Q2 2022 Avnet Inc Earnings Call
[music].
Thank you operator earlier this afternoon Avnet released financial results for the second quarter of fiscal year 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 <unk> website.
Lastly, some of the information contained in the news release and on this conference call contain forward looking statements and involve risks uncertainties and assumptions that are difficult to predict.
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 that in 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 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 us for our second quarter fiscal year 2022 earnings Conference call I Hope your 2022 is off to a great start.
Many of you are aware our priorities since I took the helm has been to make durable changes to our business that will yield more consistent results drive sustainable growth and position us to capture share across regions and segments.
I'm pleased to say our team's focus on execution has yielded strong competitive gains and financial performance, which is again evident in our second quarter results.
In the quarter revenues were $5 9 billion.
Both sequentially and year over year, and our adjusted diluted earnings per share was $1.51.
Our adjusted operating income increased 21% from the prior quarter and our adjusted operating margin also increased sequentially to three 7%.
We are competing favorably across the board, but we're particularly pleased to see further evidence that Parnell is a needle mover for total avnet.
Looking at our core electronic components business on slide five.
Revenues were up both sequentially and year over year in the quarter and we posted sequential growth across all three geographic regions.
And Asia delivered solid results, while we saw a nice rebound in our Americas region, which was up double digits year over year.
We were pleased with the America's team's ability to maintain expense levels, while capturing significant business opportunities from new customers and expanded scope of work from existing customers and that would be critical to continued success in the region.
We're especially excited about the prospects for the region is 23 year company veteran Dana Bad one takes the reins as the new president of the Americas in her prior positions at Avnet. Dana has served in sales management supplier management and customer technical support and most recently as their strategy leader, whereas you played an integral role.
Turning to find growth opportunities to enhance the overall business portfolio.
We are confident she will leverage her breath of knowledge regarding the Americas team to capture market share as well as new and expanded business opportunities with existing customers in the future.
Our book to Bill ratios that you ended the quarter remained strong.
Lead times remain extended with certain products like microprocessors Microcontrollers and power continued to have extended lead times.
We experienced continued strong demand in key verticals, such as automotive industrial defense Communications and health care pretty much across the board.
We continue to tightly manage our backlog and we're satisfied with our inventory levels, which increase later in the quarter, primarily to support past dues and firm orders. It should be noted that investment is usually made in the December quarter to support the traditionally strong start to the calendar year in the western regions.
Further our continued investments in digital and design tools and field application engineers are paying off as demonstrated by another strong quarter of design and engineering activity across all regions.
Strong levels of design registrations and wins in prior quarters.
And in record demand creation sales and gross profit in the current quarter.
Turning to farnell on slide six.
Sales were up 35, 3% year over year to $441 million with notable performance from Farnell was Americas business we.
We continue to execute on our commitment to our Parnell segment.
We added over 22000, skus in the quarter, which gets us to about 55% of the way toward our plans to add up to 250000 skus through the fiscal year 2022.
Supplementing our inventory investments, we will continue to enhance and invest in them Cornell's e-commerce capabilities.
In the second quarter 54, 5% of total sales and 71, 5% of total transactions were placed through <unk> E Commerce platform.
With additional critical updates to the platform and sustained investment in improving the user experience. We expect we'll continue to see increased traffic and new customer acquisitions in the quarters to come.
In summary, we're pleased with our performance in calendar year 2021 .
That the business is well positioned to weather macro challenges and continue to capture exciting new opportunities heading into 2022.
Our incredible employees have demonstrated their strength and commitment to the business and our customers over the last year and I am confident in our team's ability to achieve even greater success in the quarters to come.
With that let me turn the call over to Tom to report on the financials for the quarter Tom.
Thank you Phil good afternoon, everyone and thank you for attending today's call.
Phil stated we are pleased with our results this quarter.
I am encouraged by our momentum as we head into the second half of fiscal year 2022.
And I'm excited to share some highlights from the second quarter.
Turning to slide eight our revenues of $5 9 billion and adjusted EPS of $1 51, both exceeded guidance.
Consistent with our objective of growing higher margin businesses are for Enel revenues grew 35, 3% year over year, while electronic components grew 24, 9%.
Our gross margin improved to 12, 2%.
While our adjusted operating expenses continue to decline both as a percent of sales and as a percent of gross profit dollars.
Our adjusted earnings per share of $1 51 is a company record and provided a return on invested capital of 12, 5%.
Narrowing in on our two operating segments year over year prenatal revenues grew 35, 3% to $441 million.
Tektronix components grew 24, 9% to $5 4 billion.
We continue driving operating margin growth posting an operating margin of three 5% for electronic components and 13, 7% personnel solid execution in our core business and continued progress with e-commerce , and expanding inventory breadth and for now remain key priorities.
And were critical to our achievement of an adjusted operating margin of three 7% for total avnet in the quarter.
Moving to the second quarter income statement on slide 10.
Gross margin of 12, 2% was up from 11, 8% last quarter, primarily due to sequential margin expansion in farnell.
As well as strong pricing in all businesses.
Paired to the prior year quarter gross margin improved by 121 basis points.
Adjusted operating expense of $498 million were up $17 million or a three 5% sequentially.
Primarily driven by costs associated with higher volume.
As a percent of revenue adjusted operating expenses declined to eight 5% from nine 3% in the prior quarter.
On the nonoperating front interest expense decreased $1 2 million sequentially to $21 6 million.
We recorded foreign currency transaction losses of $3 2 million, which represents an improvement of $2 million over the prior quarter.
We booked a 23% adjusted tax rate in the second quarter.
High end of our guidance range.
On slide 11, we highlight results across our electronic components segment.
Sales growth across every region Americas, EMEA and Asia contributed to the 24, 9% year over year sales growth to $5 4 billion in the quarter.
As Phil noted, we were especially pleased by our performance in the Americas, which grew sales double digits year over year and is poised for sustained solid growth in the seasonally strong third quarter.
Our electronic components operating margin of three 5% improved 31 basis points from last quarter with all regions contributing to the sequential improvement.
Turning to slide 12.
For now achieved another solid sales quarter with revenues totaling $441 million.
For now as operating margin increased 276 basis points sequentially to 13, 7%.
Different L team continues to improve the business through investments and SKU expansion E. Commerce capabilities are online engineering community and new product introductions.
All major contributors to sustainable operating margins.
Turning to cash liquidity and the balance sheet on slide 13, we increase receivables and inventory in the second quarter as customer demand remains strong.
Our liquidity position remains solid with cash and equivalents of $168 million and $1 5 billion of available lines of credit.
Our gross debt leverage was one nine and net debt leverage was one seven.
The cash outflow of $232 million was primarily the result of an increase in accounts receivable from higher sales as well as inventory, which we secured late in the quarter.
We anticipate a positive cash flow in the third quarter as we collect our accounts receivable and maintain our control of inventory and payables.
Turning to slide 14, we repurchased 921000 shares in the quarter and.
And our dividend of <unk> 24 cents is a 14% increase over the prior year.
We remain committed to increasing shareholder value by delivering a reliable and increasing dividend.
Opportunistic buybacks.
And investments in both organic and inorganic growth.
Let me wrap up on slide 15 with guidance.
Our third quarter guidance today assumes ongoing strong demand.
<unk> supply constraints and.
And COVID-19 restrictions similar to the December quarter.
For our fiscal Q3, we are guiding revenue in the range of $5 four to $5 8 billion and adjusted EPS in the range of $1 45 to $1 55.
In summary, we remain committed to excellent execution in our core business.
Renewed growth and margin expansion in farnell and reliable shareholder returns.
With that I'll turn it over to the operator for questions and answers.
Thank you, ladies and gentlemen, we will now be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
The 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 Q1 moment. Please while we poll for questions.
Yes.
Okay.
Yeah.
Thank you. Our first question is from Nick Todorov with Longbow Research. Please proceed with your question.
Thanks, Dan and good afternoon, guys and congrats on great results and execution.
So a couple of quarters ago, you talked about how you see.
The current conditions sustainable at least through the March quarter, where at the March quarter. Now can you give us an update how you're thinking about the sustainability of those conditions.
And related to that are you seeing any changes in customer behavior recently.
Yes, thanks, Nick.
I did say that a few quarters ago and.
It looks like I was I was right at least to date.
We'll continue to see strong demand Nick and.
Well, it's obviously difficult to forecast how long the supply constraints in the high demand will last.
Most of the market participants, including our suppliers and I.
I think it's going to extend well into the calendar year. So yes.
We have added through March it it definitely feels like it's at least going to be pretty solid through June .
And then we'll take it from taken from there there's a lot of variables right.
As we outlined in the script as we see it right now.
Bookings are strong backlog strong demands high end products are still pretty extended one week.
Got it.
Okay. Thanks.
The second question.
Okay.
Near term margin targets that you gave several quarters ago, how should investors think about the next near term margin targets as we go forward.
Tom will take that.
Sure.
Hi, Nick in the near term margins should be staying in the high 3% range of $3. Seven. Thank you was this quarter for the foreseeable future foreseeable future would be.
Yes, definitely March and most likely June .
Further out in the back end of the year to year down the road, assuming that we have a growing economy.
Today, we're making investments in core and for an individual Skus E Commerce online community investments.
We see a path to get over 4%.
More in the mid to longer term.
What gets us there as well as what you saw this quarter with growing our higher margin businesses at a faster rate than our base distribution business you saw that with for now and with for now being over 13% and applause to the <unk> team that was very.
Very nicely done.
They seem to be in a race now with Americas, who can expand margins faster but.
With those investments and with growing for now.
Path longer term.
Okay great.
And speaking of her now.
Sequentially sales were down, but obviously margins increase.
Increased quite quiet right now.
Nicely can you give us the puts and takes between that dynamic and partner in the quarter.
Okay.
Yes.
Sequential revenue I think it was a 3% is very slight decrease that was mix that was a single board computing and Thats a product that we had shortages in so there was some.
Lower revenue.
Philosophy part of that to seasonality, but that said the mix of business was higher margin the gross margins expanded.
To be honest with you several hundred basis points. He did a very very good job with pricing.
Mix management and things of that nature. So those are the puts and takes Phil yeah, No I'll just add to that thanks Nick.
During the year was 35% growth. So we were we were really pleased but I'll highlight the seasonality aspect of it particularly in Europe , which is our largest piece of the business.
Does tend to shut down a bit more firmly if you will than than the other regions in December so with the concentration mix of farnell when your when we we we expected that.
Got it thanks, guys. Good luck.
Thanks, Nick Thanks, Nick.
Okay.
Yeah.
Yeah.
Yeah.
Yeah.
Yeah.
Okay.
Operator is there another question on line.
Yeah.
Yes.
Okay.
Okay.
Some of you there.
Yeah.
Yeah.
Yeah.
Okay.
Hello.
Yes.
Okay.
Okay.
Yeah.
Okay.
Well everybody gives us a minute, while we check with the operator.
Yeah.
Okay.
Okay.
Hey, This is Nick can you guys hear me.
Yes.
Ram is avnet, we can hear you.
Yes, so I'm on the call I don't know I don't know it seems like Microsoft is Q1, I'm not sure what's going on.
I apologize for the technical difficulty one moment and we will resume the question and answer session.
Thank you and catch up with you later than that.
Okay. Okay.
Thank you. Our next question comes from Melissa Fairbanks with Raymond James. Please proceed with your question.
Hi, guys great quarter.
Really strong margin performance in both businesses.
Very impressive results overall last quarter, you guys mentioned that pricing was a 200 basis point tailwind in farnell just wondering how much benefit you saw in the quarter in the December quarter, and then also typically youre able to pass through higher costs on the electronic component side. Just wondering if you saw any margin benefit there as well or if that was just.
Kind of the benefit from from mix.
Yes, so pricing.
It is across the board good pricing discipline for now if you took out the benefits of the market, including pricing, we had about a nine 5% to 10% operating margin, which is slightly ahead of where we expected them to be by this time, but.
Things are going very well and the good news is on the nine 5% to 10%. There is plenty of roadway ahead to continue to improve that.
Yes Melissa.
I'll just add on the on the overall price increases we.
Particularly when we have customer contracts in place, where we are passing those along as quickly as we can keep in mind, we're getting 50 plus suppliers.
Raise prices.
If it doesn't times.
Last year, or so, but we don't see as much a margin percent increases we do and that raised from from an ASP standpoint on those parts and theres other competitive pressures and other products. So.
As a general statement as there might be there is some opportunity out there when the when we don't have contracts and increase the margins, but we're we haven't we typically just pass that onto the customer.
Okay perfect great. Thanks very much.
As a follow up I'm, just wondering it's pretty clear the industry is starting to better understand the value of supply chain partners.
Just wondering if you see any opportunities out there emerging for some inorganic growth or maybe different areas different markets, you might be able to address organically.
We're definitely seeing people customers and suppliers.
Already appreciated what we do okay from a supply chain standpoint, the expertise we bring to the market, we're seeing an increased awareness and an increased interest.
From <unk>.
Customers, who are doing business with it wanted to do more with us or where there was maybe some large customers or suppliers that haven't utilize us in certain cases that are now bringing us in with our supply chain, we call supply chain architects Melissa.
Building out some new supply chains and it takes a while you'll see the immediate impact on that.
But there's some some I'll just call them large Oems that maybe werent traditionally utilizing our services that are now coming into play.
Those opportunities, we would see them as organic as organic opportunities at this point and they are very real and very sizable.
Alright.
Excellent great. Thanks, very much guys. Thanks, very much guys. Thanks, Melissa Melissa.
Okay.
As a reminder, if you would like to ask a question.
Star one on your telephone one pad.
Yes.
Thank you. Our next question comes from Matt Sheerin with Stifel. Please proceed with your question.
Yes, thanks, and Hello, everyone.
Just another question if I can regarding the pricing environment is.
Is there a way that you can tell.
The growth rates at 20% plus year over year growth rate that you saw.
In the business how much of that is related to just the pass through of higher Asps.
What you have been pretty broad do you have any sense of that.
Yes, we're continuing to do to try and extrapolate that out Matt.
And the best we can do now is what we're looking at it's a few percentage points.
It's not as large as some.
We believe the reason is even within a supplier's portfolio. The reason they might be raising prices in certain areas, but not in others and then there is the balance of what we sell that theyre not raising prices at all and its still they are flat or the competitive right, where you still need to go win that business. So it's kind of averaging out where.
It's more demand than it is.
Then it is inflation, but there is let's call it.
Zero to 3% or something along those lines at this point, we're continuing to study that one.
Okay, and then you talked about the margin tailwind that you are seeing from Premier farnell on the premium pricing.
Are you getting a sense of that benefit on the core business as well the margins, obviously are up significantly year over year.
How much of that is attributed to just favorable pricing.
So typical.
Price competition that you normally see.
Hi, Matt so on the core side, 20% to 30 basis points. So.
So it's much more pronounced on the printer.
Okay.
And then bill just a different question just regarding <unk>.
The whole supply environment. It looks like you were able to produce some significant upsides are you able to get your hands on on component as you talked about some building inventory late in the quarter, but still a lot of your customers, including some big EMS guys are missing numbers.
<unk> down because they can't get parts. So are you still seeing a mismatch of parts or how are you, helping your customers manage that so that there's not an inventory mix.
Negative mix and.
Any signs of wind when this starts to ease at all.
Well, it's a great question I got to give a shout out to our asset and procurement teams are doing a really good job in our supply chain teams working with our suppliers and customers were taken in thousands of these mlps, Matt as you know weekly monthly paces and trying to balance all those skus with the demand environment and the supply environment from our suppliers.
Yeah.
So I would just say the team has done a great job.
And yes, I'm still involved was today with multiple customers with.
The OEM and EMS space with Expedites and I know in some cases there are certain chips.
Aren't available and its causing some constraint in.
And some of them hitting their numbers.
What you're referring to as far as the welcome to the two.
The future if you will.
It's tough to call I mean, you know what I'm sitting here looking at the lead times as Im talking to you in.
There's not been a lot of relief in the lead times, whether it be in.
From ceramics to Microcontrollers soon.
Two discrete so empower.
It's pretty broad based at this point in time, the demand environment environment looks.
Really solid and were in some cases, we're going to be.
Hand to mouth.
Working to issues.
It's just that it's just robust across the board as I said in transcripts.
Pretty much as is pretty hot and then.
Further exasperates the amount of technologies that are impacted so.
I would just say that we're moving get involved with our customers upfront and more visibility they give us and with our supply chain folks will continue to do the best job, we can take care of them.
Okay, Great just lastly.
Can you talk a couple of times about the the margin expansion, you're seeing in North America components, where I know that over the last three or four years.
<unk> performed other segments because of some prior issues.
How much progress have you made there and.
What point do you expect that to get to kind of the corporate margins or above.
They made a big leap this last quarter.
That's very promising more to come in the March quarter from Americas, and when would they get to where we expect.
I would say four to six quarters.
Right Tom.
Yes, we've been very transparent about that Matt had the two needle movers for us or for now in the Americas.
Europe and Asia is kind of.
Stay the course steady as she goes.
Sure.
Percentages are probably 60% $65 60, 70% of where we need them to be and we have a.
<unk>.
Path to get to two to four to six months ago, where we need them get too and of course finals.
Kind of where we needed them.
A little bit more to go there to for Chris resident is listening.
They really jumped out.
Okay Alright.
Okay.
Thanks, a lot Matt Thanks, Matt.
Thank you. Our next question comes from <unk> <unk> with Bank of America. Please proceed with your question.
Hi, Thanks for taking my questions. So I was wondering if you can give us your view on overall inventory in the channel.
Just talking about your inventory, but your view of distribution overall.
Inventory at Oems do you think that there is any buildup of inventory maybe in Asia. I mean are you or do you think that overall inventory in the channel is still pretty lean in and there is no.
Real buildup yet.
Yes.
It's a great question group, one I wish I had the crystal ball to be able to see in everybody's inventory exactly we don't have that.
Yes.
I'm sure. There's some you know.
Buildup out there, but its tough to pinpoint how much and when.
Where it is.
I know our own inventory.
We're really pleased with what we're able to do with the inventory position.
Which is positive as we pointed out a little bit earlier.
Access we've had.
And it's clean so we track what we're trying to track inflated bookings inflated forecast and we track those as they come in and see where we might see some buildup in.
We catch that MSR asset teams and supply chain team, we see someone.
Buying excessively to what they typically forecasted.
Historically, we.
We catch that in and have a conversation and or cut it back to begin with you, but I would just speak with an avnet will see excess inventories at this point in time towards the demands are.
Again tough to tough to call that and whats in whip out there were some customers can't get components and they're holding up.
Our product for them to get a couple of chips I'm sure. There's some of that out there.
But really tough for me to make that for me to make that call.
Okay.
I understand I understand.
Phil you had said.
<unk> I think it was couple of quarters ago, you said that you have a target of getting to 250000 skus by the end of fiscal 'twenty. Two I'm just wondering how you're tracking on that and do you need to hire anymore salespeople, our field application engineers and how should we be thinking about.
SG&A Opex cost.
Yes.
The Skus, we're about 55% to 60% of the way there.
And some of that expansion is going to be availability product right.
It might have it on backlog, but maybe it's not shipping yet so we're tracking that Chris.
Chris and the asset teams and for now we're pleased with that and some of that is already I mean is already paying off and some of that we gave credit into squid to the Americas Parnell team, we don't talk about them a whole lot. That's the newer team we're expanding the skus and that they are benefiting from that to get more on the board. If you will component growth in Newark, where they do a lot of them.
Borrow in test and measurement and we're starting to see that really pay off. So we're on track we can accelerate it we will because the returns are for now are terrific as far as account managers and FTE. That's more a question for the core I would think for now has had a sales team, but they don't really have many if any ftes as we traditionally call them.
They're well staff from a sales standpoint and on the core we're continuing to invest there.
Our team has a green light to invest in account management greenlight to invest in field application engineers.
And we think we're well staffed and well continue to staff, where we where we need to and then of course one of that traditional technical.
Technical support is going to come from digital as well right. So we're putting more and more investment in the digital.
Design support in addition, that's in addition to the field application engineers.
Got it I'm going to try and sneak one more in and I apologize if you've already addressed this but are you seeing your suppliers continue to raise prices and at some point do you think some of that pricing has to come down and if it does.
And sometime in 2022, how quickly would you have to pass those savings onto your customers is there a delay or do you think pricing can remain.
Elevated over the next couple of quarters.
That's a good question and again tough one to answer Ed.
The first part is yes, we are still seeing some.
Suppliers, increasing pricing and as long as we're getting there's a lot of additional cost in the supply chain from some fabs wafer through logistics.
Plastics, and chemicals et cetera, et cetera, so as.
As they get bigger.
We will continue to pass that on as they really have two and should and will continue to do the same.
Speaker 1: continue to pass that on as they really have to and should and will continue to do the same.
Speaker 1: On the corrections side, based on supply and demand, we'll see what happens with the average selling prices this go-round. Will they go down as they have typically? I'm not sure that they will, frankly. I think there will be some.
On a correction side based on supply and demand we will see we will see what happens with the average selling prices. This go round.
Will they go down as they have typically I'm not sure that that they will frankly.
I think there'll be some.
Speaker 1: But I'm not sure how accelerated it will be and how much. It's really tough to call. And we'll remain competitive in the marketplace if we have to adjust our resales along with costs coming down. Of course, you know, customers have that information. They know what's going on. We're not going to hide that from them.
But I'm not sure how accelerated there'll be and how much it's really tough to call and will remain competitive in the marketplace that we have to adjust.
Our resales.
Along with costs coming down of course.
Customers have that information they know what's going on we're not going to hide that from them.
We've got long term partnerships with our customers will work with them on that but I think it's the way I think it's a little ways away right now.
Speaker 1: We've got long-time partnerships with our customers. We'll work with them on that. But I think it's a little ways away right now.
Okay. Thanks for all the details congrats on the execution. Thank you.
Thanks Luke.
Speaker 2: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Confirmation tone will indicate your line.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line is in the question queue.
Thank you. Our next question comes from Jim Suva with Citigroup. Please proceed with your question.
Speaker 2: Our next question comes from Jim Suva with Citigroup. Please proceed with your-
Thank you and now that we've been through this pandemic for two years now I'm wondering if your suppliers. The chip companies have talked to you about different agreements, whether it's you hold more inventory you hold more buffer for them risk mitigation for future shocks and knew that going on or is it just still right.
Speaker 2: Thank you. And now that we've been through this pandemic for, you know, two years now, I'm wondering if your suppliers, the chip companies have talked to you about different agreements, whether it's you hold more inventory, you hold more buffer for them, risk mitigation for future shocks. Any of that going on or is it just still right now kind of, you know, fork to mouth selling stuff as quick as you can? I was kind of wondering structurally if there's any thoughts about adjusting.
Now.
<unk> mouth selling stuff as quick as you can just kind of wondering structurally if theres any thoughts about adjusting what.
Speaker 2: what you get paid and what you hold to prevent risks in the future.
What you get paid and what you hold.
To prevent risks in the future.
Yeah, Hey, Jim how are you doing.
Speaker 1: The answer is yes. We're definitely having some different conversations with suppliers.
The answer is yes, we are definitely having some different conversation with suppliers.
Theyre actually Jim is not just wires as on the OEM side, as well and the customer side that.
Speaker 1: They're actually, Jim, it's not just suppliers, it's on the OEM side as well, and the customer side, that they're actually in some cases taking us in with them to some of the customers, the end customers, to help re-evaluate their supply chain, re-evaluate buffers.
They're actually in some cases taken us in with them to some of the customers the end customers help.
Reevaluate their supply chain.
Reevaluate buffers.
The just in time go too far right. We don't need just in case, but this is just the just in time go a little too lean right. So those conversations are for sure happening and definitely the.
Speaker 1: Did just in time go too far? We don't need just in case, but did just in time go a little too lean? So yeah, those conversations are for sure happening. And definitely the unit.
So hard to talk about longer term agreements as well, okay and we're in the middle of those with with the customers. So yes, the dynamics definitely changing.
Speaker 1: The suppliers are talking about longer term agreements as well. We're in the middle of those with the customers. So, the dynamic is definitely changing. How dramatic it will be, Jim, at the end of the day, not sure. But I think some of them will be permanent as we get into some of these new arrangements with the suppliers and the customers. I see it as really positive.
How dramatic it will be Jim at the end of the day not sure, but I think some of them will be permanent.
As we get into some of these new new arrangements with the suppliers and the customers.
I see it as really positive as we become that.
We call it the orchestration we went through the orchestrating supply change with the command controls and help help everybody get more visibility to what's going on in the marketplace as well I think thats part of the challenge.
Speaker 1: We call it the orchestration. We will do the orchestrating of the supply chains with the command controls and help help everybody give more visibility to what's going on in the marketplace as well. I think that's part of the challenge.
Some companies have lost the visibility of where the manufacturing is in the supply chain supporting so we see it as a positive.
Speaker 1: I think some companies have lost the visibility of where the manufacturing is and the supply chain supporting them. So we see it as a positive. So much. Thank you.
Thanks, so much thank you.
Thanks, Jim.
Yeah.
Okay.
Speaker 2: Thank you. There are no further questions at this time. I'd like to turn the floor back over to Phil Gallagher for any closing...
Thank you there are no further questions at this time I'd like to turn the floor back over to Phil Gallagher for any closing remarks.
Great. Thank you very much and thanks, everybody for joining the call and the questions. So I will just thanks for attending today's earnings call and I look forward to speaking and hopefully seeing you all again sometime between now and the first fiscal third quarter earnings report in April have a great rest of the week.
Speaker 1: Great, thank you very much and thanks everybody for joining the call and the questions. So I want to just thanks for attending today's earnings call and look forward to speaking and hopefully seeing you all again at our sometime between now and our first fiscal third quarter earnings report in April . Have a great rest of the week. Thank you.
Ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your lines at this time. Thank you for your participation.
Speaker 2: Ladies and gentlemen, this does conclude today's conference call. You may disconnect your lines at this time. Thank you for your part.
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Speaker 3: The the.