Q1 2022 Arrow Electronics Inc Earnings Call
Yes.
Good day, and thank you for standing by and welcome to the Arrow Electronics first quarter 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that this conference is being recorded if you require any further assistance to meet fastest.
Sorry zero I would now like to hand, the conference over to your first speaker today, Nick Platelets Principal financial Officer. Please go ahead.
Thank you Patricia Good day and welcome to your the Arrow Electronics first quarter 2022 earnings conference call with US on the call today are Mike <unk>, Chairman, President and Chief Executive Officer, Sean Kerins, Chief operating officer, and Emirates side, Let's interim principal financial officer.
During this call, we'll make forward looking statements, including statements about our business outlook strategies future financial results, which are based on our predictions and expectations as of today, our actual results could differ materially due to a number of risks and uncertainties, including the risk factors in our most recent 10-K 10-Q filings with the SEC.
We undertake no obligation to update publicly or revise any of the forward looking statements. As a reminder, some of the figures we will discuss on today's call are non-GAAP . We've reconciled those are the most directly comparable GAAP financial measures in our earnings release. These non-GAAP measures are not intended to be a substitute for our GAAP results you can access our earnings.
Release at Investor Arrow Dot Com, along with CFO commentary the non-GAAP earnings reconciliation and a replay of this call.
We will begin with a few minutes of prepared remarks, which will then be followed by a question and answer period I will now hand, the call to our chairman President and CEO Michael.
Thanks, Rick and thanks to all of you for joining us today.
For the first quarter, we built on the record performance we delivered in 2021.
We saw a continuation of the strong demand demand conditions from last year as a result demand for electronic components and associated design engineering and supply chain services remained high.
This led to record sales in the first quarter exceeding the top end of our expectations.
In addition, our record record gross profit and earnings per share for the quarter were driven by strong execution in the face of fear supply chain demand imbalance.
I am pleased to report that our past investments to enhance our capabilities, especially in the area of supply chain as a service are leading to growth in our profit performance.
While some bottleneck persist demand for electronic components across key industries, and all three regions, particularly the Americas and EMEA region remained strong.
A favorable mix of higher margin products and solutions, along with regional mix resulted in record quarterly operating income and margin.
This points to arrow, helping customers navigate shortages and supply chain challenges.
In this environment. So they can maintain production bring.
Bring new products to market and securely manage their applications and data.
By helping to mitigate production risks and help ensure a steady stream of products to the market Arrow solidifies its position as a trusted advisor working alongside customers and suppliers.
Thanks to the focused execution our components business.
<unk> record results this quarter are.
Our global components business delivered the highest ever operating income along with sales above our high end of expectation.
The Americas experienced robust demand across most end markets and industries EMEA.
EMEA performance was strong across all industries due to improved supply while Asia performance was impacted by product mix and supply.
Design activity improved in all three regions and backlog continues to grow indicate that all customers are still concerned with securing supply.
Our enterprise computing solutions business delivered solid operating performance, we saw demand continue to grow for a more complex solution, including hybrid with backlog at record levels in all regions with.
With operating performance growing year over year, our business is well performed performed in position for the remainder of the year as customers are anticipating longer fulfillment and placing orders further out resulting in a strong pipeline.
While the demand environment was healthy business mix was skewed towards software and services due to customer preferences.
Hardware related sale continue to face challenges from supply chain bottlenecks.
<unk> and slightly lower net sales than we anticipated compared to prior year I'd.
I'd like to congratulate all of our teams for their strong execution and delivering a record quarter era is well positioned to continue to deliver results given our investments that are driving our growth.
Aerospace also comes from consistently emerging stronger from downturns in disruption.
Performance is indicative of just that and we look forward to expanding our business to the benefit of our customers suppliers and team.
We also believe our strength comes from working on technology solutions that make a difference in People's lives.
That is engineering the power of innovation to make life better.
Before I hand, the call back over to Rick to provide more details on our results and our expectations for the next quarter I would like to add a personal note on Monday, we announced that John Karen will assume the role of President and Chief Executive Officer effective June one and.
And then I will become executive chairman over the years I have enjoyed our conversation about the business and the dynamics affecting our industry at large I am grateful for those relationships, we built and I wish you all much success in your careers John has been a leader with Arrow for 15 years, most of that working closely with me.
So you already know that you are in great hands with that with that Rick I'll hand, it over to you.
Thanks, Mike.
First quarter sales increased 10% year over year on a non-GAAP basis. The average euro dollar exchange rate for the quarter was $1 12 to one here.
Interest in foreign currencies negatively impacted sales growth by $152 million year over year slightly below the prior expectation of $160 million negative impact to growth.
First quarter gross profit margin of 13, 3% was up 220 basis points year over year due to higher margins in both global components and enterprise computing solutions.
Operating expenses increased slightly as a percentage of sales year over year, but decrease significantly as a percentage of gross profit as.
As a reminder, many of our value added services and solutions can be independent to the sale of electronic components, and therefore contribute more meaningfully to profits into sales.
Interest and other expense was $34 million, which was slightly below our prior expectation. This.
This was mainly attributable to higher interest income offset partially by higher rates on floating rate debt. Our effective tax rate of 23, 5% was in line with prior expectation in the target long term range of 23% to 25%.
Turning to the balance sheet and cash flow first quarter operating cash flow was negative $200 million.
The first quarter is typically our most challenging quarter for cash flow generation.
Compared to the fourth quarter, our inventory days have increased but this is largely due to a stocking higher value inventory with greater design and engineering components are.
Our cash cycle of approximately 60 days was six days longer than the fourth quarter. However, our return on invested capital and return on working capital reached new highs for any first quarter in Nir and are near our all time highs achieved in the fourth quarter.
We are making responsible working capital investments to capitalize on strong demand environment environment.
Net debt totaled $2 9 billion.
And total liquidity was $2 6 billion, when including cash of $243 million, our liquidity position is in one of the best in the history of our company.
Our strong profitability and the effective management of our balance sheet enabled us to deliver on our commitment to return cash to shareholders.
Purchase of approximately $250 million of shares for the fourth consecutive quarter. This brings total cash returned to shareholders over the last 12 months to approximately $1 billion.
Using our diluted shares by approximately 9%.
We remain committed to returning cash to shareholders. Because we are confident that we are repurchasing shares below their intrinsic value at the end of the first quarter, our remaining repurchase authorization stands at approximately $513 million.
Please keep in mind that the information I've shared during this call is a high level summary of our financial results for more detail regarding the business segment results. Please refer to the CFO commentary published on our website. This morning.
Turning to guidance mid point sales and EPS guidance imply apply all time quarterly records.
Global components sales guidance would be an all time record for any quarter. Our guidance reflects continued strong operating leverage for global components on a year over year basis with profit growing several times faster than sales.
Our forecast suggests enterprise computing solutions profits grow year over year and it would achieve its strongest second quarter in several years.
We estimate an approximately $300 million headwind to sales and 20 <unk> headwind to EPS growth due to the strengthening of the U S dollar compared principally to the euro.
Finally, please note that the CFO commentary includes information on our fiscal calendar closing date.
With that I'll turn the call over to the operator for Q&A.
Thank you.
At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad again that is star one on your telephone please standby will be compile the Q&A roster.
Your first question comes from the line of Sushi, a Hardy from Goldman Sachs <unk> Company. Your line is open.
Hi, Thank you so much for taking the question and congrats on the strong results and congrats to Mike for a very successful career.
Two questions first I guess on the pricing environment. We're obviously hearing from your partners your suppliers about.
Inflation and how they are passing that through to partners and customers like yourselves.
What are you seeing from a from a cost perspective, how are you translating that into your pricing and how should we expect that to impact margins going forward and then I've got a quick follow up.
Sure well as you know we've been talking about this for a few quarters and.
The <unk>.
Increases do get passed along all the way through to the customer base and.
What we started saying was that they were coming.
More often at.
At the end of last year going into this year.
The.
What I would say as I believe most of it will stick because raw materials are up.
Trucking is moving products around.
Cost more and.
Just general manufacturing for the suppliers is up.
So I expect for that to go through having said that too.
As you know then that does have an effect on your inventory ratios. Your turns in those types of things, especially if youre stocking more value added products, but the prices have gone up significantly I would say that pricing will abate towards the second half of the year, but we're still expecting some price increases.
Through there and by then I would say everybody will be caught up.
Which would be good it would be good to give some normalcy in the product again.
That's very helpful and then as a follow up I just wanted to ask about.
Your views on the overall cycle.
You guys sound really really good your suppliers. Your partners also sound very good about the demand profile going forward and the visibility you have.
At the same time, we were sure about some of the consumer facing applications from a demand perspective.
Theyre being signs of moderation.
<unk> got a war going on in Europe , you've got the Lockdowns in Asia. So I guess, the fear as things kind of slowdown from here onward, but.
What are you seeing and what are you hearing from your customers in.
How are you planning your business for the next six to 12 months. Thank you.
Yes, I can I can address most of that by.
By things, we said in some of the new things, we said first off.
Yes.
The size of this war is not as big as some of the other is however.
During work conditions, obviously, the military you start spending more money and create more demand. So while the war is a negative as you guys know.
We're economy economy isn't always a bad thing.
The second thing in general, where you are coming across especially our consumer products and some of the others.
I think the point that you've just made really plays into that we have seen pricing go up.
Unit shipments have gone down.
Over over the last year. So we're not feeling the full demand that is going to market and the question would be a thumb end used market pulled their demand out what would happen and right now the answer to that is largely not much of anything.
Ukraine demand came completely out Russia demand came completely out and here. We are in the exact same place. So I think we're in a position.
Higher priced product.
Lower unit to get to a market.
Has a higher than normal expectation of getting product I do not see manufacturing picking up to a point that is going to offset that.
All the way through the first half of next year and possibly going further from what we can see today, even though I wouldn't commit to it.
I would love to commit to it but John is going to be sitting here. So I don't want to impact that.
But I will tell you I think the demand forecast.
But from the economy is still good for a good period of time.
Very helpful. Thank you so much.
Yes.
Your next question coming from the line of Joel Let Rajeev from Wells Fargo. Your line is open.
Yes, thanks for taking the question and Echo.
Congrats to Mike and Sean new roles.
I wanted to try to understand the incremental EBIT margin that youre seeing in the components business on a year over year basis, It was pretty phenomenal.
Do we think about that looking into the second half of this year as we start to maybe comps and more significant price increases that we saw in the back half of last year.
I think we would say from our point of view it's firm if that's a.
Good enough answer for you, we don't see things going the opposite way in our ratios right now because as I said, we believe demand is going to stay.
Where it is.
So the supply factor is what.
Really gives you pause, but now we're sitting here with roughly four quarters of demand from our suppliers. So it gets a little bit easier to forecast all be tough because we can get.
Some upside but.
We expect it to.
<unk>, probably continue to improve given some of the efficiencies we're working on at the same time.
If the volume is going out the door so.
I don't see things declining for quite a while yet.
Okay. That's helpful. And then just just kind of curious you talked about.
The higher value inventory additions this quarter are we to take that as I guess, assuming that your inventory on a unit basis is continuing to still kind of decline or remain flat.
Yes, I think that that's exactly what we see.
I wouldn't say, it's declining I would say and I wouldn't say, it's totally flat I would definitely say, it's not us.
So when we start to get.
More supply and I think it will be in a regular supply in the beginning is suppliers can increase their volume, but that that's a long way off.
But.
I think it's still more of the same I think theres still some more price increases.
And hopefully we start getting upside of product towards the second half of this year a little bit.
Got it that's helpful. Thank you.
Yes.
And your next question is from Matt Sheerin from Stifel. Your line is open.
Yes, Thank you and.
Good afternoon.
A question, Mike just regarding the components business and the revenue decline in Asia year over year, you talked about constraints and some other issues yet your competitor your biggest competitor Avnet had pretty strong double digit growth year over year.
So I'm wondering what the difference might be in terms of customer mix and also.
As the supplier relationship you have with Ti, where we saw a lot of movement.
You took a lot of market share, but I know theres some of that business going direct so does that play into it at all as well.
Yeah.
Of course, there are several.
Thing.
Number one.
You also saw WPZ and WT has.
Thank you even wrote the article about it.
Some growth, but that was primarily Taiwan and as you know we're not a large player in Taiwan number one number two the.
Consumer into the business has not been a strength for us and number three it is the supply if you remember when this first started to.
Take off we were shipping a lot of product in China with overwhelmingly the biggest in the mix. So most of those manufacturers got out of trouble.
I'm not going to stay there out of trouble.
We went to a more hand to mouth situation there now than what we felt was an oversupply if balance.
It's how much product you get and.
It just varies by how your backlog, but I think we're in a good place there I wouldn't really rang the bell on any place like for example, if we.
We really did great in North America, Matt and the other guys didn't do great or they did great in Asia, and we didn't do great or vice versa in Europe .
It's about supply for each of us and.
They have their supply issues, we have ours and thats what were dealing with it is clearly not a demand problem anywhere for anybody.
Got it fair enough that's quite helpful and then on the computing side.
You talked about increased profits year over year, but for Q2, but you're guiding revenue down again is that a function of mix and then in terms of the pipeline that youre seeing are you expecting.
The second half to be up versus the second half of last year.
Yes.
Well right now what we are seeing.
Our constraint.
Odd product in hardware.
And we're trying to get that piece of it caught up but that's largely what's missing virtually everything else. We have in house is growing so the hardware pieces is the toughest piece when we get into the second half because John is going to have to live with you I'm going to let him answer that.
Okay.
Yeah, Thanks, Brian by the way.
It may come down and go fishing with you in the sound. After this event.
Thanks, Matt.
Yeah, Matt. So in addition to what Mike said I would just point out that we love hardware and we will continue.
To drive it but we've also intentionally been driving a mix shift to more software more hybrid cloud more services.
And by definition thats going to create.
A different dynamic for reported sales, we are actually going to grow on the billings line in Q2 by the way.
At the end of the day, you want to kind of evaluate things on the basis of GP and operating.
Operating income dollar growth year over year.
Did that in Q1, and we are calling for that again in Q2.
As we look to the second half.
It's hard to say exactly when the.
Hardware supply chains improve.
Our guests might be.
Not much different than mine, but the good news is that hardware pipeline and backlog continues to grow that gives us a little confidence that we're seeing some renewed activity in the traditional.
On premise piece of the of the data center, especially as it pertains to hybrid cloud activity and we will keep building that backlog and be able to benefit from it when things loosen up but we are expecting continued progress across the course of the year and we are looking for better performance in the second half.
Okay, Sean have you seen the supply constraints actually worsened in the quarter, which we've heard some from some others or is it kind of the same.
No we have Matt since we started to see lead times extend and our systems in storage and network business I would say mid last year.
Kind of late Q3 and in some cases lead times are double triple or even quadruple so the news hasnt gotten better.
We're working on a case by case and supplier by supplier and deal by deal.
We'll get better it's just tough to call exactly when.
Okay, great, Thanks, and congrats to you and Mike.
Thanks, Matt Thanks, Matt.
Okay.
And the next question is from <unk> <unk> from Bank of America. Your line is open hi, Thanks for taking my questions like to convey my congrats as well just Sean and Mike.
Again this quarter you had a very strong quarter in ECS for software and services and Mike you also talked about supply chain as a service.
Do you think at this point there is a recurring revenue component to your ECS sales that that probably is meaningful and and can you comment on.
Is that something that you would disclose at some point and how should we think about this mix of software and services trending over the next couple of.
Over the next couple of quarters.
Yes, I think that.
Yes, youre absolutely right its an astute pickup and that would be something that we would look at disclosing at a later date as we saw the consistency start to build on those products.
It's really not in a position where you can call. It a line of business, it's really a product sale in our normal conditions of business, but as we start to see that diverge. You are correct. It will move into that Youll start to see that being reported like others I wouldn't expect that for another year or so though.
And what I can tell you is we're very we're very pleased with the.
Increases were seeing in the services and the cloud business.
And that's what we've been pushing for over the last couple of years as we as we know that model is changing we just wanted to be on the front end of it this time.
Got it that makes sense.
Maybe for my follow up.
Mike can you talk about your capital allocation priorities for the next 12 months and and as you look out into.
The next three or four quarters.
What gives you the most concern I mean, it looks like the backlog is strong in Denmark and market demand is strong it doesn't look like we're going into a recession or at least you know orders arent being cut. So I mean is there anything that gives you concern as you look out over the next 12 months and how would you spend your cash and capital allocation.
Thanks, Yes, I think there is.
Got a few questions in there, but thats okay.
I think as far as our cash and allocation of cash it's the same impact.
In fact in the business, where we can get the growth and the profit.
M&A.
A possibility which is.
Rather remote during this period of time right now and then the third is to do buybacks returned cash to shareholders, which as you know we've been doing and we've been doing it with great consistency to give.
You bet that comfort level as far as that goes I don't I don't see a big change.
Right now going out things that would concern me are.
If inflation continues to go on higher value inventory, obviously that takes some more cash to buy the inventory until you can get settled through the system and get to receivable prices matching your inventory level. So.
So you might sell apart for a dollar today within that part I'm going to use an extreme example might go to a $1 50.
Next month.
And Youre still pull in your receivable then at a lower price.
It plays a little bit of havoc with your cash short term, but certainly on your sales and profit you get it there so for US it's really about.
I think cash and.
Continuing buybacks on a on a on a certain level balanced with our cash.
Okay. Thanks for all the details and congrats on the strong execution.
Thanks.
We have your next question from William Stein of Securities. Your line is now open great.
Great. Thanks for taking my question and I want to add my congratulations.
On your relative Ascension to these new positions and also especially.
The great results that you're posting today in the guidance.
And there are quite a bit of credit for that but I do want to ask you about the cyclicality of each of the businesses for a moment.
In components in the past we've seen periods like this for example post financial crisis in calendar.
Yes.
10 to 11.
And in fact, if you go further back to the tech bubble in 2000 and margins are dramatically higher now.
Seeing this expansion again in the last few quarters.
Those are great results, but I wonder if there's enough it's changed in this business.
Keep those margins at this elevated level through.
The cyclical times, it will almost certainly going to face.
Yeah.
We've kind of laid out how we saw the.
The pricing go but there is there are several things that have changed and there's obviously several things that have changed within aero.
One happens to be engineering as you know, we put more focus on that over the years and our services and software business, which.
Are less.
Susceptible to those <unk>.
It changes thirdly, if you take the components business, which as you guys know is one of the big drivers of just looking at the numbers.
The price increases appear to be more structural now.
With the raw material prices up I don't think anybody is thinking that raw material prices are going to go down.
Do you have manufacturing costs, you have new fabs coming on and you guys noted $10 billion fab.
Somebody is going to pay for it and in the end, it's going to be in the price of the product. So as these structural changes start to take place in the business.
I think youre going to.
See that the other thing is the amount of inventory on hand.
Likely to move closer to adjust in time inventory, thereby there'll be less inventory being held for two reasons one is going to be.
More visibility in the system. So customers are going to have to place their orders out further and customers are going to be more concerned with supply than trying to get that extra penny off the park like they've been conditioned to.
Yes.
All of that will come into play. The question is what we give back any of it I think anytime you're dealing with an inflationary market.
And hard to get part that one time of course, some will go back, but I don't believe it will be dramatic as dramatic as last time, because that was really an economic situation more.
Then the semiconductor business. This time was a pure on supply problem and now coupled EBIT with a little pullback in the market that's not going to fix the problem, we're still going to have the short for the next year or two.
I believe that helps yes that helps a lot Mike I was focused on the component side I think you've put some commentary in systems, but I want to focus on that business separately just for a moment.
I was talking with an investor earlier today, who said you know look at the multi year growth in revenue in this business and I know that you have in the past had this target of one and a half to two times industry spend in.
Necessarily track that so carefully but.
This business has declined in each of the last four years on a revenue basis any way its the revenues down to where it was about nine years ago.
Yes.
As you call out and I appreciate that the profitability here, maybe if we look at the operating profit that's the right way to measure it because it's not.
It looks better in that regard is that the way we should think about this business in terms of how you manage internally you're managing it to the operating profit level and Thats, what we should target from a growth perspective, and if so maybe what's the what's the growth rate that we can.
Back in the future. Thanks, so much.
Yeah.
I think you hit the nail on the head we have been pushing that business to a services and software business.
<unk> income has been getting better that business has been growing with the market. If you go nine or 10 years ago, our hardware business was basically all we have.
We just had hardware that we where sally and over that period of time.
May or may not remember based on your age, but I'll show mine, a little we used to buy storage system from EMC at $1 million.
And they used to get put in now that product is $50000.
The price of hardware, it's come way way down over the years.
And we saw it then it wouldn't be sustainable as we started building the rest of the business but.
Given how we account for things and how we have to legally account for things you don't get to see the growth in the topline and sale. So the best place to either see it is really on the bottom line and where we've applied money.
Money over the years to improve the bottom line and we're also seeing the point now of what I would say is that crossover point, where we should be seeing a little more consistent growth because we're getting to those levels down.
Great. Thank you.
Yes.
Thanks will.
And the next question is from Nikolay Todorov from Longbow Research. Your line is open.
Yes, Hello, everyone and my congrats as well to both of you.
I think Mike you mentioned when you talked about the components business in each geography.
Loosening supply, maybe you can touch upon that and expand a little bit.
You're exactly which areas or maybe products youre seeing signs of supply starting to loosen up and I guess related to that does the outlook for the components business and into the second quarter is stronger than most of your suppliers and peers is that also because of expectation of supply loosening up.
Yes.
We believe we've got a handle on the supply we're going to get for the second quarter.
And.
We believe that we've been looking at it for a while and it looks pretty good I think.
Since we started looking at it and thought of our own guidance. We also saw their suppliers come out with a little stronger market.
Then we thought was going to happen so it's very good.
It's purely a supply demand and when the when the orders or are in the system, but virtually every.
Vertical market in North America and Europe .
And in Asia.
With the exception of one or two are up.
And their demand accounts, so the ability to really forecast to you immediately by region, where that's going to fall.
Is a difficult thing we know the prices, we know the inventory levels and we kind of nowhere the inventory is coming in and that's how we build it up.
So here's supply right now.
Nothing else to it.
Okay. Thanks, that's helpful second question.
Just doubling double clicking on a comment you made a pricing will abate towards the second half.
Can you expand maybe a little bit on what do you mean by that simply because we've seen obviously the raw components raw materials continued to increase.
Throughout the first couple months of the year and maybe can you talk broadly about the sustainability of pricing power for the suppliers are you starting to see any increase in pushback from customers on the price increases on the semi side, which we've heard are quite substantial.
Yeah, I think that customers have a choice.
I'll start there they can pay it or not get parts.
That's unfortunately, that's the draconian answer.
And that's basically the answer from the suppliers to the.
The reason that I say abate I didn't say go away so.
We might as well put that out there right now.
Lot of suppliers came out with 20% immediate price increases, 25% immediate price increases to get caught up to where they thought they needed to be.
I don't believe were going to see that kind of increase again in the second half of the year I think those numbers will go down and I think largely it is a big exercise for suppliers to raise the pricing and go through everything on their side.
And I don't see a lot of them coming back and revisiting that to the following year, but the pricing power is there and as I said before the difference is either a supplier builds a $10 billion traveler. They farm it out somebody else, who has and whoever builds the fab.
Is going to have the ability to charge.
To add those products built.
And.
Customers have frankly been getting a deal for a good many years, they've been getting better faster cheaper right in their products and they haven't had to pay for that now they're going to have to pay for it and I think thats here for good.
Got it I appreciate the answers thank you.
Yes.
Again I'd like to ask a question. Please press star one can tell listen we have a question from the line of James from Citigroup. Your line is open.
Thank you so much congratulations Sean and Mike you know, having known you for decades, it's going to be a pleasure for me to say, congratulations but you'll be missed.
My question is on the inventory build.
Not saying inventory a bad thing it's not.
When I look at the percent increase year over year up over 40% in quarter over quarter.
At 10% to 11% and I look at your outlook for sales, yes prices are going higher but your sales outlook isn't even close to those type of builds. So can you help me understand and maybe some of it is it is already completely shipped out of your building and gone or I, just don't understand the magnitude.
Like a big difference again, not that it's a bad thing, but I'm just trying to get my arms around why there is such a big difference between the two numbers.
I think what you have Jim.
Is the age old answer that when you take it over time.
The inventory change is here daily.
Yeah.
One we can make a huge difference one day of shipments can make a huge difference youre.
Youre seeing an end of period number, but theres a lot of activity and a lot of churn in the period itself.
The vast difference, though remember I said before we may be carrying a part today at $1 50 that we sold 30 days ago with the dollar because the supplier just came in at the price raise the price of oil.
We have to pass that through on all future shipments. So you get the dollar value of the inventory to date.
And you get the future sale of that.
That higher level of inventory tomorrow does that makes sense.
Yes, but just a difference again of your sales outlook isn't.
Close to.
I'd say, let's call it close to nine and 10% for your sales outlook, but the inventory build was.
Up.
Year over year of 40% and so what came in and out there's still a disconnect.
When you have that but you also have as I said before this time for US we had a bit of a fraying up over the higher more expensive type parts that were more of what were the Golden grew parts. If you remember that was the biggest scream that most of the customers have they didn't have the parts to fulfill their bill.
Those parts are coming in now.
And that's one of the other reasons that you see the inventory is actually more of a skew with a higher dollar value parts than it was before.
Okay that makes complete sense and remember all casual fishing here, we do go fishing here in San Francisco also in Silicon Valley.
Thank you.
And I know you break areas.
I was waiting for you to get on maybe your July 4th Party.
Congratulations.
Thanks, Jim.
And there are no further questions I would like to turn the call back.
To the speakers for further remarks.
Please go ahead.
Thank you for your interest in Arrow electronics and have a nice day.
This concludes today's call. Thank you for participating you may now disconnect.
Okay.
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