Q4 2021 Avnet Inc Earnings Call
[music].
Please standby our presentation will now begin welcome to the Avnet fourth quarter fiscal year 2021 earnings call I would now like to turn the floor over to Joe Burke, Vice President of Treasury and Investor Relations for Avnet.
Joe you may begin.
Thank you operator earlier this afternoon Avnet released financial results for the fourth fiscal quarter of 'twenty 'twenty. One 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 Sir.
<unk> of Avnet 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.
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 in avnet as most recent Form 10-Q, and 10-K and subsequent filings with the SEC. These forward looking.
<unk> 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 Phil Gallagher, Avnet, CEO and Tom Liguori Avnet CFO.
With that let me turn the call over to Phil Gallagher Phil.
Thank you Joe and thank you everyone for joining our fourth quarter and fiscal year 2021 earnings conference call and hope everyone is safe healthy and it's taken some time to enjoy the summer.
I'd like to start today by reflecting on the past year just over a year ago to date I was named interim CEO of Avnet and during my first earnings call I shared with you my immediate priority will be to lay the groundwork to focus on our strengths to truly reinvigorate our business despite ongoing supply disruptions and the global.
Pandemic restrictions.
Our team did just just that and deliver some incredible results I'm extremely proud to be leading this team during this challenging period.
We've made important improvements to our go to market strategy focused spending on the right things and as a result, we were able to post record sales for both operating groups in the fourth quarter.
They make notable margin and revenue progress over the year I'm truly excited for the continued journey that lies ahead.
Yeah.
Now let me highlight some of this past year's accomplishments before diving into the fourth quarter performance in the past year. We continued to strengthen our foundation based on decades long relationships with our industry, leading semiconductor and IP any supplier partners.
We supported our customers and suppliers by utilizing our capabilities and expertise to help decrease risk in their supply chains.
We made significant investments in our sales and engineering personnel, enabling differentiated design solutions for our customers, resulting in demand creation numbers are at record levels for fiscal year 2021.
We also continue to invest in the Digitization of our business across both avnet and farnell, allowing for support across the entire customer product lifecycle.
That in turn attributed to margin growth moving us towards our 3% and 10% operating margin targets for electronic components and farnell businesses respectively.
Tom will get into that in more detail later.
We grew market share operating income dollars and improved our return on working capital.
Finally, we began the celebration of our 100 year anniversary, reflecting on the critical role we've played in the electronic supply chain for multiple decades.
Now all of this could not have been done without our dedication of our team across the globe throughout this fiscal year, our whole team continued to prove that avnet role at the center of the global technology supply chain is more vital than ever for our customers and suppliers and that expertise and relationships truly matter.
While I am pleased with what we've accomplished to date and excited for what's ahead, we're still operating in a dynamic market. We will continue to experience a supply driven marketplace as extended lead times persisted throughout the quarter driving very high book to Bill ratios in every region as such tightly managing our backlog and working closely with customers to.
Again extended visibility continues to be a priority as you manage your own supply chains.
Further component costs for certain technologies have increased an average of 10% to 15%. This past year with some even higher as always and always try to mitigate any customer impact where possible and we worked closely with our customers where we've had to pass some of these cost alone.
Now turning to the fourth quarter results on slide five.
We achieved fourth quarter sales of $5.2 billion.
Up sequentially and year over year on a constant currency basis, excluding Ti sales grew 31, 7% year over year electronic components and for an hour both achieved record sales in the quarter and delivered strong operating margins. We expect continued progress at the operating margin line given the strength of the market solid execution across all <unk>.
Regions as well as the durable improvements we've made to our business.
Looking at the electronic components business on slide six.
The depth of our relationships with our suppliers and customers is driving excellent results across all regions and positioning us for continued progress in fiscal year 2022.
Strong performance in EMEA, and Asia and continued operating improvements in the Americas, all contributed to better than expected results in the quarter.
In terms of vertical segments in the industrial automotive communications computer segments continue to be major drivers.
Global demand creation also continues to be a key competitive advantage supporting our long term growth and profitability in electronic components.
With demand creation accounting for roughly 30% of electronic components revenue, we will continue to invest in digital design tools fueled application engineers and relationships to drive stronger engagements as we enter fiscal year 2022.
We will also continue to enhance our current business offerings, while driving demand for our suppliers with broad based solutions software capabilities and value added services across vertical markets, including Iot solutions.
Allowing our customers to differentiate their solutions and address their current needs.
Now turning to farnell on slide seven.
For now it continues to be an important contributor and saw record sales this past quarter.
Revenues were up year over year and sequentially in the quarter at $441 million and operating margin increased sequentially to eight 3% progressing towards our target of 10%.
Our investment in Farnell digital capabilities continue to pay off with nearly 51% of revenues attributed to E. Commerce sales. We also added 2530 Skus this past quarter progressing on our plans to add an additional 250000 skus throughout the fiscal year 2022.
The combination of Farnell is high service model and electronic components business capabilities enabled us to uniquely service customers from new product introduction to mass production as we continue to enhance our digital capabilities in fiscal year 2022, we expect <unk> value proposition to continue to increase.
Now with that I'll turn it over to Tom to dive a bit deeper into our fourth quarter and fiscal year results.
Thank you Phil good afternoon, everyone and thank you for attending today's call.
As Phil stated we are very pleased with the results we posted in the fourth quarter and the progress we've made over the last year, while Theres still work ahead I am excited to share some highlights.
Turning to slide nine.
In the fourth quarter, we grew our topline by 25, 7% year over year are.
Our revenues for the fourth quarter were $5.2 billion and adjusted EPS was $1.12.
Both our revenues and adjusted EPS exceeded our guidance range and grew from $4.2 billion and 64 in the prior year's quarter.
As Phil mentioned strong revenues were primarily driven by exceptional quarter performances in EMEA Asia and for now and continued operating improvement in the Americas.
Turning to slide 10 for.
For the fiscal year, we achieved sales of $19.5 billion, representing a 10, 8% increase from the prior year.
Throughout the year, our teams improve execution and efficiency expanding operating margins for four consecutive quarters, and bringing us to a 3% target for electronic components and closer to 10% for for now.
We controlled operating expenses, improving the ratio of Opex to gross profit dollars from 91% a year ago to 76, 5% this quarter.
Our asset and finance teams consistently managed working capital reducing working capital days to 70 by year end and we grew earnings per share to $1.12 in the fourth quarter.
Moving to the fourth quarter income statement on slide 11.
Gross margin of 12, 3% was up sequentially.
Evidence that we are effectively managing our pricing in this supply constrained market.
Every electronic components region and for now so our notable improvements in their gross margin sequentially in.
An encouraging trend as we continue to work toward enhancing margins.
Opex as a percentage of gross profit continues to improve.
Reaching 76, 5% from 86% last quarter.
Adjusted operating expenses of $493 million were up seven 7% sequentially due to increased cost associated with our sales growth.
On the nonoperating front interest expense was up slightly.
Due to higher death through the quarter for working capital, reaching $23.3 million.
We recorded foreign currency transaction losses of $2.1 million, which represent the costs associated with our foreign currency hedging activities.
We booked a 13, 5% adjusted tax rate in the fourth quarter to get us to a 15% adjusted annual tax rate, which was an improvement from our expectation of 16% last quarter.
On slide 12, we highlight results across our two business segments.
Looking at the electronic components segment, we achieved revenues of $4.8 billion, increasing 23, 7% versus the prior year and five 9% sequentially.
For the electronic components segment operating margins were three 1%.
A 47 basis point improvement from last quarter, and 157 basis improvement.
Year over year.
As noted earlier, our electronic components groups performance. This quarter was driven by strong sales in EMEA and Asia and supported by higher sales and continued operating improvement in the Americas.
For now achieved a record sales quarter with revenues totaling $441 million up sequentially and year over year.
The strong market demand has benefited farnell, we continue to invest in inventory systems and ecommerce capabilities to further enable for <unk> growth.
But for now segment had an operating margin of eight 3% in the quarter.
On track to achieve our 10% target by the end of fiscal year 2022.
We are extremely pleased with the farnell recent results and expect to build upon this momentum.
Turning to cash liquidity and the balance sheet on slide 13, we increased inventory by $475 million in the past quarter to keep up with customer demand.
While working capital dollars were up we were still able to improve our working capital days to 70 as previously noted.
Our liquidity position remains strong we ended the quarter with cash and equivalents of $200 million and $1.7 billion of available lines of credit.
We remain comfortable with our debt position with debt coming in at $1.2 billion and net debt had $1 billion.
Our gross debt leverage was two two and net debt leverage was one nine.
We increased our dividend by four 8% in the quarter, returning $22 million to shareholders.
Our net book value per share increased to $41 compared with 38 in the year ago period.
I will wrap up with some comments about our expectations for the next quarter on slide 14.
Our first quarter guidance today assumes ongoing strong demand continuing supply constraints and associated electronic components price inflation.
As a result, we expect to perform better than the normal seasonal pattern.
For our fiscal Q1, we are guiding revenues in the range of pipeline one to $5.4 billion and adjusted EPS in the range of $1 <unk> to $1.12, while we expect persisting supply constraints to continue to benefit the pricing and demand environment through Q1.
We also have made significant durable changes to our business.
As Youll see on slide 15, as a result of these changes we now expect by the latter half of fiscal year 'twenty two to deliver sustainable operating margins in the three to three 5% range for total avnet.
We have spent the last year positioning the business to operate efficiently in all manners of challenging macro environments and we are confident in our ability to continue delivering value to our customers and shareholders.
I will turn it back over to Phil for some closing comments before we open it to Q&A Phil.
Thanks, Tom.
As we kick off fiscal year 2022, we see positive growth in our markets and are excited to capitalize on every opportunity.
Now is the time to build our strategies around financial and competitive performance without hurting growth and investing in the digitization of our business as well as in our employees.
I'm incredibly proud of our team's resilience amidst the challenges this past year.
They've delivered significant value and providing uninterrupted service at a global scale and are working collaboratively with our customers and suppliers to manage forecast navigate current market dynamics and mitigate supply chain risks.
Because of their hard work and focused we are well positioned today to leverage our strengths go into fiscal year 2022.
I cannot be more excited about what the next year holds in store for Avnet.
With that I'll turn this over to the operator for questions and answers.
Thank you 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 done. The question queue. You May press Star two if you would like to remove your question from the queue.
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One moment, please while we poll for questions.
Okay.
Yes.
Thank you. Our first question comes from Matt Sheerin with Stifel. Please proceed with your question.
Yes, Thank you and good afternoon, everyone.
My first question Phil is just regarding the inventory build that you saw in the quarter you seem to be one of the few.
Companies within the supply chain to be able to do that.
<unk> is on GP.
Is that a lot of that inventory already sold in other words do you expect them to run that through your balance sheet.
And could you tell us where you built it is that across your portfolio.
Yeah. Thanks, Matt appreciate that.
We're actually pretty comfortable with the inventory build Matt.
You got to remember it doesn't all come in in the in this case are closing out the June quarter doesn't all come in in April or May right. So it comes in.
Throughout the quarter near the end of the quarter. So it doesn't all get out.
But now we're comfortable with because as we go to the inventory we actually reduced the.
Working capital days and inventory days right. So arguably would probably use a little bit more to continue to drive the top line right.
We're we're comfortable with where that is we.
Maybe one of the suppliers pretty much every day and got our supply chain folks involved you know on.
On a regular basis evaluating it and we're comfortable with the level of inventory in the age of the inventory and the quality.
Yeah.
Okay. Okay. Thank you for that and thank you for that then regarding youre going to grow.
That was up pretty significantly.
Question is is that a sustainable would you expect to remain at those levels and how much of that is benefiting from the favorable pricing in the short.
The component constraint environment.
Your mix versus anything youre doing differently, and whether that's sustainable or not.
Yes.
A little bit of both.
Matt So we definitely as we noted in the script, we will definitely seeing.
Price increases I'm sure there'll be more questions on that as we get through the call anywhere from 10% to 15% in some some higher than that.
That tends to drive.
The gross profit dollars more than the percent.
A little bit in the percent, okay, where we can pass that along and.
And we do we do try to pass that along and customers have been pretty pretty good in working with us on that.
Of course.
Some of it's also a mix just the mix of what we're shipping and <unk>.
By region or what the mix is also impacts to margin, but we're pleased we're pleased with the with the.
Acceleration is on the GP percent as Tom pointed out it was pretty much across the board, but again, it's a combination of things and going back on your inventory comment also just further clarify there theres a lot of stuff we didn't get in that we need okay. So there's still a lot of lead times and extended lead times and things along those lines at their method.
That we're still looking to to increase our position.
Okay, great. Thanks very much.
As CEO.
Thanks, Matt.
Thank you. Our next question will come from <unk> <unk> with Bank of America. Please proceed with your question.
Hi, Thanks for taking my questions.
Phil I wanted to ask you you said a target of getting to 250000 skus in farnell by the end of next fiscal year fiscal 'twenty two.
Looks like you've added about 87000 this year, so that means youre going to add almost double like almost 160000 skews next year, just wondering how that happens do you think.
How are you planning to add more suppliers or do you think you can get there by AD penetrating more into the line cards of existing suppliers and to do that you need to hire more assays and salespeople and how does that affect opex going forward.
Yes. Thanks.
Appreciate that.
We're always looking and online.
<unk> card, we're always looking for we call it gaps and overlaps and where do we have gaps in technology, where we need to add lines and where we have overlap we're comfortable with the position.
We have to cover what we called the board had the whole board of technology.
Farnell is pretty well set I mean, we've been we've been a blessed to be able to leverage the avnet core along with our Christmas Parnell team at Newark and home in 2014.
To help them get some lines in the last couple of years just to name a few you know some of our top brands like Xilinx for example, we now have.
Farnell. So you know we added Xilinx you added Skus Renaissance IDT.
Go on Micron that go on and on so that right. There you expand skus, but most of it is going to come from existing lines, but were just expanding our SKU count Okay. It's critical for for NPI new product introduction.
We remember rukwa, we've expanded our warehouse, although it's a little bit.
Late in coming totally online as we've shared in the past, that's allowing us to expand our SKU count.
Physical space.
Physician, so as far as.
So that's happening and we're on track. So we will you your numbers are right at home by the way you've been you've been adding them up as we've gone through the quarters. So we're comfortable with where we are in that SKU expansion and.
As far as adding cost to do that not really I mean, it's.
Leveraging the current infrastructure.
Wasn't really lead to new Fas Farnell doesn't really have a field application engineers to do some account managers they leverage that we leverage the combined avnet FAA team on the core side, so shouldnt be any real opex expansion there other than where it leads to new demand creation, which as you know on the core side anyway.
Got it and thanks for the details on that.
For my second question, if I can just ask on farnell margins. So you had.
About 230 basis point sequential margin improvement and Youre at eight 3%.
How much of that was mix versus pricing versus FX and volume because I think you mentioned on one of the slides that.
Half of the revenues, 50% of revenues came from E Commerce.
<unk> has higher margins. So do you think that is sustainable and given you are at eight 2% margins now I mean, your target was to get to 10% by the end of fiscal 'twenty. Two do you think that that kind of speeds up and we can get there faster than that.
Thanks.
You won't take that sure.
Hi, <unk>.
Yeah, We think first of all we can get to the 10% probably faster than we expected.
The eight three yes part of it is due to a favorable market as volume and pricing and the way. We look at it is if we didn't have a favorable market environment. It was more of a steady state.
Would be on our original a trajectory, which would have been about six 5% to 7% op margin for for now in this quarter.
That said, we are really happy with the performance of her now what they are doing with the volume with the ability to ship it with pricing.
Things are really hitting on all cylinders and for now.
Okay. Thanks for all the details congrats on the quarter.
Thank you <unk>.
Yeah.
Thank you. Our next question comes from Jim Suva with Citigroup. Please proceed with your question.
Thank you so much you.
You just completed a very good year of revenue growth any initial thoughts for fiscal 'twenty two outlook I know, it's early in a lot of changing things, but you came off of a very good year, where I think sales were up about 10, 11% and I think consensus is kind of modeling for 5% any thoughts around the outward.
A year.
<unk>.
So let me go let me go first Tom Thanks, Jim I appreciate that you are.
Exactly on the year on year of growth for Us The Avnet, Inc.
So good job there.
Just from a market environment of a targeted more details I mean, it's tough to look out I mean, you know that.
The backlog looks good the book to bills incoming theres still really positive and we track that very closely.
From the standpoint of the supply chain in particular upstream and downstream with our suppliers and customers, but right now as we look at it.
Through December looks looks pretty solid and into 2022, we don't like to give much.
I won't even call guidance much much beyond that because things can change pretty quickly, but it's pretty pervasive across the board from a technology standpoint, and from a vertical standpoint. So it's.
It feels very positive as.
As we get through this first quarter as well Tom you want to.
Jim I would just add I think when you look at consensus for fiscal year 'twenty. Two so we feel very good about it we think we will probably do better.
When you go further out yes, it depends on the economy.
We feel very confident.
Because of the changes we've made there or not.
Yes, what we're trying to be opened with Oslo.
Operating margins despite of the market with.
With the help of the market, even if we didn't have that we'd be posting improved margins.
We think longer term.
We're in a good path and that's why we gave the signal of the three to three 5% sustainable.
Margins because the changes are they are durable theres significant that have been made.
<unk>.
Yes, and then my follow up question Theres going to be a lot of scrutiny on your inventory build while book to Bill is solid and your major competitor said they are basically selling everything that comes in the door right away and they had a delivery that came the last day or two the quarter that they said they already sold so.
Is it you didn't have the right parts that everybody wanted or you had the chance to say you're already sold inventory, but you said you feel pretty comfortable in the inventory Bill I'm trying to.
Triangulator square the book to Bill the strength the shortages in your inventory build.
Yes.
Well first of all that that would be.
That's a lot of inventory to receive in the last few days and be able to get in your stock. So I'll leave that to the side, but.
We feel good with the inventory.
They come through in June it's.
We have good position with our suppliers chairman.
Our inventory days are really flattish right. So that we feel it is the appropriate level.
Inventory that came in.
We were not concerned about it if that's what you're getting at.
Thank you so much and congratulations for a great year and really turning off of profitability. Thank you.
Thanks, Jim.
Yeah.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
Okay.
Our next question comes from Joe Quattrochi with Wells Fargo. Please proceed with your question.
Yes, thanks for taking the question sorry, I just want it then that the inventory again I guess Im just I wanted to try to I guess understand the inventory build relative to maybe kind of a relatively flat sequential revenue guide I guess.
Understand that it's better than seasonal but you know can you help us understand I mean with demand being as strong as it is.
And building inventory is that the right level of inventory to kind of think as being a stable amount going forward.
So Joe we always looked at our working capital and recurring days working capital. If you go back last year, we consistently had $65.66 days.
Even with a $475 million. We added were at 60 days. So this is not an abnormal.
Buildup of inventory.
View it actually the opposite quite positive that we have it we can sell it and.
Inventory days are.
They are in line if not there's still tight inside our company, yes, I think there is.
Glad we can ask the questions on the inventory there is when the inventories of good quality, it's an asset okay and we measure our business is based on the return on working capital and we've seen continuous improvement there as well and we will continue to see improvement in return overall working capital. So when I look at it and I have the luxury of doing that by by business and by.
Region, you know you start we'll get a little bit on farnell little bit Americas, a little bit in Europe. So it's not like it all was in one SKU that came in in one region or business. It's really a 50 million are in 100 million, there and it's pretty well balanced frankly, when you look at it by region and by business unit.
Okay, and then just as a follow up on all of them clearly literally to bill well above guidance.
In terms of just thinking about the lead times for your customers that you're getting.
How do we think about that relative to the normal is it 20% higher 50% higher.
Just any color there would be helpful.
You mean lead times from our suppliers.
I'm, sorry, I'm talking like in terms of demand visibility that you're seeing getting from your customers.
Oh, yeah, yeah that well.
55% of our business or so is supply chain, Joe where were actually getting in EI feeds mrp's implant stores consignment programs quite a bit.
But one of our businesses forecast management, so we're getting to triangulate thousands of customers basically across the world.
And then upstream with our suppliers to make sure we're managing that closely so.
Again, right now as we see it to the earlier question the demand.
Very good inside.
And then only six months.
I'll say December quarter.
It looks very positive.
The adjustments on our backhaul RF shared this before the normal adjustments on our backlog, whether hard orders or supply chain forecast is somewhere 20% roughly 15 to 25, so we're constantly seeing that adjustment.
And it's not increasing at this point in time, so it's pretty stable now what we are seeing is.
Which is driving some of the book to Bill higher is with longer lead times, which why I asked that question from our suppliers.
Into the Mlps and you end up getting extended bookings as well right because it would cause people mentioned lead times out further.
The demand as we see it right now today it looks pretty good.
Got it that's helpful. Thank you.
Thank you.
Yeah.
Thank you. Our next question comes from William Stein with <unk> Securities. Please proceed with your question.
Great. Thanks for taking my question and congratulations on the very good results and outlook I'm going to ask a very similar question pardon me for beating this horse, but I'm trying to understand the changes in the balance between supply and demand that might have happened in the last quarter or so.
We see the inventory build relative to historical levels. It certainly not alarming.
It seems pretty likely youre getting the.
Somewhat shorter lead time stuff and maybe having a hard time with certain inventory. So you can't get full kits.
Why that's happening but.
I'm wondering about.
How the balance between supply and demand change during the quarter and so for that I Wonder if you might disclose the actual book to Bill.
Maybe the backlog dollars or the maybe the way I think about it is the average duration of the backlog today.
Hum.
Wondering whether lead times are still increasing or if they're moderating now thank you.
Well the book to Bill was across the board.
Are you just well in excess of one.
So so.
And that's it's been that way now for about three three quarters or so so.
What we do is we try to again triangulate that back to what supplier. The customers' typical demand has been so we've got all that information with <unk>.
Chip this quarter last year last quarter, what the bookings where the backlog was with their backlog is today and what the book to Bill is today on us so we.
We manage that really closely and once you have that information and that data is where it is.
Strength in our relationships continue you Gotta go to those customers to make sure Youre verifying the reality of the book to Bill reality of the backlog.
And they're really driving responsibility.
In the supply chain, which I've used that word out a bunch of times that we need to be responsible because we've seen these types of situations before this one's definitely been unprecedented given the COVID-19 situation as far as.
Lead times, so I'm looking at them all right now as we're sitting here.
No.
If there is any improvement it's modest right now and.
And so out of the same areas, we've talked about with the controllers.
Interface products, some analogs starting to see some some capacity to go out.
In programmable logic extended so it's really.
It is it's pretty broad okay at this point in time.
You're right, there's a lot of stuff that's readily available that we were making sure we've got the inventory on.
But thats, probably the best I can do on the call today will without without really drilling down.
I would go back.
At our Q4 revenue level, our guidance for Q1 revenue level.
The amount of inventory we have is fine.
It's appropriate.
We look at the inventory addition is a good thing and we don't we do have Sean <unk>.
All said.
Book to bills and.
<unk>.
<unk> is positive.
Not concerned not no well let.
We're just building that I mentioned in the script that you know what's happening is unfortunate with the pandemic, which we're obviously all still dealing with right now right again Unfortunately.
It's just been a little unprecedented I think what it's done.
I know is it's put more value in supply chain services right and when you say, we're admitting that mobile technology supply chain. So we're actually seeing more opportunities today from let's say, maybe customers, we weren't seeing before or increased opportunities inside of existing customers and suppliers coming to us, saying, hey, we need to somehow.
Supply chain services. So like all of that is a combination of a positive if you will for <unk>.
On the supply chain and what we do there in addition to demand creation. So again Theres no no concern on our end at this point.
Yeah.
Great. Thank you.
Thanks, Paul.
Hello.
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Thank you. Our next question comes from Toshi Hari with Goldman Sachs. Please proceed with your question.
Hi, guys. Thank you so much for taking the question and congratulations on the strong results I had a similar question as well.
Phil can you describe the gap that exists today between supply and demand how big that is.
Today relative to three months ago, six months ago, and I guess going forward based on indications.
Indications from from your suppliers and demand signals from your customers at what point would you expect or do you expect supply to catch up to demand and then I've got a quick follow up.
Normally I have all that detail in front of me to share so I apologize for that but right now again based on what I shared on how we track bookings are.
Our billings the book to Bill, our cancellation rates and adjustments to backlog.
Right now were.
We're feeling again pretty.
Good through the December quarter, which is dominant.
Things are not all going to free up here in the next 30.60 90 days so.
At a high confidence level at this point and then.
When you look outside 90 days 180 days in our backlog it really it really swings quite a bit at that point, right, which is which is again very normal.
What we do.
Again, it's an asset and the value we bring to the market.
Okay. So would it be fair to say that for the balance of the calendar year.
Do you expect to be supply constrained and then beyond that 2022 is kind of TBD is that a fair statement.
Yeah, I think that's I think that's a pretty fair statement, Okay and again, there's a lot of information out there from one of our suppliers.
Or corroborate some of them are more.
He can give you more guidance out there from the standpoint of what they're seeing but that's as far as.
I'd like to go.
Okay, and then as a quick follow up just wanted to ask about your margins in both electronic components and farnell.
Obviously, youre doing a great job in improving.
Operating margins I think pre pandemic farnell margins were as high as 12 ish percent I think on the EC side you were in the mid fours. So curious is there a path kind of back to 12% for farnell and four 5% for you see or is that a is that a bit of a stretch in your view. Thank you.
Clearly a path for both.
And our game plan to hear is that we put out three to three and a half which assumes for now I guess the 10 is EC continues in the low threes and <unk>.
Once we get.
Solidly to those levels.
We will update you on the next steps.
Thanks, Tom.
You bet.
Thank you there are no further questions at this time I would now turn it back to Phil Gallagher for any closing comments.
Thank you very much and let me just.
Thank you everyone for attending today's earnings call really appreciate it hope everyone stays healthy and safe and look forward to speaking you.
Again in October for our fiscal 2022 first quarter earnings results enjoy the rest of the summer take care.
Ladies and gentlemen. This concludes today's conference you may disconnect. Your lines at this time and thank you for your participation.
Hum.
Okay.
[music].
Yeah.
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