also, could you comment on that, whether you think gross margin is going to be weaker and then the demand creation business? Jobs you see drive gross margin. Is that weaker just because of customer engagements are down because of COVID-19, or are there no changes there?

Okay <unk> interest on May follow up regarding close margin, which was you know up nicely to 12% and obviously mix helped you a lot there, particularly with premiere for an L.L. flat in Asia down it looks like that's kind of work against you pretty significantly this quarter and also so could you.

Comment on that where do you think gross margin, it's gonna be weaker and then the demand creation business. So job. He's he drive gross margin is is that a week or just because of customer engagements or or down because of kobe or or there are no changes there.

Tom Liguori: Okay. I'll take the demand creation question, and then Tom can talk about the regional mix. On demand creation, we are, in fact, holding solid. In fact, it's even a little bit more robust than we expected it to be. It's still roughly in the core business, 30% of our revenues, and it continues to be that way. Tom?

Bill Amelio: Okay. I'll take the demand creation question, and then Tom can talk about the regional mix. On demand creation, we are, in fact, holding solid. In fact, it's even a little bit more robust than we expected it to be. It's still roughly in the core business, 30% of our revenues, and it continues to be that way. Tom?

I'll take the the <unk> question at a time to talk about the regional mix on demand on <unk> back holding saw it back it is even a little bit more robust than we expected to be so it's still roughly in the core business, 30% of our revenues aren't continues to be that way Tom.

[noise] true man gross margin was up because of mix. When you looked at each individual business or gross margin was pretty much flat slightly down and makes will play a part going forward and but you're bringing up is for now.

Bill Amelio: Sure. Matt, gross margin was up because of MICS. When you looked at each individual business, their gross margin was pretty much flat to slightly down. MICS will play a part going forward. What you're bringing up is Farnell, we said, would be down the most, and Asia seemed to be flatter. You are correct. Thank you.

Tom Liguori: Sure. Matt, gross margin was up because of MICS. When you looked at each individual business, their gross margin was pretty much flat to slightly down. MICS will play a part going forward. What you're bringing up is Farnell, we said, would be down the most, and Asia seemed to be flatter. You are correct. Thank you.

It would be down the most and Asia seem to be flat or so you are correct. Thank you.

Phil Gallagher: Okay. Thanks very much.

Matt Sheeran: Okay. Thanks very much.

Okay. Thanks very much.

Bill Amelio: Thanks, Matt.

Tom Liguori: Thanks, Matt.

<unk>.

[noise] our next questions come from the line up Stephen at Fox Fox Advisers [noise]. Please proceed with your questions.

Joe Burke: Our next question has come from the line of Stephen Fox of Fox Advisors. Please proceed with your questions.

[Analyst]: Thanks for taking my question. Good afternoon. I guess first question, I was just curious if you guys could provide a little bit more insight or color into the receivables collectible question that you brought up earlier. I know there's differences between collecting from a small business versus collecting from a large EMS provider. Can you talk about how you're supporting some of the smaller customers in terms of credit terms, etc.? I had a follow-up question.

Steven Fox: Thanks for taking my question. Good afternoon. I guess first question, I was just curious if you guys could provide a little bit more insight or color into the receivables collectible question that you brought up earlier. I know there's differences between collecting from a small business versus collecting from a large EMS provider. Can you talk about how you're supporting some of the smaller customers in terms of credit terms, etc.? I had a follow-up question.

Take my question. Good afternoon, I guess first question I was just curious since you guys can provide a little bit more.

Insight or color into the receivables collectible question that you brought up earlier.

I know there's differences between I'm collecting from a small business versus collecting from a large G.S.M.S. provider can.

Can you talk about how you're supporting some of the smaller customers in terms of credit terms et cetera, and then I had to follow up question.

Tom Liguori: Sure. I'll start on that, and then Tom can get some more color on it. The good news is we've gone through cycles before. When we've gone through cycles, we didn't see a significant amount of bad debt come out from our customers, which is a great thing. We believe that may occur this time as well. We do have some level of insurance coverage across the world, but that's not enough to cover if this gets into a worse position. We're pretty comfortable with the level of the receivables, and we do an audit check on them on a regular basis to make sure that they are, in fact, good receivables and they fit our accounting standards. Tom?

Bill Amelio: Sure. I'll start on that, and then Tom can get some more color on it. The good news is we've gone through cycles before. When we've gone through cycles, we didn't see a significant amount of bad debt come out from our customers, which is a great thing. We believe that may occur this time as well. We do have some level of insurance coverage across the world, but that's not enough to cover if this gets into a worse position. We're pretty comfortable with the level of the receivables, and we do an audit check on them on a regular basis to make sure that they are, in fact, good receivables and they fit our accounting standards. Tom?

Sure I I'll start on that then talking to some work on the the good news as we've gone through cycles before and when we've gone through cycles. We had we didn't see a significant amount of bad that come out from our our customers, which is a great thing. We're <unk>. We believe that may be current this time as well we do have.

Some level of insurance coverage across the world, but that's not enough to cover this <unk> get sick into a worst position, but we're pretty comfortable with that level of the receivables than we do an audit check on I'm on a regular basis to make sure that they are in fact, good receivables and and they make that are accounting standards Tom.

<unk> <unk> no change in our receivables aging quarter to quarter. So that's a very good sign.

Bill Amelio: Thanks, Phil. Steve, no change in our receivables aging quarter to quarter, so that's a very good sign.

Tom Liguori: Thanks, Phil. Steve, no change in our receivables aging quarter to quarter, so that's a very good sign.

Okay. Appreciate that color and then just I'm getting back to one of your original comments in terms of potential panic buying reports I mean like is there a certain area that maybe you are more <unk> suspect of in terms of orders, you're seeing or certain region. I mean, what is it that.

[Analyst]: Okay. I appreciate that color. Just getting back to one of your original comments in terms of potential panic buying reports, I mean, is there a certain area that maybe you are more suspect of in terms of orders you're seeing or certain region? I mean, what is it that you're most on the lookout for in terms of maybe overbuying right now?

Steven Fox: Okay. I appreciate that color. Just getting back to one of your original comments in terms of potential panic buying reports, I mean, is there a certain area that maybe you are more suspect of in terms of orders you're seeing or certain region? I mean, what is it that you're most on the lookout for in terms of maybe overbuying right now?

You must he must on the lookout for in terms of maybe <unk> Overbuying right now.

I I would say the falling on it it it's.

Tom Liguori: I would say the following on it. You got to think about maybe on commodities: a few hot commodities that you're considering, whether they're SSDs, NANDs, DRAMs. Memory is one where you could have some level of concern. By focusing on individual customers and individual customer behavior, we're able to ferret out pretty quickly where we think there could be some double-ordering or "panic buying" that's occurring. Then we go discuss with the customer, and we put tougher terms in place when we believe that's the case. That helps essentially normalize the demand profile we have and ensure ourselves that we're not going to be caught with orders that aren't going to be fulfilled.

Bill Amelio: I would say the following on it. You got to think about maybe on commodities: a few hot commodities that you're considering, whether they're SSDs, NANDs, DRAMs. Memory is one where you could have some level of concern. By focusing on individual customers and individual customer behavior, we're able to ferret out pretty quickly where we think there could be some double-ordering or "panic buying" that's occurring. Then we go discuss with the customer, and we put tougher terms in place when we believe that's the case. That helps essentially normalize the demand profile we have and ensure ourselves that we're not going to be caught with orders that aren't going to be fulfilled.

You got to think about <unk>, maybe on commodity <unk>, hi, commodities that you're considering whether they're s. at the <unk> the around some memory.

Is one where you could have some level concern booked by focusing on individual customers and individual customer behavior, we're able to ferret out pretty quickly, where we think there could be some double ordering or quote unquote panic buying it's occurring and then we go discuss with the customer we put comfort terms and plays boy, we that's the case and that helps essentially.

Normalize the demand profile, we average sure so that we're not going to you caught with orders that aren't going to be filled.

Right, but your general viewpoint right now is broadly speaking you're not seeing that yeah, you'll be fine. If you learn cancellation rate, they're not abnormal at this juncture either so that's another good indicator tells you that we've got pretty solid backlog.

[Analyst]: Great. Your general viewpoint right now is, broadly speaking, you're not seeing that. I mean, it's not.

Steven Fox: Great. Your general viewpoint right now is, broadly speaking, you're not seeing that. I mean, it's not.

Tom Liguori: Yeah. If you look at cancellation rates, they're not abnormal at this juncture either. That's another good indicator that tells you that we got a pretty solid backlog.

Bill Amelio: Yeah. If you look at cancellation rates, they're not abnormal at this juncture either. That's another good indicator that tells you that we got a pretty solid backlog.

[Analyst]: Great. That's very helpful. Thank you. Thanks, Steve.

Steven Fox: Great. That's very helpful. Thank you. Thanks, Steve.

Great. That's very helpful. Thank you.

<unk>.

Joe Burke: Our next question has come from the line of Sean Harrison of Luke Capital. Please proceed with your question.

Operator: Our next question has come from the line of Sean Harrison of Luke Capital. Please proceed with your question.

Our next questions come from the line of Sean Harrison absolute Capitol Police proceeded with your question.

Hi afternoon, everybody.

[Analyst]: Hi. Afternoon, everybody. I guess either Bill or Phil, could you remind us kind of what percentage of your sales are automotive versus aerospace, defense, and kind of medical, given kind of the diverging trends you're seeing?

Shawn Harrison: Hi. Afternoon, everybody. I guess either Bill or Phil, could you remind us kind of what percentage of your sales are automotive versus aerospace, defense, and kind of medical, given kind of the diverging trends you're seeing?

It gives you a bill or fill could you remind us kind of what percentage of your sales or automotive versus you know aerospace defense kind of medical given that kind of the merging transitioning <unk>.

Tom Liguori: Sure. If you look at the split of the key verticals in revenue, EMS represents and has been steady about 30%, 35% of our business. Industrial and transportation represents another almost 30%. The rest of it is what we'll call diversified, which includes aerospace and defense. That kind of gives you the balance of the major revenue streams we have.

Bill Amelio: Sure. If you look at the split of the key verticals in revenue, EMS represents and has been steady about 30%, 35% of our business. Industrial and transportation represents another almost 30%. The rest of it is what we'll call diversified, which includes aerospace and defense. That kind of gives you the balance of the major revenue streams we have.

Sure. If you look at the split of the T. vertical isn't revenue.

Yeah mass represent them instead of you about 30, 35% of our business.

Industrial and transportation represents another almost 30 per cent and the rest of it is well calc diversify which includes aerospace and defense.

That kind of gives you the balance of the major revenue streams yep.

Okay.

[Analyst]: Okay. As a follow-up, I just want to the Farnell weakness, is that solely a function of that it's more I guess it's stronger positioned within Europe, or are you seeing any changes in design activity within the business? Is there something else going on in Farnell where you're seeing kind of the greatest weakness currently?

Shawn Harrison: Okay. As a follow-up, I just want to the Farnell weakness, is that solely a function of that it's more I guess it's stronger positioned within Europe, or are you seeing any changes in design activity within the business? Is there something else going on in Farnell where you're seeing kind of the greatest weakness currently?

As a follow up I just wanted the far no weaknesses it solely a function of that it's it's more.

I guess, it's stronger position within Europe are you seeing any changes and design activity within the business. There's there's something else going on in far now, where you're saying kind of the most.

The greatest witness currently.

Tom Liguori: Well, 2 things. I mean, Farnell, at the beginning of the quarter, was off to a really solid start, and we finished really strong from an operating income point of view, demonstrating the fact that our SKU expansion that we're doing, the work that we're doing on our user experience, the web speed, the marketing dollars that we're spending is all effectively starting to work. Then as we went into the latter part of the quarter when the UK, Italy, and others in the EMEA market went dark, that created an enormous problem for us as far as things slowing down. That's essentially what we saw. As far as the design activity goes, no, we're not seeing anything different with respect to that.

Bill Amelio: Well, 2 things. I mean, Farnell, at the beginning of the quarter, was off to a really solid start, and we finished really strong from an operating income point of view, demonstrating the fact that our SKU expansion that we're doing, the work that we're doing on our user experience, the web speed, the marketing dollars that we're spending is all effectively starting to work. Then as we went into the latter part of the quarter when the UK, Italy, and others in the EMEA market went dark, that created an enormous problem for us as far as things slowing down. That's essentially what we saw. As far as the design activity goes, no, we're not seeing anything different with respect to that.

Well a couple things at least for now at the beginning and a quarter was off to really solid start now and we you know finished really strong from the operating income point of view demonstrating the fact that are skew expansion that we're doing the work that we're doing our user experience the speed the <unk> marketing dollars that we're spending is all effectively started.

The work and then.

Into the latter part of a quarter when the UK.

Italy and others in the.

Market went dark.

Norms problem for us as far as you know things slowing down and that's what we essence was so as far as the design activity goes no. We're not saying anything different with respect to that and I think is it as people come start going back to work again, a country started opening back up again, we're hopeful that turns back around again, but it's still a wildcard.

Tom Liguori: I think as people start going back to work again and countries start opening back up again, we're hopeful that that turns back around again. It's still a wild card.

Bill Amelio: I think as people start going back to work again and countries start opening back up again, we're hopeful that that turns back around again. It's still a wild card.

Yeah, Shaun actually if I would just say, we we got a lot of confidence in in our for now a position right now and in in the bills. One of the run around March 17th frankly, starting to see that decline, which is where you started you'd be acceleration onto your point in Europe, okay in the U.K. and whatnot, where yes, the that that's their strongest region by good shot.

Phil Gallagher: Yeah. Sean, I think I would just say we've got a lot of confidence in our Farnell position right now. To Bill's point, right around March 17th, frankly, we started to see that decline, which is where you start to see the acceleration, to your point, in Europe, okay, and the UK and whatnot, where, yes, that's their strongest region by good shot.

Okay. That's helpful in Thomas when they slip in one last question. Just you know in in 20 velocity, you think you'll be able to keep it at this level, there's <unk> into the gym quarter or do you somehow think a with Asia coming back, you'll actually improved and employee velocity into the gym quarter.

[Analyst]: Okay. That's helpful. Tom, if I may slip in one last question, just inventory velocity, do you think you'll be able to keep it at this level into the Q4, or do you somehow think with Asia coming back, you'll actually improve inventory velocity into the Q4?

Shawn Harrison: Okay. That's helpful. Tom, if I may slip in one last question, just inventory velocity, do you think you'll be able to keep it at this level into the Q4, or do you somehow think with Asia coming back, you'll actually improve inventory velocity into the Q4?

[noise] well, we've we've we think Asia will improve inventory velocity you know they think the bottom line, but we're wanting to be able to achieve in June I'm, Sean is no positive cash flow.

Bill Amelio: Well, we think Asia will improve inventory velocity. I think the bottom line, what we want to be able to achieve in June, Sean, is positive cash flow. That implies that working capital will continue to get better. Thank you.

Tom Liguori: Well, we think Asia will improve inventory velocity. I think the bottom line, what we want to be able to achieve in June, Sean, is positive cash flow. That implies that working capital will continue to get better. Thank you.

And that implies that were capital [noise].

Well you know, we'll continue to get better.

Thank you.

[noise] next question was coming from the line of Tim Yang of City. Please proceed with your question.

Joe Burke: Our next question has come from the line of Tim Yang of Citi. Please proceed with your questions.

Operator: Our next question has come from the line of Tim Yang of Citi. Please proceed with your questions.

Hi, Thanks for taking the question are you mentioned witnessing Asia in March quarter, I think it was 34% of the over a year, but one of your largest <unk> dumping P.G. reported in double digit you'll you'll gross or the March quarter can you provide some color on a disconnect between will perform as much and stuff.

[Analyst]: Hi. Thanks for taking the question. You mentioned weakness in Asia in March quarter. I think it was down roughly 4% year-over-year. One of your largest competitors, WPG, reported double-digit year-over-year growth for the March quarter. Can you provide some color on the disconnect between your performance versus WPG?

Tim Yang: Hi. Thanks for taking the question. You mentioned weakness in Asia in March quarter. I think it was down roughly 4% year-over-year. One of your largest competitors, WPG, reported double-digit year-over-year growth for the March quarter. Can you provide some color on the disconnect between your performance versus WPG?

<unk>.

Oh, you want to take a shot at that one.

Tom Liguori: Phil, you want to take a shot at that one?

Bill Amelio: Phil, you want to take a shot at that one?

Phil Gallagher: Yeah. I'll take a shot at that one. Of course, we don't know exactly all the details about WPG. They do play in a different market than we play, particularly in processors, memory. They have a very substantial-sized business in that space and tend to be much lower-margin business, and we just don't play there. As far as the share goes in our lines that we manage as far as the basket in Asia, we're holding our own plus some. I'm going to estimate that it's a commodity situation.

Yeah, I think he shot at that one in <unk>, we don't know exactly all the details about W.P.G. They do play in a different market than we play, particularly in in processors a memory. They they they they have a very substantial size business and that and that space intended to be much lower margin.

Business and we we just don't play there so as far as a share goes in our in our lines that we manage as far as the basket in Asia, We're we're holding her own plus some so.

I'm going to.

Made that it's a commodity a situation.

So it's not share shift is more like just and the marketing mix that <unk>, yeah, I would say that it's it's it could be n. market mix as to where to processes memory.

[Analyst]: Got it. It's not share shift. It's more just the end-market mix that's playing?

Tim Yang: Got it. It's not share shift. It's more just the end-market mix that's playing?

Phil Gallagher: Yeah. I would say it could be end-market mix as to where the processors, memory, those types of products go that we don't play in as much. Correct.

Those part those types of Prattas go that we don't play in as much correct gotcha.

[Analyst]: Gotcha. My second question is, can you maybe talk about the demand and the linearity during the quarter? I think you mentioned that in early March that you would not meet the March quarter guidance, but you still achieved the on the revenue side, you still achieved the midpoint of the original guidance. Did you see a strong demand in the months of March which drove the offside?

Tim Yang: Gotcha. My second question is, can you maybe talk about the demand and the linearity during the quarter? I think you mentioned that in early March that you would not meet the March quarter guidance, but you still achieved the on the revenue side, you still achieved the midpoint of the original guidance. Did you see a strong demand in the months of March which drove the offside?

Question is can you talk about the demand the being an allergy during the quarter I think it you mentioned that it already March that you would not be into March quarter guidance, but you still are to the other <unk> achieve your point of the orange or a guy that you just see a strong demand in the most of the March which drove <unk> <unk>.

I'm, sorry can't repeat the last part of that question.

Tom Liguori: I'm sorry. Can you repeat the last part of that question? Is that just the performance of the months of March that drived the offside so that you can actually achieve the midpoint or the guidance range? In the beginning of March, you actually mentioned that you cannot meet the guidance.

Bill Amelio: I'm sorry. Can you repeat the last part of that question?

Tim Yang: Is that just the performance of the months of March that drived the offside so that you can actually achieve the midpoint or the guidance range? In the beginning of March, you actually mentioned that you cannot meet the guidance.

So.

Just the performance of the most of March drive the on off site. So that you could actually achieved the mute point or the guy this range, but at the beginning of the March you actually mentioned that you know you cannot meet the guidance.

Bill Amelio: Well, when we said we could not meet the guidance, it looked like things were going to fall off faster than they did, and we were able to end up doing better than we expected. As you noted, when you look at it, some of this operationally, we also had some advantages on tax, so that helped us along as well. We were really close to that bottom end, and that's one of the reasons why we did the pre-announcement.

Well, we certainly cannot be the guys look like things are going to fall off faster than they did and we were able to and ended up doing better than we expected and as you know to when you look at at some of its operationally. We also had some advantages aren't taxed so that that helped as along as well, but we were really close to that bottom and that's one reason why we did it did the.

<unk>.

<unk> Okay. Thank you.

Phil Gallagher: Gotcha. Okay. Thank you.

Tim Yang: Gotcha. Okay. Thank you.

[noise] [noise]. Our next question, it's comforting the line up neck Todoroff long, though research. Please proceed with your questions.

Joe Burke: Our next question has come from the line of Nick Tadara of Longbow Research. Please proceed with your questions.

Operator: Our next question has come from the line of Nick Tadara of Longbow Research. Please proceed with your questions.

[noise] thing so good afternoon, gentlemen, given that someone vindication of sort of extended lead times can you talk about the pricing outlook I know that matters, mostly for for now, but and that that saying he's going to get help from the top y. perspective, but <unk>.

[Analyst]: Thanks. Good afternoon, gentlemen. Given some of the indications of extended lead times, can you talk about the pricing outlook? I know that matters mostly for Farnell, and that segment is going to get hit from the top-line perspective. Is that the potential area of near-term benefit here over the next couple of quarters? Can you talk about the pricing, please?

Nikolay Todorov: Thanks. Good afternoon, gentlemen. Given some of the indications of extended lead times, can you talk about the pricing outlook? I know that matters mostly for Farnell, and that segment is going to get hit from the top-line perspective. Is that the potential area of near-term benefit here over the next couple of quarters? Can you talk about the pricing, please?

<unk> these that potentially area of near term benefit here over the next couple quarter scheme talk about the pricing place.

Tom Liguori: Of course. When lead times start to extend, that's always an opportunity to see some ASPs expand as well. We haven't seen that occurring yet, but of course, as time goes on and the situation gets tighter and tighter, you'll start to see that occur.

Bill Amelio: Of course. When lead times start to extend, that's always an opportunity to see some ASPs expand as well. We haven't seen that occurring yet, but of course, as time goes on and the situation gets tighter and tighter, you'll start to see that occur.

Of course, when lead times guard to extend that's always an opportunity to d.

S.P.'s expands as well we haven't we haven't seen that occurring yet but of course as time goes on in the situation gets tighter and tighter you'll you'll start to see that occur.

Okay and as a follow up you mentioned most Trenton aerospace multiple times you know typically would think about the production cuts from the major aerospace companies is there anything different of your exposure that allows you to see extracting that business M.D. expectancies check going for.

[Analyst]: Okay. As a follow-up, you mentioned the strength in aerospace multiple times. Typically, we think about the production cuts from the major aerospace companies. Is there anything different in your exposure that allows you to see strength in that business, and do you expect to see strength going forward?

Nikolay Todorov: Okay. As a follow-up, you mentioned the strength in aerospace multiple times. Typically, we think about the production cuts from the major aerospace companies. Is there anything different in your exposure that allows you to see strength in that business, and do you expect to see strength going forward?

Tom Liguori: Yeah. I think when we made that comment, we're talking more about defense than we are actually aerospace because clearly, with planes not flying, that has an impact on aerospace. We're not seeing that in defense. Also, as you'd imagine, medical is up for us too, and that's all in the same sector.

Bill Amelio: Yeah. I think when we made that comment, we're talking more about defense than we are actually aerospace because clearly, with planes not flying, that has an impact on aerospace. We're not seeing that in defense. Also, as you'd imagine, medical is up for us too, and that's all in the same sector.

Yeah, I I think like when we we made that comment we're talking more about the fence than we are actually aerospace because clearly the with planes not flying that has in fact gone <unk> aerospace, but we're not seeing that the fence and also as you imagine medical is up for us to and that's on the same sector.

[Analyst]: Okay. If I can sneak one more, can you talk a little bit about that expanding relationship with Micron? What does that entail for which products or end markets that is?

Nikolay Todorov: Okay. If I can sneak one more, can you talk a little bit about that expanding relationship with Micron? What does that entail for which products or end markets that is?

Okay, and it's I guess sneak while moral can you talk a little bit about bad expanding relationship with microphone, what the then tail for which products or <unk>.

Tom Liguori: Yeah. Absolutely. Phil, you want to give them the details associated with Micron, please?

Bill Amelio: Yeah. Absolutely. Phil, you want to give them the details associated with Micron, please?

Absolutely. So you want to give them the details such a microphone. Please.

Phil Gallagher: Yeah. Well, we've got Micron around the world on the Avnet core, the simple response to Nick is really just that we're expanding that with Farnell. It's a real big win. It'll be across the portfolio of Micron. It's a nice win for us there.

Yeah, well, we've got Mike Bryan around the World and you have an accord in the simple simple response, Nick is really just standing out with a with four now so it's a it's a real big window it'll be a across the portfolio of my problem.

It's a it's a nice when for Sir.

Okay. Thanks.

[Analyst]: Okay. Got it. Thanks.

Nikolay Todorov: Okay. Got it. Thanks.

Our next questions come from the line of joke bought Roci of Wells Fargo. Please proceed with your question.

Joe Burke: Our next question has come from the line of Joe Kwatroci of Wells Fargo. Please proceed with your question.

Operator: Our next question has come from the line of Joe Kwatroci of Wells Fargo. Please proceed with your question.

[Analyst]: Yeah. Thanks for taking the question. Just kind of building on the last one, are there any products or categories where we should think about being the most likely to see shortages or extended lead times at this point?

Joe Quatrochi: Yeah. Thanks for taking the question. Just kind of building on the last one, are there any products or categories where we should think about being the most likely to see shortages or extended lead times at this point?

Yeah. They stay in the question just kind of building on the last one is there any products are categories, where we should think about you know being the most likely to see shortages or or extended lead times at this point.

Well I think that specific by supplier and I think you could <unk> every one of the suppliers to know which ones have facilities in some of the countries that have had lockdowns life in the Philippines in Malaysia to name a couple of.

Tom Liguori: Well, I think that's specific by supplier, and I think you could talk to every one of the suppliers and know which ones have facilities in some of the countries that have had lockdowns, like the Philippines and Malaysia, to name a couple.

Bill Amelio: Well, I think that's specific by supplier, and I think you could talk to every one of the suppliers and know which ones have facilities in some of the countries that have had lockdowns, like the Philippines and Malaysia, to name a couple.

Oh.

[Analyst]: Okay. Fair enough. Then just 1 kind of housekeeping question, how do you think about the tax rate, just given the quite significant decline in the March quarter relative to your long-term target rate?

Joe Quatrochi: Okay. Fair enough. Then just 1 kind of housekeeping question, how do you think about the tax rate, just given the quite significant decline in the March quarter relative to your long-term target rate?

Okay Fair enough and then just one kind of housekeeping question. How do you think about the tax rate just given the.

You know quite significant decline in the March core relative to your longterm target rate.

[noise] [noise]. It you know till till your estimate is about 19% and as long term targeted to get it under 30%. So you know we feel really good about the progress with her.

Bill Amelio: Total year estimate is about 19%, and our long-term target has been to get it under 20%. We feel really good about the progress with our tax rate, Joe. Did I answer it?

Tom Liguori: Total year estimate is about 19%, and our long-term target has been to get it under 20%. We feel really good about the progress with our tax rate, Joe. Did I answer it?

There.

X. Rachel.

<unk>.

[Analyst]: Yeah. That's perfect. Thank you.

Joe Quatrochi: Yeah. That's perfect. Thank you.

Yeah, that's perfect. Thank you.

Bill Amelio: Thank you.

Tom Liguori: Thank you.

Thank you.

Channel in there are no further questions at this time I'll now trying to call back to Bill Emilio for closing remarks.

Joe Burke: Gentlemen, there are no further questions at this time. I'll now turn the call back to Bill Amelio for closing remarks.

Operator: Gentlemen, there are no further questions at this time. I'll now turn the call back to Bill Amelio for closing remarks.

Tom Liguori: Thank you, Operator. In closing, I'd like to say that our thoughts are with all those that are impacted by the COVID-19 across our global community. We are incredibly grateful for the dedication of the first responders and healthcare professionals who are out there each day working tirelessly to fight this virus. We're proud of how our employees have risen to the challenge and have come together to make a positive difference in our industry, in our communities, and other people's lives. We will continue to monitor the COVID-19 developments closely as things continue to evolve, and we will update you on our fiscal Q4 results in just a few months. Thank you, Operator.

Bill Amelio: Thank you, Operator. In closing, I'd like to say that our thoughts are with all those that are impacted by the COVID-19 across our global community. We are incredibly grateful for the dedication of the first responders and healthcare professionals who are out there each day working tirelessly to fight this virus. We're proud of how our employees have risen to the challenge and have come together to make a positive difference in our industry, in our communities, and other people's lives. We will continue to monitor the COVID-19 developments closely as things continue to evolve, and we will update you on our fiscal Q4 results in just a few months. Thank you, Operator.

Thank you operator, and then closing I'd like to say that our thoughts.

Or with all those are impacted by the code in 19 across our global community.

<unk> credibly grateful for the dedication of the functions Bonder and healthcare professionals, Rob there each day working <unk> fighting fires and we're proud of our employees have responded to challenge and I've come together to make it positive difference in our industry in our communities in other People's lives.

Continue to monitor that a covert 19 developments closely if things continue to a ball and we'll we'll update you on our fiscal fourth quarter result, you just a few months. Thank you operetta.

[noise], ladies and gentlemen. This does include today teleconference. You may disconnect your lines at this time.

Joe Burke: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great night.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great night.

Thank you for your participation and have a great.

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