Q1 2023 Avnet Inc Earnings Call
We stand by our presentation will now begin welcome to the Avnet first quarter fiscal year 2023 earnings Conference call I would now like to turn the floor over to Joe Burke, Vice President of Treasury and Investor Relations for Avnet.
Thank you Paul earlier this afternoon <unk> released financial results for the first quarter fiscal year 'twenty to 'twenty three the release is available on the Investor Relations section of the company's website.
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 its website.
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 avnet <unk>. 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 Ken Jacobson Avnet CFO .
With that let me turn the call over to Phil Gallagher Phil.
Thank you Joe and thank you everyone for joining us on our first quarter fiscal year 2023 earnings conference call.
In the prior fiscal year, we delivered record results and continue to take strategic steps to position Avnet as a more durable company with an increasingly critical role in the global technology supply chain.
We are well positioned to continue to deliver value to our customers suppliers and shareholders even in the face of a more challenging and uncertain operating environment.
I am pleased to share that we kicked off the fiscal year with another quarter of solid financial results.
According meaningful sales growth across all regions and improved profitability year over year.
We achieved these results despite the macro headwinds affecting certain areas of our business, which I'll touch on in a minute.
In the quarter, we achieved sales of $6 8 billion.
This exceeded the higher end of our guidance up 6% sequentially and over 20% year over year on a constant currency basis.
Sales increased nearly 29% year over year.
Efficient management of our operations also enabled us to drive solid operating margins of four 3%, which is the third consecutive quarter of greater than 4% operating margin.
Further the combination of a solid sales and effective management of operations allowed us to increase operating income three times greater than revenues on a year over year basis.
A significant driver of our results in the quarter was of course, the continued execution by our incredible global team. Our team has effectively managed market complexities and has served as great partners to our customers and suppliers.
They faced fast changing supply chain conditions, and uncertainties, we're more deeply engage with our customers and suppliers than ever before which enables us to maintain the necessary expertise and.
<unk> abilities to help them navigate today's supply chain complexities.
And with the structural and organizational changes, we made to our business over the last two years, we are well positioned to continue serving as a control tower for our customers and suppliers.
In the quarter demand remains strong globally and in key vertical segments like transportation industrial and aerospace and defense and we have continued to invest in inventory to meet this demand.
We'll see that inventory levels were higher at the end of the first quarter as compared to the prior quarter, which Ken will speak to further in his commentary.
This reflects our need to support sustained sales levels in Asia.
<unk> increases were specific supply chain engagements.
Overall, we continue to be very comfortable with our days of inventory heading into our second quarter.
With that let me turn to the highlights for our business.
At the top line.
While the components business saw sequential and year over year growth across all three regions.
In constant currency electronic components sales were up nearly 9% sequentially and up over 31% year over year, reaching $6 $3 billion in the quarter.
These results were primarily driven by another record quarter of sales in Asia, and consistent strong sales growth in both the Americas and EMEA regions.
Increased sales in Asia were driven primarily by growth in the transportation and industrial markets.
The team in Asia is also successfully gaining share in the region leading to record quarter billings.
The Americas and EMEA regions, both benefited from strength in key verticals, notably industrial transportation and aerospace and defense.
We were very pleased with the growth in these markets as highlighted at our Investor day in June .
This is proof that we are well diversified across the end markets, we serve and reinforces our expectation that these end markets will continue to have positive long term growth prospects.
Further.
Our enhanced focus on growing key supplier relationships and addressing their supply chain needs continues to bring benefits across all of our regions.
We continue to coordinate closely with customers and suppliers to effectively manage our backlog.
As a result of those actions our overall book to Bill ratio continue to moderate as was near parity leading into our second quarter.
We continue to benefit from our unique engineering capabilities with our field application engineers.
And digital design tools, resulting in another record revenue quarter for demand creation.
We believe this continued strength is indicative of the increasing value of the capabilities, we provide to customers and suppliers.
And it's important to supporting our margins in a more uncertain operating environment.
Okay.
Turning to our farnell business for.
Cornell sales and profitability were impacted by currency fluctuations, particularly weakness in the British pound.
Ongoing component shortages that are affecting for eligibility to fully meet demand for single board computers.
Even with that the backlog for single Board computers remains robust and we expect to realize such sales what product becomes available. Additionally.
Additionally, Fornell recently became the exclusive license to sugar the Raspberry Pi single Board computer. We are really excited about this development, which will increase our market share and favorably impact for that was revenue in the midterm.
Operating margins for now we're above 12% during the quarter.
We expect currency fluctuation do we have a continued impact for now into the second quarter.
We remain excited about for now and contingency opportunity to leverage part of LS and electronic components unique and synergistic collaboration to better serve our avnet customers.
To conclude I want to reiterate that we are stronger and much more durable company today due to the changes we've made to our business.
And I believe our recent trends and results reflect that.
While we cannot control the overall market.
I'm confident in our team's ability to execute in a challenging and uncertain environment and continue to deliver value to our supplier and customer partners.
There's never been a greater need for the capabilities that Amgen has and we look forward to continuing to play critical role at the center of the technology supply chain.
With that I'll turn it over to Ken to dive deeper into our first quarter results.
Thank you Phil good afternoon, everyone and thank you for participating on today's call.
As Phil mentioned, we are very pleased with our first quarter performance. Our teams continued execution resulted in significant sales and operating income growth with excellent returns and we are encouraged by the great start to fiscal year 2023.
In the first quarter, our sales were $6 $8 billion up 21% year over year, well exceeding the top end of our guidance range sales growth in constant currency was 21% year over year with each region contributing to the growth.
We also grew sales, 6% quarter over quarter or over 8% in constant currency, which is well above our typical seasonal trend.
We had strong sales in the first quarter across all of our regions led by our Asia team, which delivered a record $2.9 billion of sales.
On a year over year basis sales grew 33% in the Americas, 42% in Europe in constant currency and 18% in Asia in constant currency.
From an operating group perspective, electronic components sales grew 23% year over year or 31% in constant currency.
Electronic components sales grew 7% quarter over quarter or 9% in constant currency.
For now sales declined 6% year over year, but grew 2% in constant currency farnell sales continued to be negatively impacted by the continued shortage of certain components needed to complete single board computers.
Excluding sales of certain single board computers, Farndale sales grew 7% year over year.
For the first quarter gross margin of 11, 4% was down 85 basis points quarter over quarter. This decline was primarily driven by higher Asia regional sales mix and from declines in gross margin due to product and customer mix.
We continued to maintain discipline around expenses in the quarter as adjusted operating expenses were $475 million for the quarter down, 4% sequentially and down 1% year over year.
Adjusted operating expense as a percentage of gross profit dollars was less than 62% in the first quarter, which is the lowest it has been over the past several years.
Adjusted operating income of $293 million increased 64% year over year and grew three times greater than sales demonstrating our ability to continue to drive operating leverage as we grow our business.
Our adjusted operating income margin was four 4% in the first quarter, which is the third consecutive quarter with greater than 4% operating income margin.
Electronic components operating income was $267 million up 65% year over year electronic.
Components of operating income margin was four 2% up over 100 basis points year over year.
Most notably our Americas business continued to make progress towards our operating margin improvement goals.
This is the eighth consecutive quarter of Americas year over year operating margin improvements and we are encouraged by the momentum of our Americas team has coming into the December quarter.
For now operating income was $52 million up 4% year over year, despite the 6% decline in sales.
Farnell operating income margin was 12, 1% in the quarter up over 120 basis points year over year.
The quarter over quarter decline in Farnell operating income margin was primarily driven by a combination of lower sales and a lower gross margin because of the foreign currency impact on <unk> pricing and related gross margin.
Turning to expenses below operating income interest expense of $45 million in the first quarter increased by $15 million quarter over quarter, primarily due to higher debt balances to support working capital investments and from rising interest rates. This increase in interest expense negatively impacted adjusted diluted earnings per share by 12 cents quarter over quarter.
Sure.
Our effective income tax rate was 23% in the quarter as expected.
Adjusted diluted earnings per share was $2 for the quarter, which increased 64% year over year.
Turning to the balance sheet and liquidity during the quarter, we invested in working capital to support our sales growth, resulting in approximately 700 million dollar increase quarter over quarter of this working capital increase of approximately $300 million came from additional receivables and approximately $400 million came from additional inventories.
With respect to our inventory, we are comfortable with the quality and age of our inventory.
The increase in inventory was driven by several factors, including support for sustained sales levels in Asia, and an approximate $120 million increase specific to a single supply chain engagement. They came in at the end of the quarter. We expect the inventory related to the specific engagement to ship early in the quarter.
Additionally, we continue to work with our customers and suppliers to come to mutually beneficial solutions as certain customers have high levels of inventory as they wait for the Golden screw components.
As a result of this working capital increase working capital days was 73 days for the quarter, which is within our acceptable range of working capital days are returns on working capital continue to be significantly higher than our cost of capital.
The increases in working capital led to an increase in debt of approximately $700 million and a corresponding $650 million use of cash from operations.
The increase in debt led to a gross leverage of 1.9 times at the end of the quarter.
Still well within our required leverage ratios at.
At the end of the quarter, we had approximately $600 million of available borrowing capacity and we expect to generate positive operating cash flows in our second quarter because of seasonal declines in sales from our western regions.
In our first quarter repurchased approximately $150 million worth of shares which represented nearly 4% of outstanding shares over the last two quarters. We've retired approximately 6% of outstanding shares.
There are $383 million left on our current share repurchase authorization entering the second quarter we.
We expect to continue to buy back shares at similar levels. During the second quarter as our shares continued to trade at meaningful discount to book value and at a lower multiple than our shares have historically traded at.
During the quarter. We also increased our quarterly dividend of 29 cents per share and over 11% increase from the prior quarterly dividend.
During fiscal 2023, we expect our capital expenditures to increase primarily to support our new warehouse in Europe .
Turning to guidance for the second quarter of fiscal 2023, we are guiding sales in the range of 6.35 billion to $6 six $5 billion and adjusted diluted EPS in the range of $1 80 to $1 90.
Our second quarter guidance today is based on current market conditions, including a $60 million negative impact on our sales guidance at the midpoint from the recent strengthening of the U S dollar as compared to the first quarter. This guidance implies a sequential sales decline of down 1% to down 5% in constant currency and assumes that typical seasonal decline in sales in our western regions.
As those regions have fewer shipping days compared to last quarter because of the holidays.
This guidance assumes similar interest expense to the first quarter and effective tax rate of between 21% and 25% and 94 million outstanding shares on a diluted basis.
In closing I want to thank our team for delivering another quarter of sales and earnings growth. We believe that we are well positioned to continue to gain market share in the future Avnet is diversification of suppliers products and end markets. We serve are key differentiators that will enable us to continue to deliver positive financial results, despite uncertain and change.
Market conditions.
With that I will turn it back over to the operator to open it up for Q&A operator.
Thank you, ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd 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.
Okay.
Thank you. Our first question comes from Melissa Fairbanks with Raymond James. Please proceed with your question.
Hi, guys congratulations on a great quarter and guide really refreshing to see and then all of this uncertainty.
I was just wondering for modeling purposes, you know opex was kind of a record low as a percentage of sales just wondering going forward, how sustainable that is if opex needs to kind of trend higher.
As we go forward or can.
Can we expect to see this kind of operating leverage in the model.
Emlen. This is Ken I would say in general.
<unk> the the the absolute level of Opex you know it did it would sustain around the same levels. You know if sales continue to decline and we have some levers on the overall opex side, but.
We feel pretty good about the absolute number of Opex now depending on you know the the level of sales the percentage of a GP might change a little bit but.
But we feel pretty good.
Thanks, We had this last quarter and that can be sustainable into.
Into the into the fiscal year.
Okay, great Great and maybe just one quick follow up I imagine you're probably.
Going to get a lot of questions on the inventory balance.
I'm just wondering is there any risk to the inventory due to price inflation, meaning as you've been able to accumulate the inventory. Some of these supply constraints ease is there any risk going forward as we get into maybe some normalization of pricing next year.
Is that the value of inventory is overstated.
Yeah, I would say, we don't see a huge risk there you know we do have some.
Price protections on you know lowering prices if it happens to come from our suppliers, but at the same time you know we have commitments.
Commitments from our customers and we work through the inventory levels, but we don't see a huge risk in terms of.
Taking inventory losses and things like that.
Is it pricing.
Yes, Melissa grill.
As Apple listen thanks.
Apologize for my voice on the call.
And some allergies year, but.
Yes.
Well within our range.
For inventory and returns we model around around the inventory.
That's important so I'll get ahead of the next question the quality of inventory is extremely good our reserves or are well aligned and the aging inventory is not increasing so it's relatively current.
Okay excellent great. That's all for me. Thank you. Thank you.
Jude.
Thank you. Our next question is from Matt Sheerin with Stifel. Please proceed with your question.
Yes, thanks for taking my questions.
No.
Just trying to get your perspective.
On the outlook.
Looks like you're down a little bit seasonally your book to Bill is finally, a parity after how many quarters of very positive.
Some of the suppliers of semiconductor suppliers and other component suppliers are modeling or at least looking.
More cautiously to Q4.
Pete, Texas instruments last night guided down double digits.
Other component suppliers are starting to see some inventory correction going on our customers and it doesn't sound like you're seeing that in a big way yet is it that you're lagging the cycle or are there still those hard to get parts for our customers are still dealing with that imbalance. So they're not going to start cutting their inventory until that straightens out.
Yes, it's probably.
64000 hour question, Matt Thanks, well look.
We're given the outlook as we see it today with our backlog today in the next.
Three to six months backlog.
And it is a straight roll up from the regions. We were not precedent, we're not pushing them. It's a number we feel that.
We can hit at this point in time and.
If you look and we caught out essentially the industrial defense Aero transportation as we see it today those still look pretty solid we're not as exposed in the consumer.
And some of the compute even okay that others are so and the other thing Matt.
The leanest as we're watching tobacco.
The book to bills have come down what were helping to drive some of that because you and I, both though that's not realistic what's kind of going on here. The last 12 to 2024 months, we're not seeing.
As of yet cancellations.
As much we're seeing some push outs and we're managing our customers' backlog with them if they can't get their golden screw and all that kind of stuff, we're not seeing that wanted removed off the books.
So what we're driving to some that we want to make sure. It's real is the next two to three months or so this is this is the Apple we see based on the rollout from the teams.
Okay. Thanks for that and then on the gross margin I understand why that was down sequentially because of the mix.
Looking forward.
As you said, our North America, and Europe have fewer selling days. So would you expect gross margin to remain at these levels.
And be down I guess meaningfully year over year or is there some pricing power or the reasons why gross margin could be higher.
Yeah, Matt I would say flattish, but we're still going to have a higher mix of Asia in our second quarter due to the holidays, but that gets offset by a better <unk>.
Product and customer mix.
Then we had this quarter to kind of offset some of that impact. So flattish is probably the right way to think about it and then when you get into the third and fourth quarters you'd have a higher mix of west you get some of that margin back on a gross margin perspective.
Okay, and just lastly on the SG&A.
It was noted that it was down year on year.
How much of that is related to FX and the natural hedge that you have and in regions like the U K and in Europe , where we're.
Where where the currency is an Fe basically a favorable swing for you on the on the Opex side.
Yeah from a currency perspective, you know somewhere between 35 and 40 million Matt was the was the benefit I guess, we got with overall opex.
From a reported perspective.
On a year over year basis.
On a year basis, yes.
Okay terrific, thanks very much.
Thanks, Matt if you are one of these investors.
Thank you. Our next question comes from Jim Suva with Citigroup. Please proceed with your question.
Thank you so much quicker.
Quick question on your operating margins given.
Given the state I think Phil mentioned, there's a few push outs, but nothing material I keep an eye on it as far as cancellations and such.
What about operating margins do you think they're kind of sustainable at these levels because you know the investor concern out there of course is that it's asp's come down in order push outs and cancellations ratchet up that ASR that mark operating margins could be under pressure. If you could just kind of help are.
Address that elephant in the room that would be great.
Yeah, I guess I would say, we feel pretty good about the second quarter operating margin still being above 4% you know what's implied in the guidance.
As you look out clearly there would be an impact on our operating margins if we have.
How about deterioration in sales are meaningful deterioration.
So that's that's a given I think when we think about it we feel really good in the mid to long term that we can sustain that level of margins.
And so you know there might be some temporary declines as as those market factors come through the model.
But in general we feel good about our opex levels and feel good about some opportunities like demand creation supply chain services IP that can that can help.
Still give us some some positives on the gross margin.
But clearly we would lose some and then say if the sales go down meaningfully.
Great and a quick follow up interest expense outlook.
A little bit more on that and does it include a planned November increase.
By the fed just so you can kind of think about that.
Yeah, I would say it contemplates.
<unk> increase there in and we're looking at kind of flattish from the first quarter.
Thank you congratulations.
Thank you.
Thank you. Our next question is from William Stein with <unk> Securities. Please proceed with your question.
Great. Thanks for taking my questions first I'm, hoping you can elaborate on the control tower topic. You mentioned this at the analyst day I'm not sure.
How.
Deep we dug into this topic, but I understand that provides your customers with a way to envision their inventory across <unk>.
Various channels.
Can you maybe spend a minute or two talking about how your customers are using you for this and what the financial.
Locations are on your business. Thank you.
Sure well this is Phil.
Yes, we started quoting that serve as we went through the the pandemic and we saw.
The supply chains breakdown, yeah, we're right in the center of that technology supply chain and that's the value we bring to the market as managing supply chain of course demand creation as well.
So we've got many customers and suppliers.
From all verticals frankly, starting to covenants to help them rebuild their supply chain. So there's just a lot of <unk>.
The word transparency lost.
And Oems to where to manufacturing was <unk>.
Multiple manufacturing sites.
Hundreds to suppliers to tens of thousands of Skus and when things started to break down that has lost a lot of that visibility and the one you're right. We had at the Investor Day was Milwaukee right in and they spoke very clearly about that how we were able to build them a week.
We call control tower.
They can help the aggregate.
There are many different skus for many different suppliers, and then filter that or drive that to the right. In this case EMS provider, that's driving the manufacturing for that so it's really a visibility on the transparency and Ben Harris analytics in there to help them with their forecasting and demand.
Friday's as well as what's coming in from our suppliers as we managed at lead times coming in to the Mrp's. So hopefully that helps explain what we're talking about there.
A follow up if I can.
The.
The distribution of parts that are still in a shortage situation I think certainly the microcontroller companies.
For example, those.
Buying from <unk>.
Foundry on very trailing edge they talk about how this is still an AR.
Sort of protracted shortage situation and then there are other components like memory broadly speaking that's in severe oversupply.
Can you talk about the mix between those two dynamics unusual to have.
Such as.
Sort of disparate.
Yeah, I'll do the best I can image sensors.
Tens to 100 different commodity breakout so I'll just give it at a high level, well, which is why by the way with some of the lead times coming in is why we're getting some more inventory, which is again not not a bad thing.
Well maybe to start with the interconnect interim.
<unk>.
For most of it has come down a bit, but there's still a wide range of ammo.
8% to 30 weeks or so well with its approved to the eight weeks since the beginning of 2022.
When you go to jump over to the capacitors MLC sees the general purpose.
Those lead times will come back to more normalcy with there's a lot of those applications are in the PC, but most notably in the mobile suit are back to normal levels in the 12 to 18 weeks, but even in capacitors and even if you look at the high capital large sized caps that go into automotive and high voltage large capesize theres still out 30 plus weeks.
And the passive connector.
There is a huge range of of.
Disparity, if you will and the lead times, which is why it's so tough to just summarize it if you jump over to.
The semi side and you've got you know again products, primarily supporting consumer and compute.
We're experiencing lead time reductions in that area. You mentioned, one like I E. You know memory has come way way down.
Recent but demand is still outpacing any M. C use in power discrete for example lead times remain in the 40 to 52 weeks things like <unk>.
Amps are still 40 to 52 weeks voted regular reached 48 to 52 weeks program with logic, even some program logic, although some of that has improved.
Still as you know anywhere from 20 to 26 weeks and then controller space as you pointed out not much change there.
816, 32 bit pretty much across the board you know low end might be 20 weeks higher than 52 to 60 weeks I'd say.
Every every commodity its the time to do that but we.
We do this for our customers, though by the way or.
That are using a host control towers that are in all of our supply chain services.
Hope that answered at least at a high level.
A mixed bag out there, which I think whats driving it the complexity and the disparities.
Thank you.
Thank you.
Yeah.
Thank you. Our next question is from <unk> <unk> with Bank of America. Please proceed with your question.
Hi, Thanks for taking my questions.
First question is on for now.
Wondering how did that e-commerce sales impact.
Revenues this quarter and then if you can touch on the margin performance I mean, you had pretty strong margins even this quarter.
Percent plus but last quarter was very strong at 14. So just the sequential margin decline how much would you say was FX how much was volume if any color on that sequential trend and how should we think about farnell margins for the third quarter.
Yeah. So I'll go first and turn it over to Ken Thanks, Roop Blue.
E Commerce sales, so still really really strong we call. It for most most of that is on the board computing. So components that are on the board semi IP any.
It represented roughly 73% of the activity. So the line items coming through farnell and still on a 52% to 54% range of the revenue. So we're really really pleased overall with that are those stats and overall pleased with for now still they had a couple of other things that impacted my way Ken touch one.
The FX.
FX with the pound and then a bit with the with the single Board computing.
That drove some volume.
Loss.
Yeah from a operating margin perspective, I would say its about 60 40, 60% was driven by just the sales decline and 40% was driven by.
The impact on gross margin for their pricing because of FX.
Okay. Thanks for the details there.
My follow up can I ask a question on the core business.
It looks like again had a strong quarter with Asia, how should we think about that trend going forward do you think that region's sustained and the demand there versus Europe and North America. Just your thoughts on regional mix are going into the next quarter and then just same question on margins.
Sequentially.
Between the June and September quarters, what were some of the impacts there and how should we think about core margins in the December quarter.
Yeah.
So I'll hit on the revenue.
To touch on the margin.
No other way to say it we're really really pleased with our team's execution in Asia Pac with.
The mixed messages that there was another record quarter for us in Asia Pac.
And we're also really watching their backlog as well for the reality of the backlog and the integrity of the backlog in our leadership team. There has been very I would say very assertive in making sure. That's that's as clean as possible as we move forward and as you look into.
Q2.
We're seeing pretty steady performance.
Performance in Asia Pac from the September to the December quarter, Okay, which is.
We think pretty positive so as of.
March quarter, what we'll look at we don't go that far out, but we'll see how the the traditional Chinese new year holiday in Asia impacts March we'll talk about that next quarter, but right now the December quarter is looking pretty good for us in Asia as we see today, Ken you want to touch on them yet. So so from an overall Asia mix, you're going to see an increase in Asia sales. This next quarter.
Because of the west has a little bit softer sales because of the holidays less shipping days. So and then you get into the third quarter, you'd see Asia become less and less percentage in the west become higher so that's kind of how to think about it from a seasonality not not talking about anything in the Q3 sales levels that are just more in general to the cadence of the business.
I'd say from a core business operating margin perspective, you know, we will have a higher Asia mix. So that will put pressure on the operating margin, but I think I'll have a better product and customer mix offsetting that so flattish is the right way to think about the core operating margin into this next quarter and we'd expect it all things being equal and seasonality that to go up as we get.
Onto our third and fourth quarters with a higher mix of west business that has a higher gross margin.
Got it thanks for the detail sorry, if I can just has one more quick follow up did.
Did you Phil mentioned, what was demand creation as a percent of total revenue and how should we think about that going forward.
Yes, we did lose roughly 30, 31% of our total revenue.
And with the revenue being as high as it was it was another record of demand creation dollars.
The funnel looks good moving forward, our registrations and design wins I'm still a big part of our success story as we move forward, so pretty pretty bullish on our demand creation.
Okay. Thanks for all the details appreciate it.
Hi.
Thank you. Our next question comes from Joseph Cardoso with J P. Morgan. Please proceed with your question.
And thanks for the question.
First one is just a quick one and a follow up on the Parnell margin this quarter and prior quarters, you called out pricing benefits that you've seen in the margins themselves. So I was just curious did.
Did you see any pricing benefits on farnell margins in the September quarter, and if so what was the magnitude of that.
Yeah, I wouldn't say, we saw any pricing benefits from the Farnborough margin if anything a couple of those.
Commodities, where the lead times have come down we might have got a little pressure on it but I would say you know the pressure. We saw this quarter is really purely FX and and you know the difference in pricing due to variance various currencies.
Between our U S based competitors in farnell being a primarily U K based.
Company, so that that was the main pressure.
A little bit of noise here, and there, but nothing nothing meaningful to point out.
No understood. Thanks for the clarity and then just my follow up you know last quarter, you spoke about seeing ASP inflation for E. C. I think it was somewhere in the range of 17% high single digit cash bonds.
And could we start to see some moderation. Thanks for the question guys.
Hey, Joe Let me take a shot I think you kind of broke up at least on our end a suite of other pricing inflation, we talked about last quarter.
Correct, yes.
Okay. Yeah. So yeah last quarter, we said roughly to 20% to 25% of our growth would've been for ASP.
Price increases.
It doesn't affect our margin as much I'm not sure. If that's part of your question, it's more GP dollars than anything about G. P per cent and then this quarter, we started to see some of that moderate so some of it would've been from carryover, but a lot of the price increases have seemed to work through the system at this point so in quarter.
Commentary at least from our supplier partners about them lowering.
Prices. So yes, the price increases have moderated, but not a lot on lowering prices.
And so.
That's kind of how how we're viewing it right now, but you know clearly continue to monitor.
The tone of conversation around Asp's.
Thanks for the question I appreciate all the color guys.
Thank you Joe.
Okay.
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 remarks.
Sure. Thank you very much I just wanted to again well thank everyone for attending today's earnings call and one more time, thank the avnet team around the world for a terrific performance.
And we really look forward to speaking to all of you again on our fiscal second quarter earnings report in January Okay have a good rest of the year. Thank you.
Yeah.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.