Q4 2020 Avnet Inc Earnings Call
Please standby or presentation will begin now welcome to the AD that fourth quarter fiscal year 2020 earnings conference call.
I'd now like to turn the floor to your host gel Burke, Vice President Treasurer, and Investor Relations for Avnet. Thank you you may begin.
Thank you operator earlier this afternoon I've never released financial results for the fourth 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 today's remarks can be found by the link in the earnings release as well as on the IR section of Avnets website.
Lastly, some of the information contained in the news release and on this conference call contain forward looking statements that involve risks uncertainties assumptions that are difficult to predict in particular, the scope and duration of the Kobin 19 outbreak and its impact on global economic system, and our operation 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.
Several factors that could cause or contribute to such differences are described in detail and have that's 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 or supply new information regarding the circumstances. After the data this presentation.
Today's call, we'd be led by Phil Gallagher Avnets interim CEO and Tom the Dory Avnets CFO with that I'm pleased to turn the call over to Phil Gallagher Phil.
Thank you Joe and thanks, everyone for joining us for a fourth quarter fiscal year 2020 earnings call.
Before we begin discussing earnings we want to start by thank you Bill Emilio for the many contributions he made while serving that that's CEO for the past four years, we're grateful for builds hard work during his time would add that and we wish him the best in his future endeavors.
Next.
We want to thank our 15000 employees for their continued dedication and support during the pandemic as well as during this leadership transition.
I know not a well when I say that I believe avnet had a solid foundation from which to grow with valuable assets.
And some of that was talented people in our industry.
Finally I.
I want to say that I've been adding that long enough to know, what we do well and what we need to do better.
One of my immediate priorities as interim CEO would be to lay the groundwork to truly reinvigorate our business.
It's a new fiscal year and a new chapter for Radnet and you will see we have a renewed focus.
We will build on 100, your history and distribution, while continuing to accelerate the profitable growth a far now.
I O T and our ecosystem.
We will show our suppliers and customers that our commitment to them has never been stronger.
We will relentlessly pursue superior execution.
Put simply.
We will work harder than ever before I'm truly excited and hope you are too.
Now turning to our fourth quarter fiscal year 2020 results.
Similar to other properties, we spent the quarter continuing to navigate the cobot 19 operating environment.
On our last earnings call in April we told you that the macroeconomic headwinds, resulting from the pandemic as well as other factors will likely impact our fiscal fourth quarter financial results.
We also told you we were taken numerous steps to prepare for significant downturn to ensure financial stability for avnet. During these uncertain times.
Although we did not give quantitative guidance for the fourth quarter. The qualitative expectations. We provide an update for were in line with our fourth quarter results.
This included our expectations for performance in Asia, AMEA, and the Americas as well as for for now.
Importantly, our actions during the quarter were consistent with a commitment we made to ensure financial stability for our company.
Looking at our overall performance for the fourth quarter, our revenues were down sequentially and year over year.
Our adjusted diluted EPS was up sequentially and down year over year.
Softer demand, particularly in EMEA impacted our quarterly results as what was softer pricing and some additional cost related to the impact of the coven 19 on our logistics operations.
Similar to last quarter, we focused on conserving cash and managing our debt.
We generated positive operating cash flow for the seventh consecutive quarter.
Looking at our electronic components business revenues and operating margins were down both sequentially and year over year in the June quarter.
The region that was most negatively impacted was amir well Asia's showed signs of recovery and continues to.
Our book to Bill ratio at the end of the fourth quarter was slightly below parity.
What has shown signs of improvement in July.
Since our book to Bill is based on lower quarterly revenue base.
We're primarily focused on our rate of bookings and backlog to ensure the integrity of our supply chain.
In terms of vertical segments as you've likely heard from other companies. This quarter weakness was driven primarily by auto and commercial air transportation.
However, we saw some strength in the industrial communications defense and technology segments.
Notably a bright spot during the quarter was out of our global demand creation trends and design wins a remaining steady.
Turning to Forno, both sales and operating income margins in the fourth quarter were down sequentially and year over year, which is what we expect it as we indicated her last earnings call.
This again was primarily impacted by the slowness in EMEA.
In the quarter finals, new customer acquisition is rose around 13% year over year, largely driven by products supporting Koeppen 19 safety requirements.
We also added multiple new suppliers to for knows line card globally.
Well, we've adapted our near term priorities to respond to the pandemic.
We're still executing against our five long term strategic priorities as outlined on this slide.
In fact, we brought our distribution traditional demand creation design services and I O T strategies closer together in a way that will enable us to scale faster and drive better results for Avnet overall.
Our customers suppliers and investors are recognizing how I T solutions aren't extension of our key capabilities driving more demand creation.
Suppliers are particularly excited about this direction, because it's creating significant component demand for them.
As we think about what's ahead, it's important to note that we are reviewing some of the lessons we've learned during the cold 19, and how we can apply them to improve our business. For example, we've seen that many of our roughly 15000 employees around the world can work effectively from home.
We've also seen how productive our meetings can be over video conferencing.
So we're assessing opportunities for cost rationalization.
That could benefit our business in the future from decreased travel spend to decrease real estate cost.
We are confident that identifying these areas now a revealing our potential options can allow us to operate more efficiently in the future.
As we mentioned last quarter, we're doing everything we can to ensure the safety and health of all of our employees, while keeping our business running as smoothly as possible.
And as I mentioned earlier, we are so grateful for our employees continued dedication through this pandemic a period that has been challenging and filled with uncertainty.
We are truly proud of how and his team members are collaborating across our businesses around the world to support our customers and supplier partners in the fight against Cobot 19.
In closing we acknowledge that this past year has had obstacles for us and for many other companies. We've adapted our business in response to the operating environment and we'll continue to do so.
We are focused on increasing our profitability by building on our century long foundation and distribution.
We are diversifying and growing our revenue streams with comprehensive solutions that will equip our customers and suppliers to succeed.
Solving world of connected technology.
With that I'll turn the call over to Tom to report on the financials for the quarter.
Tom.
Thank you Phil good afternoon, everyone.
Well, let's start by congratulating fill on his new role I know I speak for the global Avnet team, saying, we look forward to your leadership and you have 100% of our support.
I'm going to keep my commentary brief so as to allow a good amount of time for Q and eight.
Turning to the financials on slide 10.
Revenues for the fourth quarter were 4.2 billion.
Adjusted EPS was 64 cents.
Cash flow from operations was 288 million.
Both our revenues and adjusted EPS in the quarter well above that consensus estimates.
Although there was softer demand in AMEA, our EMEA revenue came in better than expected.
GAAP and non-GAAP diluted EPS were positively impacted by 42 cents from a favorable effective tax rate primarily related to the reduction in value in certain assets and the carriers that.
Also contributing to the bottom line were favorable foreign currency gains and lower interest expense contributing another eight cents to adjusted EPS.
Revenues of 4.2 billion were down slightly from 4.3 billion in the third fiscal quarter.
Gross margin of 11.4% was down 62 basis points from last quarter, primarily due to mix.
All right Asia revenues came in sequentially stronger, while our higher margin Americas EMEA businesses declined.
Adjusted operating expenses of 432 million were lower by 16 million sequentially.
We implemented actions to control costs in the face of the pandemic uncertainty.
Excluding the onetime 42 million tax gain adjusted tax rate was 19%.
Slide 11, we show results by segment and region.
China components revenue of 3.9 billion declined 2.7% versus the previous quarter.
Sequentially Americas in EMEA revenues, both declined by 4.5% and 11.1% respectively.
Meanwhile, Asia revenues increased by 4.6%.
And at the same time, Egypt produced positive cash flow during the quarter. So I have to commend the team there, France, Alan CH for their continued hard work and results.
Electronic components operating margins for 1.5% sequential decline due to the lower sales volume.
For now revenues for the quarter.
Total 292 million down 12.9% sequentially.
As we mentioned last quarter, we anticipated a challenging quarter for for now.
The segment had an operating margin of 3.6% in the corner.
Regarding the Texas instruments transition revenues from T. I in the fourth quarter were 324 million with their gross profit of approximately 8%.
We expect to see a continued steady decline in T.I. revenues in the second half of the calendar year has his transition is completed by December 31st.
Turning to cash flows and balance sheet on slide 12.
We ended the quarter with a cash balance of 477 million and debt of 1.4 billion.
Our gross debt leverage was 3.1 in our net debt leverage was 2.1.
Our net book value per share was $38 up slightly over the prior quarter.
Tangible book value per share remained relatively constant at $29.
Turning to liquidity on slide 13.
Our liquidity position remains strong.
Recall that you're in calendar year 2019, we put in place improved processes and tools to enhance our focus on cash generation.
These actions Weve benefits this fiscal year, 2700, 30 million and cash flow from operations.
In the fourth quarter.
We generated 288 million of cash flows from operations.
This is the seventh straight quarter of positive cash flow from operations.
We use the cash to pay down 300 million of debt to satisfy a June maturity date.
In the banks are supporting US we amended the terms of our revolving credit facility to prepare for any potential headwinds over the next few quarters.
With these changes to our financing we are well positioned to maintain ample liquidity.
Turning to slide 14.
Looking ahead, we will focus our financial assets and managing our inventories and receivables generating cash and paying down debt during the pandemic.
Today, we also announced plans to reduce our operating expenses by 75 million annually and our working capital levels by another 100 million.
Both are expected to be fully realized by the December quarter.
Turning to business outlook on slide 15.
You are guiding revenue in the range of 3.8 billion to 4.2 billion in.
In adjusted EPS in the range of zero to 16 cents. This.
This guidance reflects a wider range than in the past quarters, given their continued uncertainty from factors related to cold at 19.
Turning to slide 16.
We currently are seeing it demand environment similar to the just completed June quarter.
Seasonally the September quarter has lower EMEA revenues with the Asia in the Americas being somewhat flat.
For September we are seeing a slight uptick in for now revenues.
We expect T.I. revenues to decline sequentially through the range of 102 150 million.
Overall with the lower T.I. revenues.
Seasonally lower AMEA respect a slight decline in operating margins.
In summary.
Realty to generate cash flow remains intact, and our balance sheet as healthy.
You're taking steps to reduce both our cost and working capital, which are expected to improve our financial results starting in the December quarter.
With that let's open the line for Q in a.
Operator.
Thank you, ladies and gentlemen, we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad a confirmation tell indicate your line is in the question Q.
You May press star too if you like to remove your question from the Q4 participants use and speaker equipment baby necessary to pick up your handset before pressing the star keys. One moment. Please why we poll for questions.
My first question comes from Adam Tindle with Raymond James. Please proceed with your question.
Okay. Thanks, good afternoon, and congrats to fill Phil I just wanted to start out just thinking about the portfolio Holistically and strategic options last time, we had a CEO change you acquired for now and divested T. S. In fairly short order. So just one some color on your thoughts on the portfolio, how you're thinking about strategic options and if you want it.
Hi in some of the color on enhancing your core distribution capability that would be helpful.
Yeah, Thanks, Adam I appreciate that.
I haven't thought through all of you get in the last four days, but we're we're certainly working with I thought it would be well we're gonna be doing is certainly a reinvigorating the foundation, okay, the core business and avnet integrated as well.
Any extremely close with our supplier partners and customers and then driving to demand creation design services supply chain.
We will continue to be doubling down.
Oh, one for now what were we know we're not where we need to be a in for now with Cornell right now, but we are tracking and making progress appropriately. So we need as well we're proud of where we are in a center technology right smack in the middle of it that we weren't even more out of about the value, we're bringing to the customer.
Suppliers through the last three four months of the a pandemic is the global logistics capabilities, we have sort of a double down on that.
Reinvigorate that while building out the new businesses Guy in the things like the Io T that we've talked about a and ecosystem. So some is no no buttoned down the execution buttoned down the fundamentals well then looking looking ahead to the future diversification the portfolio.
Understood.
And then maybe just as a follow up I thought it was notable to see Cypress. Returning if you could maybe just walk us through that it seems to have come full circle. It was one of a string of losses years ago and is now returning so just some color on why and failure relationship guide you perceive this sort of thing becoming more of a trend.
Well, you know I'm not sure, but the latter part yet yeah I, absolutely believe a nice I called the upstream in the value the supply relationships key and critical to our success in service our customers globally.
With regards to Cypress, specifically, we're the number one a distributor today with a with Infinium a globally, we have a great relationship with Infineon. So with this acquisition of Cyprus, we're proud to be bringing a cypress back on that alike part I would hope that's going to happen in next few months and it's similar to what.
With that with Microsemi, a week everybody at Microsemi back the Microchip acquisition so.
We feel confident okay. We feel good about where we are we still have some work to do but this is this is a big win for the team.
Got it thanks, and Tom Congrats on cash flow again.
Thank you thanks.
Our next question is from Matt Sheerin with Stifel. Please proceed with your question.
Oh, yes, yes. Thank you.
Well I mean your comments regarding you had good demand environment. If you take out the loss of T.I., you're looking at sort of flattish.
Sequentially, it's really sounds in line with some of your peers and suppliers could you talk about I'm, particularly what you see in Europe. As you look maybe to the December quarter, particularly auto because I know you have decent amount of auto exposure. There are there any signs of life there.
In terms of backlog or bookings you any hope that that that's going to recover.
Yeah. Thanks, Matt I appreciate that enough yeah, well, we net out the loss of that one supplier, who we feel pretty confident with the guidance and where do you get what the guidance given what's going on in the marketplace.
Specific to Europe.
Europe is is the toughest region for US right now probably consistent with others as well the book to Bill in Europe is starting to come back a bit still still below parity, but I'd just say that the internal guys. We had for Europe for the June quarter I'm the team in Europe exceeded that yeah. It's.
Yeah well.
Decembers, a tough call Mac.
Even with all the shutdowns through the past four or five much as you know I get the holidays, you know the summer quarter, a New York, So it's really a tough when the.
The call <unk>.
We feel it's gonna start to bounce back in December and but more into the March quarter.
Well, that's why I mean, Europe, I would probably your team inside of our performance over there.
Given given the Oh the share data we gathered we've we've been pretty sharing the best [noise].
[noise], Okay, and Tom on the they affect Sag reduction efforts that $75 million that you talked about will any of that be coming out of the September quarter. You can you give me some feel for what you shouldn't expect while we should expect opex to be.
At this math for the September quarter should be about the same and you will see most of the reduction where you'll see all of the reduction in the December quarter.
Well I'm wondering I had a couple of points around it you know it's about 5% of the total.
Part of it half of it is temporary measures because this is all related to match in expenses to the lower volume. So projects on hold travel things of that nature I wanted to be very clear to everybody. We're not touching our markets facing activities. The engineering staying intact. In fact this is net of.
Some investments because as Phil said this is all about growing or share going a business executing so we'll have select incentive investments and geographic specific geographic location specific industries to grow our business, but this is more line in cost of revenues.
Thanks, Okay, alright, thanks, a lot in best of luck, Phil Thanks, Pat.
Thanks, Matt.
Our next question is from Ruplu, how to Gerard with Bank of America. Please proceed with your question Hi, Thanks for taking my questions I'll fill congrats on the new assignment, Oh, well deserved I'm sure you're going to do a great job.
Just wanted to ask you a high level question first you know when you look at the quarter did the end markets pretty much play out as you had expected I'm looking at far now margins at 3.6%. They came in better than we had thought so has it changed your your thinking on the cadence of how are no margins can improve back to the double digit range. So if any.
You touch on how the quarter progressed and and how are you know how should we think about you know margins, especially in far no progressing from here. Thank you.
No. Thank you and and it did progress as we expected in it and as we noted just so our internal goals are little bit better and not where we need to be but certainly a better now than we had originally forecasted the end markets, yes figured out exactly what we put in the script there for sure we're seeing the automotive transportation markets off.
And of course aerospace a very very soft and in some of the a challenge compounds for now is the other strains is your case. So they they just kind of the double dip for them for that sort of better strength marketing with mark you're a little softer it impacted them on the margin side, we're very pleased with Chris Roseland and the team has a good.
Oh good process she's good management and we are encouraged im confident that roadmap we have for a far now for the next three four quarters. We can continue to increase or the operating margin to two or the goals that we set.
Okay. Thanks for that and I'm just for my follow up I'm, Tom I. Just wanted to clarify you had a cost reduction plan in place was that completed or was there anything remaining in that and for the new 75 million a opex reduction that you announced is there a cost associated with that as well and how much is cash and how much is noncash. Thank you.
No. Good question, who flew okay. So the original Opex reduction program was 245 million and to date with through 190 million of that somebody who's more to come there.
And on the 675 million you know that about half of its permanent measures, which would be on top of that.
In the 75 million roughly a little over half of it would be a cash cost implement and I think most of the implementation cost would be cash related.
Great. Thanks for all the details.
You bet.
Our next question comes from Tim Yang with Citi. Please proceed with your question.
Hi, Thanks for taking my question congrats to fill on the new role or your book to Bill which is below poverty. I believe you mentioned your book to Bill was Lucky about why or did you well. So can you maybe just talk about a book to bill trend in the quarter and how should we think about the book to bill for set them quarter.
Sure I'll take that Tom yes.
Closing out the June quarter.
Globally, a book to Bill was slightly down or slightly less I should say then one to one or it was positive in Asia Pacific, Okay, and very close to one to one in the Americas pace again to the earlier question European that little bit of the Wagner.
Early as we see it through the quarter, we're today sitting above a one to one or closing out a July.
In all regions shown a positive trending there, but I do want to remind you that is the base is a little bit lower so still no we don't than what we need to be but at least the book to Bill was is improving.
Got it. Thanks, and then next question is on margins you're talking about your guidance I think it implies your components segment margins remain at roughly 1.5% or maybe you might have been below what are my question is is my math right and if so why was less.
T T I go more.
For a couple of it.
Thanks.
Tim you were breaking out, but basically the guidance would infer slightly lower.
Operating margins in.
[noise] inner core distribution and.
Most of the revenue declined in the guidance is associated with the you know the transition of T. <unk>.
You know we have.
Taken steps as you can see this quarter Opexas down 16 million sequentially and you know the president's the teams around the world have H progress and replacing some of the T.I. revenue through share shifts. Another measure. So you know I think you know, we're pretty well entree.
Back to what our original plan was which was about 24 months to make up the gross profit dollars hope that answers your question.
Tom I'll add on to attend the other thing.
In addition, dji mixes the Asia mix its a little seasonality in here in.
Asia coming back a little bit stronger in Europe, so that were needs to be that's going to drive a bit of the margin mix issue.
Thanks, Phil started to talk to you.
Thanks, Thanks, Tim.
Our next question is from Shawn Harrison with loop capital. Please proceed with your question.
Hi afternoon, everybody in my congrats as well Phil I guess, what did it dig into your comments on you know far now, maybe not eating or being where you'd like it to be what's still has to happen to get this business in the exact same competitive lane as you know the peers in that business is is it so.
The inventory or they're the best practices are there other factors that we can watch over the next six to 12 months to see that business more in a more competitive.
Dynamic with appears.
Yes, good question, Sean and I'm sure Chris resident listening so.
Oh, you get we've got a first of all give give credit to the couple the leaders out there is a very good at what they do okay. So we're definitely coming in from from a different position.
I would say as I said earlier in Europe, we hold our own in Europe, a in the catalog E Commerce space, we're expanding and Asian doing well there are one of a really working on off from a regional standpoint is the Americas North is really good what they do a and were traditionally tomorrow, but expect.
And in that line card to get anymore accessibility to the gold women to review on expanding skews. So that's that's the one who must find the Caldwell runs the Americas, that's what we're really driving hard as far as the you. Other big thing. We've done is expanded to skews that's not all on the shelf, yes, we've expanded or skews over 50000.
And in the plan and that will help you've got to have first call effectiveness, particularly in digital side of the world and E. Commerce Center to two big things, we're doing and then the we're also expanded the marketing campaigns.
With for now and expanding the line card for example, I think last quarter, we announced we picked up micron.
A large number guy globally, what do they do not have that before it's not just the might affect to bring it micron be bringing my accomplish associated simple around the micron. So finished in line card. We've got the leads logistic center are going to be ramped up closer to the end.
End of calendar year, Oh, that's slightly delayed due to the coven buyers are the code situation and I get it is going to work done there's that's been a little bit of a delay, but we don't think it's impacting us too much at this point in time I think you'll see to the early question that quote unquote a quarter when we continue see that come back.
Okay, Great and then kind of if I may have two clarifications.
One is the buyback restarted it looks like there was a little bit in the quarter and then second if I do my math correct. It looks like 200 million of a T.I. supplier sales will have to come out in the the calendar fourth quarter.
Okay. So the first question the buyback remains on Pos and the second question.
Just for clarity you know.
June quarter was 325 million that will go down to 102 150 in the current quarter. So December which go down by the remaining 100 to 150.
Okay. Thank you.
You bet. Thank you.
Our next question comes from Joe Karachi with Wells Fargo. Please proceed with your question.
Yeah. Thanks for taking the question.
Tom and I apologize if I missed it but what was the estimated Ur cobot 19 cost I think last quarter was 10 million and I think you assume that that freight costs kind of return more tied normalized level and just curious if theres an update on that.
Good question, so freight did come back to normalized level, though and this quarter. It remained at about 10 million and the way to think about this this is full three months, a P.P.E. and different you know work rules and our distribution center.
Okay. That's helpful. And then maybe on the demand side can you talk about the growth that you can and design activity this quarter or maybe you know how do we think about that kind of going forward for or in terms of how we think about revenue growth.
Phil I'll take that you know I got that Tom Yes, actually the demand creation continues to move it at a at a really good patient and holding holding steady both on design registrations.
And actual design ins and design win production. So we're we're actually very pleased I'd say, probably somewhat surprised deal with nothing no. Though you know kind of hand to hand, if you will with the ease into the customers but.
With the a remote capabilities now we've actually had really good success or the trend is steady as she goes in demand creation and that design ins, which is which is terrific.
It's actually holding up better than the core if you look at our design win revenue.
It was.
Half if were down X percent it was down half. So it's actually are stickier than bounced a core business.
That's helpful. Thank you.
Our next question comes from William Stein with Truest Securities. Please proceed with your question.
Great. Thanks for taking my question, Phil I want to add Mike Congrats to the new role well deserved I Wonder if you can talk a little bit about your vision for capital allocation in the past I guess, maybe it's a little bit way past now, but the company used to be very acquisitive I wonder if you see any opportunity.
He is in that regard you also have a dividend right now which sort of stretches beyond what the company's current earnings power is has the risk of diminishing your tangible book value over time I Wonder if you have any thoughts in those two and other uses of capital then I've a follow up if I can.
I, probably defer that little too or the Tom is in a short term yeah, we're gonna be focused on organic and reinvigorating the cores et cetera, we entered into in the evaluate distribution bring to the marketplace round.
Organic growth organic investments in a fees account managers demand creation for now as we talked or as far as a M&A and Io to of course, and our them at M&A in Devon, and I'll turn it over to a to Tom.
Thanks, Phil and you know just reiterate you know this.
Reinvigorate the core put money into that.
Well you know basically the priorities today during the pandemic or balance sheet and liquidity and maintain that so the buyback is pause the dividend Hey, we agree with you 100%. It's it's it's greater than the net income that cannot continue forever, but.
No.
We are fully aware of that's finance traditionally where that what keeps you. We keep an eye on that in a you know we do expect that.
We'll get it recovery, we think that our actions being taken this quarter will help that is all so right now we plan to continue with the.
[noise] with the dividend as far as M&A, you know, it's not a priority today. She wants there was something small that makes sense, we would look at it but today, it's all about balance sheet and liquidity. Let me answer your question well done. Thank you one follow up if I can I know it was under a different Ceos leadership I know.
Just a couple of years ago at this point, but I think the last analyst day, the company highlighted that expectation it to 4.5% to 5% operating margin.
And were well below that now when I think we understand that a good part of that is cyclical factors.
But you know it.
All of the supplier consolidation and.
I'm not only consolidation among the suppliers the consolidation of their sort of distribution partnerships.
My call into question whether.
Whether reviewed or renewed take on operating margin goals would result in something much lower.
I Wonder what your.
Take is fill or Tom here, but if you have you could share as to what might be a realistic goal for when demand returns to more normalized level. Thank you.
Sure Phil you want me to take that.
Yeah go ahead, Tom. Thanks, you know this is this is fills a this is Phil. This is your 76 six day. So you know obviously.
Phil It still has a vision is very focused on core and continuing to grow high margin business as well. So I think it'd be presumptuous of me to put any target out there right now.
We'll be working through that I think what is important to note was you know this is probably like an evolution of strategy I'm, just fulfill was saying earlier snow or not a revolution of strategy and so you know we think we always look historically historically distribution operating margins are in the 3% to 4% range. So.
You know what it regardless of what we come out with has goes after working through this with Phil you know I think those owner.
Those are good benchmark I'm in the meantime for you to look at does that help will or any follow up on that.
Helpful. Thank you good luck guys.
Thank you Oh.
[noise] [noise] as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, one moment why we poll for questions.
Our next question comes from Nick Potter off with Longbow Research. Please proceed with your question.
Thanks, Gary or good afternoon, guys same feel congrats from me as well.
I guess you guys can touch on your assessment of the inventory situation at customers I think there's been a lot of mixed data points.
The connector suppliers have seeing some excess inventory and auto but generally what is your view how do you assess the inventory situation that they've been customers.
[noise] they'll do you want to start or do I mean, it's fairly I'd be a a me take that its thanks, Nick I appreciate that.
Well, it's always difficult frankly to get exactly the end customer inventory.
It is account by account I can tell you what we're doing with our backlog or with our suppliers were managing that extremely tight we have a a regional president NASDAQ call every single week or using analytics to understand what customers are.
Frankly living up to their forecast and expectations, which ones art and we're one of the time.
Discussing what's going on so is it as a whole what's difficult.
But I will say the one thing that does override, which which we look at very closely as our book to bill and the cancellations and push out which is an aggregate, okay and right now cancellations and push outs are not excessive okay. There, they're in a norm, which is 20% 25%, which.
Typical that's what we do we kind of the shock absorber to fuel for the industry. So right now not yeah, I think it's relatively healthy okay. In the there's nothing to show that there would be that much excess inventory out there frankly Toms comments one.
No I would agree with fill 100% on that.
Our inventories are healthy as well yeah.
Okay as a follow up I feel well I'm just love to hear your thoughts on the overall kind of supplier consolidation in the industry. How do you see that potentially impacting you know.
Not not so much interested in you know a the potential impacts from the deals but.
How does that impact customers and your ability to maybe you know acquired there's no customers that you're not currently working with.
Yeah, and they commit unit and acquiring additional suppliers I think.
The so.
We don't will sit in their supplier boardroom. So we're not sure exactly who they're looking to the buyer or divest or what have you I can tell you that it's not new yes. It is the acquisitions and mergers of as certainly accelerated over the last several years and we all we all know who's been acquiring who.
Last couple of how do you just can't connecting the actually the last.
Couple of actually benefited us with the as we announced this week cypress coming in with Infinium Microsemi with with Microchip.
And we're always with my car for the gaps and overlaps and adding lines, whether they are keen critical to from a technology standpoint. So well. We can do is continue to execute with those suppliers that we have.
And be a good supplier partner for them in driving demand creation customer expansion revenue growth and do what's right for carton and then no pun intended but the chips for where they may.
Okay, Great and just a quick follow up our Tom what was the Ti contribution in the March quarter, I don't know I remember if you guys your that.
[noise] March was for 400 million.
Okay got you bring has got good luck.
Right. Thanks, Nick.
Gentlemen, there are no further questions at this time I'll now turn it back to Phil Gallagher for closing remarks.
Thank you operator appreciate that.
Well as I mentioned earlier, it's only my first week, a fourth day on the job, but I guess have really energized about the role is the interim CEO and I look forward to Sharon.
My vision and the teams vision for renewed radnet in the months. They had so thank you for your time, we hope everyone stays healthy in safe. During this time as we enter into fiscal 2021 were motivated to succeed no matter the economic environment drive execution as we know we can and will afford updating you on our first quarter results.
October Thank you have a great nice.
Ladies and gentlemen, this does conclude todays teleconference. You may disconnect. Your lines at this time, we thank you for your participation.