Q1 2022 Avnet Inc Earnings Call
Please stand by our presentation will now begin welcomed to the Avnet first quarter fiscal year 2022 earnings call.
I'd now like to turn the floor over to Joe Burke, Vice President of Treasury and Investor Relations for Avnet.
Thank you operator earlier this afternoon Avnet released financial results for the first fiscal quarter of 2022. 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 website.
Lastly, some of the information contained in the news release and on this conference call contain forward looking statements that involve risks uncertainties and assumptions that are difficult to predict such.
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 having its 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.
<unk> 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. Thanks.
Joe and thank you everyone for joining our first quarter fiscal year 2022 earnings conference call.
As we shared last quarter, despite supply disruptions and ongoing pandemic restrictions in certain regions. We have continued to execute well in a strong market environment and progress on our margin expansion efforts by accelerating the growth of our high margin for <unk> business. While also supporting the growth of our core distribution business through investments to improve efficiencies and strengthening Chris.
Partner relationships.
Our focus on execution and the durable changes we've made to position avnet as a stronger business are reflected in this quarter's results for both electronic components and Cornell businesses.
This momentum brings us much closer to achieving our goal of delivering sustainable operating margins of at least three to three 5% for total avnet and any kind of market.
Of course, this momentum is largely due to the dedication of our employees.
Cannot emphasize enough how truly lucky I am to lead a company with such hardworking and talented individuals across the globe.
Our team has endured the challenges of a complex market, but I truly believe it is resulting in a stronger more resilient organization that is poised for long term success.
Even as we've continued to navigate a difficult operating environment. Our priority has remained investing in our people our relationships and digital enhancements that make our business more effective and efficient.
These investments have been critical to our success to date and I'm confident they will continue to yield strong returns.
Now with that let me turn to the highlights of the first quarter on slide five.
In the quarter, we achieved sales of $5 $6 billion up seven 6% sequentially and 17, 5% year over year in constant currency.
Excluding <unk> sales and the extra week in the prior year sales grew 32, 9% year over year in constant currency.
Record sales for electronic components and for for now supported by improved operating efficiencies, allowing us to deliver operating margins that reached our short term targets of 3% and 10% respectively. We.
We were pleased to achieve these targets sooner than originally forecast and given the current market environment and the improvements we've made to our business. We expect to sustain these margins in the coming quarters.
Our strong results are partially driven by continued market strength overall demand was robust across vertical segments with the industrial automotive and communications segments, serving as significant drivers.
Looking at electronic components segment on slide six revenues for the business were up both sequentially and year over year in the quarter to $5 $1 billion.
With sequential growth across all three geographic regions.
Growth, primarily came from our largest region Asia <unk>.
Which again had record quarterly sales.
<unk> performance in EMEA and continued improvement in the Americas also contributed to better than expected results in the quarter.
Our investments in digital and design tools and field application engineers continues to pay off as we had another strong quarter of design and engineering activity across all regions.
Strong levels of design registrations and design wins in prior quarters have resulted in record sales and design win revenue and gross profits for the first quarter leases.
These design wins and registration is continue to be a key organic growth driver for avnet benefiting our operating margins, while also driving new business for our supplier partners.
As mentioned last quarter, our supply chain services capabilities also continue to be of great value to new and existing customers as they navigate the increasingly complex supply chains we.
We are excited to continue to build out this capability and demonstrate avnet vital role at the center of the global technology supply chain.
We exited this quarter with a positive book to Bill and all regions well above parity.
Now before I move on to for now I would like to briefly address the analog devices Maxim decision.
As we shared a few weeks ago.
Maximum intends to discontinue its distribution relationship with our electronic components business.
<unk> products only accounted for about 3% of the company's sales during fiscal year 2021, and the financial impact on our business won't be immediate gear.
Given current market dynamics, the strength of our existing line card and supplier partners and our track record of managing through the impact of industry consolidation. We believe we can replace the margin dollars. We're proud of the strong supplier partnerships, we have today and look forward to expanding these relationships.
To meet the specific analog needs and the broader technology needs of our customers.
Yeah.
Now turning to for now on slide seven.
Our strategic investments in Skus and E Commerce continue to benefit performance. It for now as we achieved record revenues of $455 million and operating margins of 10, 9% in the quarter.
Our investments in farnell continue to deliver meaningful returns in the quarter for those digital capabilities yielded notable performance with 53% of revenues and 69% of total transactions attributed to E Commerce sales we.
We have seen positive results from the <unk> platform over the last 18 months as the team has embraced digital transformation and we're really excited by the potential for even greater success as we move all avnet businesses to the platform over the coming quarters.
We also continued to invest in inventory this past quarter, adding 18800 skus.
This reflects continued progress on our plan to add an additional 250000 skus through the fiscal year 2022.
Our inventory investments that for now have been critical to our success. This quarter, 15% of Cornell sales were derived from new Skus added over the last two years.
We look forward to delivering continued returns on these investments as they have enabled us to grow and strengthen our overall offering for a broad base of engineering customers and suppliers around the globe.
With that I'll turn it over to Tom to dive a bit deeper into our first quarter results.
Thank you Phil Good afternoon, everyone and thank you for attending today's call is.
As Phil stated we were very pleased with our results this past quarter.
While theres still work ahead I am encouraged by our strong start to the fiscal year and excited to share some highlights from the quarter.
Turning to slide nine.
Our revenues of $5 6 billion and adjusted EPS of $1 22, both exceeded guidance.
Consistent with our objective of growing higher margin businesses are for Enel revenues grew 33, 5% year over year, although electronic components grew 17, 1%.
We delivered our second consecutive quarter of record sales in both our electronic components and for now segments. We reached our short term operating margin objectives, achieving three 2% for electronic components and 10, 9% for for now.
Our operating expenses remain well managed declining 12 million sequentially in a quarter in which our revenues grew.
And we continue to manage our working capital with net working capital days decreasing to 69 days compared to 79 days a year ago.
All of these contributed to a return on invested capital of 11% in the quarter.
As demonstrated on slide 11.
This was our fifth consecutive quarter of operating margin expansion.
It was also our fifth consecutive quarter of reducing our operating expense as a percentage of gross profit dollars.
Our goal is to deliver sustainable operating margins.
Three to three 5% for total avnet.
Moving to the first quarter income statement on slide 12.
Margin of 11, 8% was down slightly from 12, 3% last quarter, primarily due to regional mix.
The September quarter is seasonally slower for EMEA, while Asia remains strong.
Compared to the prior year quarter gross margin improved by 88 basis points all of our businesses improved gross margin year over year.
Adjusted operating expenses of $481 million were down $12 million or two 5% sequentially.
On the nonoperating front interest expense decreased slightly to $22 8 million from the prior quarter.
We recorded foreign currency transaction losses of $5 1 million.
Which represent the impact of FX fluctuations throughout the quarter.
Primarily between the U S dollar and the euro and British pound as well as the costs associated with hedging our foreign currency risk.
We booked a 21% adjusted tax rate in the first quarter, which is also our estimated rate for total fiscal year 2022.
On slide 13, we highlight results for Crossrail electronic components segment and farnell.
Looking first at electronic components, we achieved revenues of $5 1 billion with every region growing sales and a strong market.
Operating margins were three 2% ASP.
Slight improvement from last quarter as the team continues to manage operating expenses, while growing revenues driven by improved efficiencies across the business.
<unk> achieved a record sales quarter with revenues totaling $455 million.
The <unk> segment had an operating margin of 10, 9% in the quarter.
While favorable pricing contributed approximately 200 basis points of the 10, 9% for now team has made notable improvements in their business.
Primarily driven by investments made over the last two years.
As Phil noted these initiatives include our efforts to expand Skus and for <unk> inventory.
And enhanced new product introductions.
As well as make investments in systems and E Commerce, all of which have been major contributors to strong and sustainable operating margins.
Overall, we are extremely pleased with for now we continue to believe that for now is a critical component of our long term margin expansion effort.
Turning to cash liquidity and the balance sheet on slide 14.
Inventory remained relatively flat sequentially and.
And as a distributor we are pleased that we are able to maintain these levels in a tight market.
While working capital dollars were up we were still able to improve our working capital days to 69.
Our liquidity position remains strong.
We ended the quarter with cash and equivalents of $299 million.
And one 5 billion of available lines of credit.
We remain comfortable with our debt position or.
Our gross debt leverage was 2.1 and net debt leverage was one seven.
Our net book value per share increased to $41 compared to 38 in the year ago period.
On slide 15, I would like to reiterate our capital allocation priorities.
You should expect a balanced approach to our capital allocation with.
With approximately half coming to reinvestment in our business and have to shareholder returns.
Reinvestments will primarily be capital expenditures for distribution centers and business systems for continued efficiency improvement as well as expansion.
A portion will be dedicated to M&A.
To grow our higher value add businesses, such as for Enel <unk> and embedded systems.
For shareholder returns.
<unk> desire for steady and reliable returns and we have responded by focusing on delivering our steadily increasing dividend, we increased our dividend by nine 1% in the quarter on top of a four 8% increase in the June quarter.
As a shareholder you should expect an increasing dividend through the cycle.
We also re initiated our share repurchase program toward the end of the quarter.
And we expect to continue our repurchase activity going forward as an integral part of our capital allocation plan.
Let me wrap up on slide 16 with guidance are.
Our second quarter guidance today assumes ongoing strong demand.
Continuing supply constraints and associated electronic components price inflation.
The impact of COVID-19 across the globe remains uncertain as it relates to potential shutdowns and constraints and todays guidance assumes conditions remain about where they are today.
For our fiscal Q2, we are guiding revenue in the range of $5 three to $5 7 billion and adjusted EPS in the range of $1 20 to $1 30.
Turning to slide 17.
In summary, we remain committed to building a better business supported by excellent execution in our core distribution and growing our higher value add businesses such as for now.
Through the cycle, our objective of sustainable operating margins of at least three to three 5%.
Focus on growing higher value add businesses.
A reliable and increasing dividend.
Opportunistic buybacks and investments in both organic and inorganic growth.
We remain committed to this roadmap for increasing shareholder value.
With that I'll turn it over to the operator for questions and answers.
Yeah.
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 that 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 questions.
Yeah.
Yeah.
Yeah.
Thank you. Our first question is from Nick Todorov with.
Our research. Please proceed with your question.
Yes, thanks, and good afternoon, and congrats on achieving the margin goes ahead of a timeline.
So question on that are.
Given that you reached that milestone now and it seems like you are seeing the benefits of the current environment and backdrop into the whole environment, how should investors think about the next near term.
Our goal for the margin. So I think you'd mentioned that you would anticipate that youre going to sustain those but what are the levers that you can call. So you can continue to see improvement in those margins.
Sure Nick.
Yes, we are.
Cheat them early.
We expect to be able to do that for the next several quarters and beyond the levers are really what we've always talked about for now.
Got to 10, they've got to 10%.
We think they can do more.
Our investments in the Skus and inventory are paying off you see that in the revenue investments in the e-commerce is paying off.
You see that in the e-commerce revenue as a percentage of total and then over on the cores as what we've talked about with Americas Americas. You know that team has done a stellar job of getting the growth and margins are over halfway of where we want them to be but what you should all know there's still more to come those are.
And continuing on demand creation, but those are the main levers.
You called out with for now yes. They are benefiting from pricing. So we wanted to be sustainable regardless of that pricing benefit I think the other thing you should know, though there were some there are some headwinds in all of our businesses like fuel costs to expedite and cost. So we expect those to subside over time, it's hard to hard to say when but.
Our team did a good job I'm op margins and more to come.
Okay, Great and a question on capital return on capital.
You, obviously raised the dividend again.
How should investors think about the balance of increasing the dividend throughout the cycle and and and returns through through buybacks, given just where the stock is that I think it's fairly obvious that the you know it's pretty attractive to buy back the stock here, but how do you balance that with the dividend increases that you're planning to do it.
Through the cycle.
Yes, we spent a lot of time internally as most companies do modeling our cash flows through different different cycles. Many sessions with our finance committee and what our message is that.
We believe that we're at a point, where we can deliver and increasing dividend through the cycle every year.
Going forward, that's why is that different from the past, we're starting with a much lower debt position right. So we're just in a better position.
Position from the balance sheet.
You may see more on the dividend.
Trying to do is get it to the level and we look at it as a percent of net income not going to go into the specifics, but we're trying to get it to the level that we think is appropriate and from there. We will continue to increase it on an annual basis by Baxter opportunistic so.
This took a lot of time, our capital allocation plan, but we're really happy where it landed and you should expect that it will vary based on share price and we're in the market back in the game on buybacks.
Okay. Thanks, and last one for me. So just on Maxim can you dive a little bit on the strategy to replace the gross growth dollars from that then can you give us some timeline I'm guessing you're sold out on Max and for the next few quarters help us understand the timing of transition and the commitment there.
Yeah sure. Thanks.
So on the action, we are putting the scripted.
3% of our total revenues, we 8-K did a few weeks ago.
Internally just you know we're not doing any re budgeting, we don't see it.
Just paid it affecting our earnings.
Over the next as a feeder.
Balance of the fiscal year.
And frankly beyond we have plans in place we've got great supplier partners that have parts of that technology, and we're mapping it over and that's going to be the goal for the team. So this one is.
Again relatively small we see it as a.
Hum.
An opportunity for us to go replace it but it won't be not an issue of nickel.
We've got a great wildcard, we got great technologies to fill the gaps.
Got it thanks good luck.
Thanks, Dan.
Thank you. Our next question comes from Matt Sheerin with Stifel. Please proceed with your question.
Oh, yes, thanks, Todd and good afternoon.
Phil I just wanted to ask about the the supply.
Environment everyone's been talking about supply.
Supply constraints a lot of your big.
EMS customers are all missing guidance, because they can't get a part you're talking about <unk> from from semi suppliers could you give us some color on what youre seeing in and I noticed your inventory was up slightly but I imagine you would probably want to have more if you could get it so or are you having issues getting parts is.
Well could you just give us color there.
Yes.
Yeah.
Matt, it's such a broad spectrum of commodities.
Particularly know.
Some parts are more readily available than others as a standard lead times I'm looking at now across the commodities have not they're not really expanded out a whole lot since the last quarter, but there is still pretty far out there pretty much.
Pretty much across the board.
We're expediting every day different commodities.
The $50 million roughly as you pointed out our inventory being up is like really fine with that and our days of inventory as well.
Like to have more alright, no question about it but were as we were last quarter. We were fine with your inventory going up and of course, you saw that play out in Asia numbers, where they they really blow out the number.
Yes.
It's a tough call backs.
It's customer by customer.
But overall, we saw good growth. We're pleased with that can always do more if we got more inventory for sure tough to say exactly how much but theres still a lot of pain in the supply chain, there's no doubt about it.
Okay. Thank you.
And on the gross margin, which was down sequentially I imagine that was mostly on mix, but I also think that youre benefiting in addition to premier farnell, but your core business.
On the pricing side in terms of margin.
What would should we expect for December it looks like backing into the number it looks like that it should be up sequentially. The gross margin.
Yes, Matt.
And in the current quarter the gross margin.
Was mix right. This is Europe is generally slower, but they did a great job. This time, they were not sure but Asia really.
This is a big quarter for building electronic components.
The good news is if you look at every one of our businesses year over year gross margin is up right.
Right.
Okay.
Okay, alright, thanks very much.
Thanks, Matt.
Thank you. Our next question is from <unk> bought it Korea with Bank of America. Please proceed with your question.
Hi, Thank you for taking my questions congrats on the quarter and on the strong guide.
My first question has to do with.
Our narrow margins.
Thank Tom you said on the on the prepared remarks that all of that.
260 basis points sequential improvement 200 of those of those basis points was from pricing.
I also see that you had a good e-commerce transaction quarter at 69% of transactions where ecommerce.
The question I have is do you think this is sustainable given it's a demand constrained environment and so pricing is strong do you think theres room to increase further pricing.
On the Farnell side, and and then just going forward I mean, when should we be thinking about 15% is the next target is that something you can achieve in fiscal 2002, So just puts and takes on.
The things that really strong this quarter and if that can sustain going forward.
Yes group with thank you for the question so.
Right now they had a stellar growth operating margin and gross margin.
Quarter, and the 200 basis points. So in other words, if you take a pricing benefit they would have been at eight 9%, which is still a strong quarter and.
Keep in mind, there is a pricing benefit the quarter before and the quarter before that so this isn't anything new.
So to us they are performing very well, we think without the pricing.
Will they can get to 10% or higher we're not going to give targets.
There appears operate at much higher levels, but the puts and take our number one continue to invest in skus that is bringing new people to the website and you're seeing that in revenue.
To continue with our investment in systems and E Commerce.
In E Com, our web order is cheaper to process and is generally less price sensitive. So were very happy on that I did mention too I think it was with Nick they have some headwinds with as every business does with fuel and freight costs.
We think over time those will so since subsidence and it helps them even more so.
Just really good things happening with Cornell.
Thanks for that Tom I appreciate the details.
And then I wanted to ask you about.
Opex you've done a good job controlling expenses can you give us an update on your restructuring effort and is there any more opportunity to have more operation operational efficiencies take more cost out how should we think about SG&A going forward.
Yeah.
We're really focused on and we've got everybody in the company focus on really there are operating expense as a percentage of gross profit dollars and the reason for that in a growing market, yes, we're going to need more cost.
Afraid out for logistics for sales commissions. So the good news is that was one of the slides opex as a percent of gross profit dollars come down for five quarters in a row set the low 70%, 72% I think it was we'd like to get that into the the high to mid sixties, we think that's very doable.
Are there specific things that we can we continue to work on to reduce costs. Yes. There are certain things for outsourcing, but those are those more has reinvestments.
[noise] dollars available for Reinvestments in the business and to deal with it is inflationary.
Economy ruble EMEA. This is Phil let me just jumping up with Tom there's there's either a hard black and white cause energy efficiencies right and when we talk a lot about the digital side of the equation and even you just brought it up for now close to 70% of their transactions over 50% of their dollars being generated online.
<unk> taken out over to the core as well right. So not just in e-commerce, but digital automation about customer self serve tech.
Technical support online too as an adjunct to our <unk> community. So a lot of it is those are areas, where we can get efficiencies so as we grow.
Can automate a lot more of that.
Okay. Thanks, Thanks for that and then if I can just wondering.
Phil.
Can you just remind us of the Ti revenue that you were trying to make up where does that stand how much more do you need to make up.
Based on your target and then with the Maxim is there I mean do you have a similar target of how many.
How long it can take for you to make up that revenue.
Yes.
The Ti we're kind of it's kind of in the rearview mirror at this point in time.
Most regions have recovered most if not all of it never got to help with the market there for sure but if you look at Asia. For example, we had a record quarter in Asia without Texas.
Parts of our divisions in Europe had record quarters, all time record quarters without those.
Those guys. So we're kind of moving on and off of that as far as Maxim. We don't again, we as I said, it's not going to have any effect. We don't believe in the next several quarters to our earnings and as we plan for fiscal 'twenty three and we just the net number that we plan for an and.
Baked into the budget so.
No re budgeting on this end for Maxim.
Okay. Thank you for all the details congrats again you got it.
Sure.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Formation, Tony will vacate that Youre line is in the question queue.
Our next question comes from Jim Suva with Citigroup. Please proceed with your question.
Thank you very much and I have two questions. You can ask him any order you want and then I'll I'll be finished and get off to Mike, but the question is as you know there has been over the past handful of years fill a handful of share shifts.
Relationships.
And with that you know are there any more and works other than Maxim or do you think we're going to come to an end here or what the semiconductor still doing more and more integration do you think that we could enter some more share shifts because it seems like you know.
That's my one question. The second question is everybody asks are you over earning on components given the shortages and maybe if you can just answer that elephant in the room question and why or why not thank you.
Yes, Jim.
Let me I'll take the first one.
Or are you really going to share some supplier consolidation right and with supplier consolidation.
Put them right out there sometimes you win some sometimes you lose and sometimes they're neutral right.
But it's not new I've been around for four decades.
When I started at general electric and Intercell Fairchild of National where the top line's Motorola and they're all gone right Diamond acquired emerged.
This most recent one decision went the other way, but if you look at the.
Cypress acquired <unk>, we got that Microchip acquired Microsemi brought that back Renaissance inquired IDT in dialogue and then that's in the other in house. So they kind of go back and forth our jobs to adjust to that we can't predict all we can do is go drive and execute to the value proposition, we are bringing to the marketplace from design.
Through supply chain being centered technology so.
Again tough to predict frankly, we don't sit in the boardroom, but we feel if we execute well we'll be on the on the winning side for as many as we possibly can so again don't know no Jim.
Got it continue there's no question, there's going to be something else happening out there.
<unk> been around 100 years, you've just got to adapt and move on and that's what we're doing with this one it's the mindset is on offense no issue.
On the earnings on the over earnings I'm, assuming you're talking about.
Tom can jump in and I know you jumped off to Mike.
ASP.
Soon as what Youre, bringing up yeah exactly.
Yes, the ASP.
Okay. Good you're still there so I hope I answered your first question.
<unk>.
We're looking at that because some of them.
Of course, some of that lift is from ASP inflation right I mean, as we get cost increases from our suppliers, which by the way over 50, plus suppliers and there's been multiple iterations of price increases. So you can imagine the effort on the part of our teams, which we're really proud of and we work to pass those on to the customers as quickly as we can every supplier handle that a little.
A bit different but you need to keep in mind, it's not on a 100% of our portfolio right. It's on April 30, or 40% or whatever that number might be exactly and then the balance of it is prices are flat and others are still competitiveness in the marketplace.
3% to 5% might be something in that range and we're looking at that by SKU by the way.
Year on year quarter on quarter trying to nail that down how much is inflationary.
Asps versus not but it's not as it's not as much as you would think.
Go ahead Jim.
That's how we're saying three to three 5% operating margins on a sustainable basis.
Phil said in the core.
Little benefit, but you are passing on and not really <unk>.
<unk> that much from the from the price increase for now.
We are right I can it's 200 basis points.
Do have headwinds with afraid out, but again that thus far we're just trying to be transparent three to three 5% on a sustainable basis, we realized that there are some benefits here too.
The pricing I was trying to say near term.
Hard to say right everybody's got a different opinion on that.
But that three to three 5%.
Sustainable basis.
Yeah.
Hey, Jim much for the details and clarifications, it's greatly appreciated thank you.
Thanks, Jim.
Thanks, Jim.
Thank you. Our next question is from Melissa Fairbanks with Raymond James. Please proceed with your question.
Hi, guys. Thanks for taking my question I just had a quick question on the capital allocation slide.
A couple of things that we noticed this is the first time in a while.
It's been a while since you've done M&A and now that's one of the things that you highlighted as one of your priorities for capital allocation what are potential targets that youre looking at I know you mentioned benefiting for now and accretive to margins is this a shift in the strategy as it related to growing.
The business or is this just kind of business as usual.
And then as a follow up to that you know with the sharing that's Jeremy excuse me share buyback reintroduce.
Do you have a target for optimal capital structure like with the leverage.
Normalized Ken.
Capital returns if any any kind of color that you can provide there. Thanks.
Sure. Thanks, Melissa welcome to tab and I would be glad to have you on the call.
<unk> <unk>.
Capital allocation.
Slight refinement, maybe we've said smaller strategic.
Yes, the refinement more geared to growing our higher value add businesses. So that's why we mentioned for now.
As already mentioned <unk>, which is passive since you connect which has a slightly higher margin and we added and I think we've talked too much about embedded systems, but these are chips board software things that we do that we think that can benefit and it's gone to that term make avnet, a better company by bringing out a few yes, we have TARP.
Internally, we're not going to share them, but yes, we do.
On the capital structure.
We look at our leverage has maury.
The mid twos is desirable depending on where you are in the cycle. It could be three it could be below two but our target through the cycle is is more of a mid two times gross leverage and that's important because net leverage is less.
So to answer your question.
Yeah.
It sure does thanks very much.
Thanks Melissa.
Thank you. Our next question is from Joe Quattrochi with Wells Fargo. Please proceed with your question.
Yeah. Thanks for taking the question queue.
Curious on the farnell pricing benefit of the 200 basis points, you talked about what was that last quarter.
And then also is there a goal in terms of just target of E Commerce.
Percent of sales for that business over time.
Yes.
I think last quarter, we said it was about 150 basis points.
So this is not new job.
I recall it was in that range. So it's a continued benefit going into this quarter.
We haven't publicized our goal for the web orders only to say that yes. They are more efficient to handle they're typically better pricing and then there's room for <unk> to grow yes, Chuck yeah, absolutely on the ecommerce side, we're really really pleased and we broke over 50% in revenue and closer to get to 70% of that.
Transactions that really lifts a load off the team so.
And exactly when published but it's obviously to continue to increase that and what's helping with that obviously is our increased SKU count right. So we committed to put over 200, plus thousand new skus in and the more we do that that's going to drive the automation of E Commerce, which we've got many initiatives behind the scenes ago.
If you will with the.
Low touch high service model and then.
Port some of that over to the core business as well I'll take the best of what Fornell does went out leveraged across the enterprise, which we're beginning to do as well.
Thanks, that's helpful. And then just as a follow up I was wondering if you could maybe talk about the demand that you're seeing for your supply chain services given all the disruptions that we're seeing out there.
That is relatively sticky in higher margins.
Yes, I'll take downloads supply chain services are certainly picking up.
I'd like to say people don't worry about supply chain until they can't get what they need so we're getting calls from many tier ones and many of our suppliers for assistance.
We're actually increasing our supply chain architecture, because or the.
The near capacity, Dave Paulson and team with velocity. So yeah. They are more sticky for sure where we're seeing some unique opportunities as well, which is which is exciting.
The margin did a lot of those are it depends on the margin Joe we model those when returns so they don't have it.
Typically have a higher turns model.
There might be a little different but the returns are well above the corporate goals net net RWC over 20%, 25%. So.
It's good business, but to your point is very sticky typically their global okay, which is great.
But we've had we've had quite a few calls.
Yes.
Thank you. Thank you.
Yeah.
Thank you. Our next question is from our next Todorov with Longbow Research. Please proceed with your question.
Yeah, just just one follow up do you guys see a change in the volume or breadth of expedite requests by customers. There were some suppliers have talked about it so and if you do why do you think is driving that.
Yeah.
Next is this the same earnings call you jump back in again.
Yeah.
Oh yeah.
Yes.
I would say this past quarter was it was it was interesting as any as far as Expedites go so theyre not declining.
By any stretch I am involved in quite a few myself people haven't talked to a many many years frankly and audit tier ones columnist Nick So I think it's just a sign back to Matt's question, what products are tighter than others or what's causing the issues. At this time. It's just so broad again Fox are fine and available, but certainly in the controller space.
Certain analog certain discrete certain power.
Sensors are just really really tight.
So, it's causing us some disruption that was asked earlier on the call.
But I think it's going to get a little tighter.
Here short term.
Got it and last question just on the Asia very strong performance in the quarter. What are you seeing in terms of order trends. There are some people are seeing a softening or a moderation call Ed.
Quickly coming out of China, what do you see from your perspective in Asia, particularly in China and do you see any you hear about any impact from the power shortages there too. Thanks.
Yeah.
Question, Yes, we've had an amazing number of quarters in Asia Pac and it's really across the Asia. So it's not just China or greater China, which is which is really really good news because it's more diversified if you will from a from a revenue stream.
The moderation fraud right word I mean, yes. So the book to bills are still positive on pretty much record billing numbers. So.
A moderation is probably not necessarily a bad thing no cases of startup, maybe normalizing and moderation right term.
But.
Again, we'll see how this quarter or this quarter go then you get into next year.
Any media was effectively cancelled it won't be this year. So there's a lot more variables.
Map in here over the next 345 months in Asia, Pac, but still overall, particularly strong with.
With our team there.
Got it thanks.
Thank you there are no further questions at this time I'd like to turn the call back over to Phil Gallagher for any closing comments.
Great. Thank you very much I want to thank everybody for attending today's earnings call. Appreciate all the questions.
It's pretty incredible that this year will be wrapping up our 100 year anniversary celebration.
A century in business is pretty outstanding accomplishment that not many companies achieve.
My time here I've, certainly seen our company adapt persevere evolve I'm excited for what's to come in the future in the next 100 years.
As we said as we look ahead to next quarter, we expect the current operating environment to persist our priority remains.
Staying close to all of our customers and supplier partners and continue to demonstrate that adding this role at the center of the global technology supply chain is more vital than ever we've made significant durable changes over the past year that positions us to capture growth continuing to invest in our business and sustain at least three to three 5% operating.
For total Avnet.
And any type of market in turn driving our ability to deliver steadily increasing shareholder returns.
We believe our results are past year reflect the impact of these changes and we will continue to execute and capitalize on the current market to capture additional upside opportunities.
With that I hope, everyone stays healthy and safe and look forward to speaking to you again in January for our fiscal year 2022 second quarter earnings results have a great day. Thanks.
Ladies and gentlemen, this does conclude today's conference you may disconnect. Your lines at this time. Thank you for your participation have a wonderful evening.
Okay.
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Okay.