Q4 2024 Avnet Inc Earnings Call

Please stand by. Our presentation will now begin. Welcome to the Avnet fourth quarter fiscal year 2024 earnings call. I would now like to turn the floor over to Joe Burke, Vice President, Treasurer, and Investor Relations for Avnet.

Operator: Welcome to the Avnet 4th quarter fiscal year 2024 earnings call.

Joseph Burke: I would now like to turn the floor by the Joe Burke, Vice President, Treasurer, and Investor Relations for Avnet.

Operator: to the Avnet fourth quarter fiscal year 2024 earnings call. I would now like to turn the floor over to Joe Burke, Vice President, Treasurer, and Investor Relations for Avnet.

Joseph Burke: Thank you, operator. I'd like to welcome everyone to the Avnet 4th quarter fiscal year 2024 earnings conference call. This morning, Avnet released financial results for the 4th quarter and fiscal year 2024. And the release is available on the Investor Relations section of Avnet's website, along with a slide presentation, which you may access at your convenience.

Joseph Burke: Thank you, operator. I'd like to welcome everyone to the Avnet fourth quarter fiscal year 2024 earnings conference call. This morning, Avnet released financial results for the fourth quarter and fiscal year 2024, and the release is available in the Investor Relations section of Avnet's website along with a slide presentation which you may access at your convenience. As a reminder, some of the information contained in the news release and on this conference call contains forward-looking statements that involve risk, uncertainties, and assumptions that are difficult to predict.

Joe Burke: Thank you, operator. I'd like to welcome everyone to the Avnet fourth quarter fiscal year 2024 earnings conference call.

Speaker Change: This morning, Avnet released financial results for the fourth quarter and fiscal year 2024, and the release is available on the investor relations section of Avnet's website, along with a slide presentation, which you may access at your convenience.

Joseph Burke: As a reminder, some of the information contained in the news release and on this conference call contain forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Such 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's 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.

Joseph Burke: Such forward-looking statements are not guarantees 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's most recent Forms 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.

Speaker Change: As a reminder, some of the information contained in the news release and on this conference call contain forward-looking statements that involve risk, uncertainties, and assumptions that are difficult to predict.

Speaker Change: 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.

Speaker Change: Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent Form 10-Q and 10-K and subsequent filings with the SEC.

Speaker Change: 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.

Joseph Burke: Please note, unless otherwise stated, all results provided will be non-GAAP measures. The full non-GAAP to GAAP reconciliation can be found in the press release issued today, as well as in the appendix slides of today's presentation and posted on the Investor Relations website.

Joseph Burke: Please note, unless otherwise stated, all results provided will be non-GAAP measures. The full non-GAAP to GAAP reconciliation can be found in the press release issued today as well as in the appendix slides of today's presentation and posted on the Investor Relations website.

Speaker Change: Please note, unless otherwise stated, all results provided will be non-GAAP measures. The full non-GAAP to GAAP reconciliation can be found in the press release issued today as well as in the appendix slides of today's presentation and posted on the Investor Relations website.

Joseph Burke: Today's call will be led by Phil Gallagher, Avnet's CEO, and Ken Jacobson, Avnet's CFO.

Joseph Burke: Today's call will be led by Phil Gallagher, Avnet's CEO, and Ken Jacobson, Avnet's CFO. With that, let me turn the call over to Phil.

Phil Gallagher: Today's call will be led by Phil Gallagher, Avnet's CEO , and Ken Jacobson, Avnet's CFO . With that, let me turn the call over to Phil Gallagher. Phil?

Philip Gallagher: With that, let me turn the call over to Phil Gallagher. Phil?

Philip Gallagher: Thank you, Joe, and thank you everyone for joining us on our fourth quarter and fiscal year 2024 earnings call. For fiscal year 2024, we delivered 23.8 billion hours in revenues and five hours and 43 cents of diluted earnings per share. Looking back on fiscal year 24, we began the year with great momentum from fiscal year 23, which was a record year both for revenues and earnings per share.

Philip Gallagher: Thank you, Joe, and thank you everyone for joining us on our fourth quarter and fiscal year 2024 earnings call. For fiscal year 2024, we delivered $23.8 billion in revenues and $0.0543 of diluted earnings per share.

Phil Gallagher: Thank you, Joe, and thank you, everyone, for joining us on our fourth quarter in fiscal year 2024 earnings call.

Speaker Change: For fiscal year 2024, we've delivered $23.8 billion in revenues and $0.0543 of diluted earnings per share.

Philip Gallagher: Looking back on fiscal year 24, we began the year with great momentum from fiscal year 23, which was a record year both for revenues and earnings per share. As 2024 progressed, we faced a softening demand environment. I want to thank our team for their execution and perseverance in these challenging market conditions. Their continued efforts will allow us to emerge from the corrections stronger as the market recovers.

Speaker Change: Looking back on fiscal year 24, we began the year with great momentum from fiscal year 23, which was a record year both for revenues and earnings per share.

Philip Gallagher: As 2024 progressed, we faced a softening demand environment. And I want to thank our team for their execution and perseverance in these challenging market conditions. Their continued efforts will allow us to emerge from the corrections stronger as the market recovers. Turning to the completed fourth quarter, I'm pleased we delivered another quarter of financial results that exceeded our top line in EPS guidance. In the quarter, we achieved sales of 5.6 billion dollars and adjusted operating margins of 3.5 percent, highlighted by a 4.1 percent operating margin in our electronic opponents business. With the structural improvements we've made over the past few years, our EC business has now delivered 10 consecutive quarters of greater than 4 percent operating margin.

Speaker Change: As 2024 progressed, we faced a softening demand environment, and I want to thank our team for their execution and perseverance in these challenging market conditions. Their continued efforts will allow us to emerge from the correction stronger as the market recovers.

Philip Gallagher: Turning to the completed fourth quarter, I'm pleased we delivered another quarter of financial results that exceeded our top line in EPS guidance. In the quarter, we achieved sales of $5.6 billion and adjusted operating margins of 3.5%, highlighted by a 4.1% operating margin in our electronic components business. With the structural improvements we've made over the past few years, our EC business has now delivered 10 consecutive quarters of greater than 4% operating margin.

Speaker Change: Turning to the completed fourth quarter, I'm pleased we delivered another quarter of financial results that exceeded our top line in EPS guidance.

Speaker Change: done

Speaker Change: In the quarter, we achieved sales of $5.6 billion and adjusted operating margins of 3.5%, highlighted by a 4.1% operating margin in our electronic components business.

Speaker Change: With the structural improvements we've made over the past few years, our EC business has now delivered 10 consecutive quarters of greater than 4% operating margin.

Philip Gallagher: We also had another good quarter of cash flow generation. Primarily, the result of executing sound working capital management as we navigate through the market correction.

Philip Gallagher: We also had another good quarter of cash flow generation, primarily the result of executing sound working capital management as we navigate through the market correction, sequentially demand declines across most of the end markets we serve. On a year-on-year basis, aerospace and defense was the only end market with increased demand. Semiconductor lead times have continued to decrease and remain relatively low for most technologies. And as I mentioned last quarter, the growth in data center build-outs surrounding cloud and artificial intelligence is driving longer lead times for certain products, and we would expect this to continue. On the IP&E side, lead times are generally stable at a return of what I would characterize as a normal range.

Speaker Change: We also had another good quarter of cash flow generation, primarily the result of executing sound working capital management as we navigate through the market correction.

Philip Gallagher: To quench the demand decline across most of the end markets we serve. On the year and basis, aerospace and defense was the only end market with increased demand goal. Samuel Leverly times have continued to decrease and remain relatively low for most technologies. And, as I mentioned last quarter, the growth and data center buildouts surrounding cloud and artificial intelligence is driving longer lead times for certain products, and we would expect this to continue. On the IPN side, lead times are generally stable and every turn of what I would characterize as a normal range, and we are seeing increasing demand for some interconnect products and capacitors for certain applications.

Speaker Change: Sequentially, demand declined across most of the end markets we served. On a year-on-year basis, aerospace and defense was the only end market with increased demand globally.

Speaker Change: Semiconductor lead times have continued to decrease and remain relatively low for most technologies. And as I mentioned last quarter, the growth in data center build-outs surrounding cloud and artificial intelligence is driving longer lead times for certain products, and we would expect this to continue.

Speaker Change: On the IP&E side, lead times are generally stable and have returned to what I would characterize as a normal range, and we are seeing increasing demand for some interconnect products and capacitors for certain applications.

Philip Gallagher: And we are seeing increasing demand for some interconnect products and capacitors for certain applications. Our global book-to-bill ratio improved modestly over the last quarter, led by our Asia and Americas regions, both finishing the quarter approaching parity. Our EMEA business, which has a large portion of its business driven by the industrial and transportation end markets, is seeing softer bookings and billings due to lower demand. However, our backlog is lower as a result of shorter lead times and customers working through their inventory on hand. Cancellations have remained at normal levels.

Philip Gallagher: Our global book-to-build ratio improved modestly over the last quarter, led by our Asia and America's regions, both finishing the quarter approaching parity. Our Amia business, which has a large portion of its business driven by the industrial and transportation markets, is seeing softer bookings and buildings due to lower demand. Our backlog is lower as a result of shorter lead times and customers working through their inventory on hand. Cancelations have remained at normal levels. I'm really pleased with the progress our team has made in improving our inventory position. This is a key focus area for our organization, and we still have some work to do.

Speaker Change: Our global book-to-bill ratio improved modestly over the last quarter, led by our Asia and Americas regions, both finishing the quarter approaching parity.

Speaker Change: Our EMEA business, which has a large portion of its business driven by the industrial and transportation end markets, is seeing softer bookings and billings due to lower demand.

Speaker Change: Our backlog is lower as a result of shorter lead times and customers working through their inventory on hand.

Speaker Change: Cancellations have remained at normal levels.

Philip Gallagher: I'm really pleased with the progress our team has made in improving our inventory position. This is a key focus area for our organization, and we still have some work to do. While we have more inventory than we need to support near-term demand in some areas, there are other areas where we want to make strategic investments. Having the right inventory is still a key growth enabler and is an important part of our value proposition at the center of the technology supply chain. Now with that, let me turn to the fourth quarter results. On the top line, our electronic components business declined on a global basis.

Speaker Change: I'm really pleased with the progress our team has made in improving our inventory position.

Speaker Change: This is a key focus area for our organization and we still have some work to do.

Philip Gallagher: While we have more inventory than we need to support in your term demand in some areas, there are other areas where we want to make strategic investments. Having the right inventory is still a key growth enabler, and it's an important part of our value proposition at the center of the technology supply chain.

Speaker Change: While we have more inventory than we need to support near-term demand in some areas, there are other areas where we want to make strategic investments.

Speaker Change: Having the right inventory is still a key growth enabler and is an important part of our value proposition at the center of the technology supply chain.

Philip Gallagher: Now, with that, let me turn to the four-quarter results. At the top line, our electronic components business declined on a global basis. In Amia, demand in the aerospace defense and market increased sequentially and year on year as military budgets have increased across Europe. In the Americas, demand increased sequentially for aerospace and defense and industrial end markets, and aerospace end defense was strongest on a year-on-year basis. I mentioned on our last earnings call we were seeing signs of a bottoming in our Asia region, giving us reasons to be optimistic that the market correction may be nearing its final phase in Asia.

Speaker Change: Now with that, let me turn to the fourth quarter results.

Speaker Change: At the top line, our electronic components business declined on a global basis.

Philip Gallagher: In the MIA, demand in the aerospace and defense end market increased sequentially and year-on-year as military budgets increased across Europe. In the Americas, demand increased sequentially for aerospace and defense and industrial end markets, and aerospace and defense was strongest on a year-on-year basis. I mentioned on our last earnings call that we were seeing signs of a bottoming in our Asia region, giving us reasons to be optimistic that the market correction may be nearing its final phase in Asia.

Speaker Change: In EMEA, demand in the aerospace and defense end market increased sequentially and year-on-year as military budgets have increased across Europe .

Speaker Change: In the Americas, demand increased sequentially for aerospace and defense and industrial end markets and aerospace and defense was strongest on a year-on-year basis.

Speaker Change: I mentioned on our last earnings call we were seeing signs of a bottoming in our Asia region, giving us reasons to be optimistic that the market correction may be nearing its final phase in Asia.

Philip Gallagher: So the notable that our Asia revenues increased sequentially as demand in the industrial, transportation, and consumer end markets all increased, with transportation showing the best growth on a year-on-year basis.

Philip Gallagher: So it is notable that our Asia revenues increased sequentially as demand in the industrial, transportation, and consumer markets all increased, with transportation showing the best growth on a year-on-year basis. We expect a return to overall year-on-year growth in Asia in either the September or December quarter.

Speaker Change: So it is notable that our Asia revenues increased sequentially as demand in the industrial, transportation, and consumer end markets all increased, with transportation showing the best growth on a year-on-year basis.

Philip Gallagher: We expect a return to overall year-on-year growth in Asia and either the September or December quarter. On the demand creation side, our engineering teams continued to engage with our customers and suppliers on design wins and registrations. This growth increases in revenues on a sequential basis and validates the value proposition we can deliver in any type of market.

Speaker Change: We expect a return to overall year-on-year growth in Asia in either the September or December quarter.

Philip Gallagher: On the demand creation side, our engineering teams continue to engage with our customers and suppliers on design wins and registrations. This drove increases in revenues on a sequential basis and validates the value proposition we can deliver in any type of market. Before we get into Farnell's results, I would like to highlight that Rebecca Obergon has recently been named president of Farnell.

Speaker Change: On the demand creation side, our engineering teams continue to engage with our customers and suppliers on design wins and registrations. This drove increases in revenues on a sequential basis and validates the value proposition we can deliver in any type of market.

Philip Gallagher: Before we get into Fresnel's results, I would like to highlight that Rebecca Obergaard has been recently named President of Fresnel. In her time at AdNet, Rebecca has demonstrated the ability to develop an execute strategy and drive cultural alignment not only with our employees but with our customers and suppliers globally. I am confident that her experience, relationships, and collaborative approach will drive important synergies to accelerate Fresnel's profitable growth. Fresnel is not immune to overall market softness, and the fourth quarter sales were down sequentially and year on year, similar to the sales trends in our MEA EC visit.

Speaker Change: Before we get into Farnell's results, I would like to highlight that Rebecca Overgaard has been recently named president of Farnell.

Philip Gallagher: In her time at Avnet, Rebecca has demonstrated the ability to develop and execute strategy and drive cultural alignment, not only with our employees but with our customers and suppliers globally. I'm confident that her experience, relationships, and collaborative approach will drive important synergies to accelerate Parnell's profitable growth. Arnell is not immune to overall market softness, and his fourth quarter sales were down sequentially and year-on-year, similar to the sales trends in our EMEA EC visit. Sales were lower sequentially, mostly due to lower demand for semi-locked.

Speaker Change: In her time at Avnet, Rebecca has demonstrated the ability to develop and execute strategy and drive cultural alignment, not only with our employees, but with our customers and suppliers globally.

Speaker Change: I'm confident that her experience, relationships, and collaborative approach will drive important synergies to accelerate Farnell's profitable growth.

Speaker Change: well

Speaker Change: Arnell is not immune to overall market softness and the fourth quarter sales were down sequentially and year-on-year similar to the sales trends in our EMEA EC business.

Philip Gallagher: to Ells were lower sequentially, mostly due to lower demand for semiconductors. Gross margin that for now have stabilized, and with the previously announced cost reductions, which are proceeding as planned, we expect margins to improve over the course of fiscal year 2025. We continue to expect for now's high service offerings to enhance the synergistic collaboration between for now and Avnet. The combination allows us to serve our customers from new product introduction to mass production as one of them. Avnet is positioned as one of the only broadline global distributors that also has a global high-service distribution business.

Speaker Change: Sales were lower sequentially, mostly due to lower demand for semilockers.

Philip Gallagher: Gross margins, as for now, have stabilized, and with the previously announced cost reductions, which are proceeding as planned, we expect margins to improve over the course of fiscal year 2025. We continue to expect Farnell's high-service offerings to enhance the synergistic collaboration between Farnell and Avnet. The combination allows us to serve our customers from new product introduction to mass production as one Avnet is positioned as one of the only broad line global distributors that also has a global high service distribution business.

Speaker Change: Gross margins, as for now, have stabilized, and with the previously announced cost reductions, which are proceeding as planned, we expect margins to improve over the course of fiscal year 2025.

Speaker Change: We continue to expect Farnell's high-service offerings to enhance the synergistic collaboration between Farnell and Avnet. The combination allows us to serve our customers from new product introduction to mass production as one Avnet.

Speaker Change: Avnet is positioned as one of the only broad line global distributors that also has a global high service distribution business.

Philip Gallagher: As a key player in the global technology supply chain, we continue to leverage our value proposition and other areas such as demand creation, IP&E, and embedded computing. I've already mentioned our demand creation engineering capabilities. IP&E continues to be a key focus for our team, and in Q4, we saw a nice increase in this area, particularly in Asia, much of which is related to the build out of data centers. In addition to IP&E and demand creation, we're also focused on driving value for our embedded solutions of offerings. OEMs are increasingly looked to move from chip down manufacturing to using modular compute solutions into their products.

Philip Gallagher: As a key player in the global technology supply chain, we continue to leverage our value proposition in other areas, such as demand creation, IP&E, and embedded computing. I've already mentioned our demand creation engineering capability. IP&E continues to be a key focus for our team, and in Q4 we saw a nice increase in this area, particularly in Asia, much of which is related to the build-out of data centers. In addition to IP&E and demand creation, we're also focused on driving value through our embedded solutions offering.

Speaker Change: As a key player in the global technology supply chain, we continue to leverage our value proposition in other areas, such as demand creation, IP&E, and embedded computing. I've already mentioned our demand creation engineering capabilities.

Speaker Change: IP&E continues to be a key focus for our team, and in Q4 we saw a nice increase in this area, particularly in Asia, much of which is related to the build-out of data centers.

Speaker Change: In addition to IP&E and demand creation, we are also focused on driving value for our embedded solutions offerings.

Philip Gallagher: OEMs are increasingly looking to move from chip-down manufacturing to using modular compute solutions in their products. Because of this trend, we recently announced the launch of the TRIA brand for our business unit, which is designed to manufacture embedded compute modules and systems. The new Distinct brand will improve our ability to compete with other standalone brands in the embedded solutions business. The market opportunity we targeted through TRIA is just another example of how we have adapted to the changing needs of our customers and the technology offering of our suppliers over the past 103 years.

Speaker Change: OEMs are increasingly looking to move from chip-down manufacturing to using modular compute solutions into their products.

Philip Gallagher: Because of this trend, we recently announced the launch of the Tree of Brand for our business unit that is designed to manufacture embedded compute modules and systems. The new distinct brand will improve our ability to compete with other standalone brands in the embedded solutions business. The market opportunity we targeted through TRIA is just another example of how we have adapted to the changing needs of our customers and the technology offering of our suppliers over the past hundred and three years.

Speaker Change: Because of this trend, we recently announced the launch of the TRIA brand for our business unit that's designed to manufacture embedded compute modules and systems.

Speaker Change: The new distinct brand will improve our ability to compete with other standalone brands in the embedded solutions business.

Speaker Change: The market opportunity we targeted through TRIA is just another example of how we have adapted to the changing needs of our customers and the technology offering of our suppliers over the past 103 years. So stay tuned for future updates on our progress in embedded space.

Philip Gallagher: So stay tuned for future updates on our progressing Embedded Space. To conclude, I continue to feel optimistic about the long-term trends and the demand for technology and the pervasiveness of electronics in so many applications today and in the future. This includes those driven by AI adoption as companies explore innovative ways to leverage its capabilities in both the data center and ultimately edge computing applications. We are participating in the AI growth through sales of components into data centers, as well as providing supply chain services surrounding the data center.

Philip Gallagher: So stay tuned for future updates on our progress in embedded space.

Philip Gallagher: To conclude, I continue to feel optimistic about the long-term trends in the demand for technology and the pervasiveness of electronics in so many applications today and in the future. This includes those driven by AI adoption as companies explore innovative ways to leverage its capabilities in both the data center and ultimately edge computing applications. We are participating in the AI growth trends through sales of components into data centers as well as providing supply chain services surrounding the data center. This participation is expected to grow over the next several quarters and should positively impact sales across several verticals.

Speaker Change: To conclude, I continue to feel optimistic about the long-term trends in the demand for technology and the pervasiveness of electronics in so many applications today and in the future.

Speaker Change: This includes those driven by AI adoption as companies explore innovative ways to leverage its capabilities in both the data center and ultimately edge computing applications.

Speaker Change: We are participating in the AI growth trends through sales of components into data centers, as well as providing supply chain services surrounding the data center.

Philip Gallagher: This participation is expected to grow over the next several quarters and should positively impact sales across several verticals. I'm excited that Avnet's position at the center of the technology supply chain will allow us to continue to deliver increasing value to our customers and supplier partners. As we enter fiscal year 25, the prevailing belief is that the market correction seems to be in its last stages. Our Asia region appears to have bottomed, and we are awaiting signs for a similar bottoming or inflection point to manifest in the Americas and Europe.

Speaker Change: This participation is expected to grow over the next several quarters and should positively impact sales across several verticals.

Philip Gallagher: I am excited that admin's position at the center of the technology supply chain will allow us to continue to deliver increased value to our customers and supplier partners.

Speaker Change: I'm excited that Avnet's position at the center of the technology supply chain will allow us to continue to deliver increasing value to our customers and supply our partners.

Philip Gallagher: As the enter fiscal year 25, the probability of relief is that the market correction seems to be in its last stages. Our Asia region appears to have bottomed, and we are awaiting signs for some were bottoming or a fraction point to manifest in America's and Europe. Until then, we will continue to navigate through this market and control what we can control in anticipation of a brighter demand environment in the quarters to come.

Speaker Change: As we enter fiscal year 25, the prevailing belief is that the market correction seems to be in its last stages.

Speaker Change: Our Asia region appears to have bottomed, and we are awaiting signs for a similar bottoming or inflection point to manifest in the Americas and Europe .

Philip Gallagher: Until then, we will continue to navigate this market and control what we can control in anticipation of a brighter demand environment in the quarters to come. Now, with that, I'll turn it over to Ken to dive deeper into our fourth quarter results.

Speaker Change: Until then, we will continue to navigate through this market and control what we can control in anticipation of a brighter demand environment in the quarters to come.

Ken Jacobson: Now, with that, I turn it over to Ken to dive deeper into our fourth quarter results.

Speaker Change: Now, with that, I'll turn it over to Ken to dive deeper into our fourth quarter results.

Ken Jacobson: Thank you, Phil, and good morning, everyone. We appreciate your interest in Avnet and for joining us on our fourth quarter earnings call. Our sales for the fourth quarter were approximately $5.6 billion, above guidance and down 15% year-over-year, or down 14% in constant currency, on a sequential basis. Sales are down 1% in constant currency due to sales declines in the western regions and below seasonal sales growth in Asia. On a year-over-year basis, sales declined in constant currency by 2% in Asia, 21% in EMEA, and 22% in the Americas.

Ken Jacobson: Thank you, Phil. Good morning, everyone. We appreciate your interest in Abda and for joining our fourth quarter earnings call. Our sales for the fourth quarter were approximately $5.6 billion above guidance and down 15% year-over-year, or down 14% in constant current. On a sequential basis, sales are down 1% in Concentrancy due to a sales decline in the western regions and below seasonal sales growth in Asia. On a year-over-year basis, sales decline in Concentrancy, 2% in Asia, 21% in Amia, and 22% in the Americas. From an operating group perspective, electronic component sales decline, 15% year-over-year, and 14% in Concentrancy. EC sales decline, less than 1% quarter of a quarter in Concentrancy.

Ken Jacobson: From an operating group perspective, electronic component sales declined 15% year-over-year and 14% in constant currency. EC sales declined less than 1% quarter-over-quarter in constant currency. Cornell sales declined 16% year-over-year and 15% in constant currency. For now, sales declined 8% sequentially in concert.

Ken: Thank you, Phil, and good morning, everyone. We appreciate your interest in Avnet and for joining our fourth quarter earnings call. Our sales for the fourth quarter were approximately $5.6 billion above guidance and down 15% year-over-year, or down 14% in constant currency.

Ken: On a sequential basis, sales were down 1% in constant currency due to sales declines in the western regions and below seasonal sales growth in Asia. On a year-over-year basis, sales declined in constant currency 2% in Asia, 21% in EMEA, and 22% in the Americas.

Ken: From an operating group perspective, electronic component sales declined 15% year over year and 14% in constant currency. EC sales declined less than 1% quarter over quarter in constant currency.

Ken Jacobson: For an sales decline, 16% year-over-year, and 15% in Concentrancy. For an sales decline, 8% sequentially in Concentrancy. For the fourth quarter, gross margin of 11.6% was 92 basis points lower year-over-year and 28 basis points lower sequentially. Our fourth quarter gross margin benefited from the impact of some of the strategic inventory opportunities we mentioned last quarter. EC gross margin was down sequentially in year-over-year. The sequentially decline was primarily due to the lower mix of sales from the western regions. For an L gross margin was down sequentially in year-over-year, largely due to continued weak market demand for on-the-board components.

Speaker Change: Farnell sales declined 16% year-over-year and 15% in constant currency. Farnell sales declined 8% sequentially in constant currency.

Ken Jacobson: For the fourth quarter, gross margin of 11.6% was 92 basis points lower year-over-year and 28 basis points lower sequentially. Our fourth quarter gross margin benefited from the impact of some of the strategic inventory opportunities we mentioned last quarter. E.C.

Speaker Change: For the fourth quarter, gross margin of 11.6 percent was 92 basis points lower year over year and 28 basis points lower sequentially. Our fourth quarter gross margin benefited from the impact of some of the strategic inventory opportunities we mentioned last quarter.

Ken Jacobson: Gross Margin was down sequentially year over year. The sequential decline was primarily due to a lower mix of sales from the western region. For now, Gross Margin was down sequentially and year-over-year, largely due to continued weak market demand for on-the-board. Turning to operating expenses, SG&A expenses were $450 million in the quarter, down $56 million, or 11% year-over-year, and down $17 million, or 4% sequentially. As a percentage of gross profit dollars, SG&A expenses were flat sequentially at 70%.

Speaker Change: EC gross margin was down sequentially year over year. The sequential decline was primarily due to a lower mix of sales from the western regions.

Speaker Change: Fornell Gross Margin was down sequentially annually over the year, largely due to continued weak market demand for on-the-board components.

Ken Jacobson: Turning to operating expenses, SGN expenses were $450 million in the quarter, down $56 million, or 11% year-over-year, and down $17 million, or 4% sequentially. As a percentage of gross profit, SGNA expenses were flat sequentially at 70%. In the fourth quarter, we incurred additional restructuring, integration, and other costs for our previously communicated cost reduction actions at both For Now and REC business. These actions included a combination of permanent and temporary cost reductions across all regions. We saw some impact from these actions during the fourth quarter, including it for now. Moving into fiscal 2025, we expect to realize further benefits from those cost reduction actions.

Speaker Change: Turning to operating expenses, SG&A expenses were $450 million in the quarter, down $56 million or 11% year over year, and down $17 million or 4% sequentially.

Speaker Change: As a percentage of gross profit dollars, SG&A expenses were flat sequentially at 70%.

Ken Jacobson: In the fourth quarter, we incurred additional restructuring, integration, and other costs for our previously communicated cost reduction actions at both Farnell and REC Business. These actions included a combination of permanent and temporary cost reductions across all regions. We saw some impact from these actions during the fourth quarter, including at Farnell.

Speaker Change: In the fourth quarter, we incurred additional restructuring, integration, and other costs for our previously communicated cost reduction actions at both Farnell and our EC business. These actions included a combination of permanent and temporary cost reductions across all regions.

Speaker Change: We saw some impact from these actions during the fourth quarter, including it for now.

Ken Jacobson: Moving into fiscal 2025, we expect to realize further benefits from those cost-reduction actions. However, some of the impact will be offset by operating expense headwinds driven by the start of the new fiscal year. For the fourth quarter, we reported adjusted operating income of $193 million, and our adjusted operating margin was 3.5%. By Operating Group, Electronic Components operating income was $210 million, and AC Operating Margin was 4.1%. Parnell's operating income was $15 million, and its operating margin remained at 4%.

Speaker Change: Moving into fiscal 2025, we expect to realize further benefits from those cost reduction actions. However, some of the impact will be offset by operating expense headwinds driven by the start of the new fiscal year.

Ken Jacobson: However, some of the impact will be offset by operating expense headwinds driven by the start of the new fiscal year. For the fourth quarter, we reported adjusted operating income of $193 million, and our adjusted operating margin was 3.5%. By operating group, electronic components operating income was $210 million, and AC operating margin was 4.1%. For now, operating income was $15 million, and for now, operating margin remained at 4%. For now, the expenses were lower this quarter by approximately $10 million, but this benefit was offset by the sequential sales decline driven by the overall market correction, as most of the Far Now's business is in Amia and the Americas.

Speaker Change: For the fourth quarter, we reported adjusted operating income of $193 million and our adjusted operating margin was 3.5%. By operating group, electronic components operating income was $210 million and AC operating margin was 4.1%.

Parnell: Parnell Operating Income was $15 million dollars and Parnell Operating Margin remained at 4%.

Ken Jacobson: Farnell's expenses were lowered this quarter by approximately $10 million, but this benefit was offset by the sequential sales decline driven by the overall market correction, as most of Farnell's business is in EMEA and the Americas. Turning to expenses below operating income, fourth-quarter interest expense of $64 million decreased by $11 million year-over-year and was down $9 million sequentially, primarily due to lower debt levels throughout the quarter. Our adjusted effective income tax rate of 15% was lower than expected in the quarter, driven by various factors, including truing up the full year adjusted effective tax rate of 22% during the fourth quarter.

Speaker Change: Farnell's expenses were lowered this quarter by approximately $10 million, but this benefit was offset by the sequential sales decline driven by the overall market correction, as most of Farnell's business is in EMEA and the Americas.

Ken Jacobson: Turning to expenses below operating income, fourth quarter interest expense was $64 million, decreased by $11 million year over year, and was down $9 million sequentially, primarily due to lower debt levels throughout the quarter. Our adjusted effective income tax rate of 15% was lower than expected in the quarter, driven by various factors, including truing up the full year, adjusted effective tax rate of 22% during the fourth quarter. Adjusted diluted earnings per share of $1.22 exceeded our expectations for the quarter due to a combination of higher sales, lower interest expense, and the lower tax rate. The adjusted EPS benefit from the lower than expected interest expense and tax rate was approximately 18 cents.

Speaker Change: Turning to expenses below operating income, fourth quarter interest expense of $64 million decreased by $11 million year-over-year and was down $9 million sequentially, primarily due to lower debt levels throughout the quarter.

Speaker Change: Our adjusted effective income tax rate of 15% was lower than expected in the quarter, driven by various factors including truing up the full year adjusted effective tax rate of 22% during the fourth quarter.

Ken Jacobson: Adjusted diluted earnings per share of $1.22 exceeded our expectations for the quarter due to a combination of higher sales, lower interest expense, and a lower tax rate. The adjusted EPS benefit from the lower than expected interest expense and tax rate was approximately $0.18.

Speaker Change: Adjusted diluted earnings per share of $1.22.

Speaker Change: exceeded our expectations for the quarter due to a combination of higher sales, lower interest expense, and a lower tax rate. The adjusted EPS benefit from the lower-than-expected interest expense and tax rate was approximately $0.18.

Ken Jacobson: Turning to the balance sheet and liquidity, during the quarter, working capital decreased $228 million sequentially, including a decrease in reported inventory of $283 million, a $71 million increase in receivables, and a $16 million increase in payup.

Ken Jacobson: Turning to the balance sheet and liquidity, during the quarter, working capital decreased $228 million sequentially, including a decrease in reported inventories of $283 million, a $71 million increase in receivables, and a $16 million increase in payables. Working capital days decreased six days, quarter over quarter, to 110 days. Our return on working capital was essentially flat quarter over quarter. However, our inventories were down 5% during the quarter, reflecting decreases in the Americas and EMEA regions of EC, and to a lesser extent, across Farnell. Declines in EC inventories were a net of increases in inventories due to strategic opportunities we saw this quarter. Inventory days decreased five days sequentially to 104 days.

Speaker Change: Turning to the balance sheet and liquidity, during the quarter, working capital decreased $228 million sequentially, including a decrease in reported inventories of $283 million, a $71 million increase in receivables, and a $16 million increase in payables.

Ken Jacobson: Charles. Working capital days decreased six days, quarter of a quarter to 110 days. Our return on working capital was essentially flat quarter over quarter. Our inventories were down 5% during the quarter, reflecting decreases in the Americas and Amir regions of E.C. and to a lesser extent across far now. The climbs in E.C. inventories were net of increases in inventories due to strategic opportunities we saw this quarter. Inventory days decreased five days sequentially due 104 days. Our near-term goal is to get inventories below $5 billion. As Phil previously mentioned, although our inventories are elevated in certain areas, we will be looking to invest in other areas where it makes sense for our business.

Speaker Change: Working capital days decreased six days, quarter over quarter, to 110 days. Our return on working capital was essentially flat quarter over quarter.

Speaker Change: Our inventories were down 5% during the quarter, reflecting decreases in the Americas and EMEA regions of EC, and to a lesser extent across Farnell. Declines in EC inventories were a net of increases in inventories due to strategic opportunities we saw this quarter.

Ken Jacobson: Our near-term goal is to get inventories below $5 billion. As Phil previously mentioned, although our inventories are elevated in certain areas, we will be looking to invest in other areas where it makes sense for our business. Our goal continues to be to ensure that we are well positioned to take advantage of the market recovery. We expect to make continued progress heading into fiscal 2025 by adjusting our inventories lower in the areas where they remain elevated. Our decrease in working capital led to a decrease in debt of $56 million.

Speaker Change: Inventory days decreased five days sequentially to 104 days. Our near-term goal is to get inventories below $5 billion.

Speaker Change: As Phil previously mentioned, although our inventories are elevated in certain areas, we will be looking to invest in other areas where it makes sense for our business.

Ken Jacobson: Our goal continues to be to ensure we are well positioned to take advantage of the market recovery. We expect to make continued progress heading into fiscal 2025 by adjusting our inventories lower in the areas where they remain elevated. Our decrease in working capital led to a decrease in debt of $56 million. We generated $274 million of cash from operations in the quarter, $773 million over the past two quarters, and $690 million for the full fiscal year. We ended the quarter with a gross leverage of 2.7 times, and we had approximately $759 million of available committed borrowing capacity.

Phil Gallagher: Our goal continues to be to ensure we are well positioned to take advantage of the market recovery.

Phil Gallagher: We expect to make continued progress heading into fiscal 2025 by adjusting our inventories lower in the areas where they remain elevated.

Speaker Change: Our decrease in working capital led to a decrease in debt of $56 million. We generated $274 million of cash from operations in the quarter, $773 million over the past two quarters, and $690 million for the full fiscal year.

Ken Jacobson: We generated $274 million of cash from operations in the quarter, $773 million over the past two quarters, and $690 million for the full fiscal year. We ended the quarter with a gross leverage of 2.7 times, and we had approximately $759 million of available committed borrowing capacity. With regard to our capital allocation, we continue to prioritize our existing business needs. During the quarter, cash used for CapEx was $26 million, as expected. We expect CapEx to remain at historical levels in fiscal 2025 of approximately $25 million to $35 million per quarter. In the fourth quarter, we paid our quarterly dividend of $0.31 per share, or $28 million. We also repurchased approximately $79 million worth of shares, which represented nearly 2% of our outstanding shares.

Speaker Change: We ended the quarter with a gross leverage of 2.7 times, and we had approximately $759 million of available committed borrowing capacity.

Ken Jacobson: With regards to our capital allocation, we continue to prioritize our existing business needs. During the quarter, cash use for CAPEX was $26 million, as expected. We expect CAPEX to remain at historical levels in fiscal 2025 of approximately $25 million to $35 million per quarter. In the fourth quarter, we paid our quarterly dividend of $0.31 per share or $28 million. We also repurchased approximately $79 million with the shares, which represented nearly 2% of shares outstanding. As we enter the new fiscal year, we have so far repurchased an additional $46 million of shares in July 2024. As our share price continues to trade below look value, which was $54 a share in the fourth quarter.

Speaker Change: With regards to our capital allocation, we continue to prioritize our existing business needs. During the quarter, cash use for CapEx was $26 million, as expected. We expect CapEx to remain at historical levels in fiscal 2025 of approximately $25 million to $35 million per quarter.

Speaker Change: In the fourth quarter, we paid our quarterly dividend of $0.31 per share, or $28 million.

Speaker Change: We also repurchased approximately $79 million worth of shares, which represented nearly 2% of shares outstanding.

Ken Jacobson: As we enter the new fiscal year, we have so far repurchased an additional $46 million of shares in July 2024, as our share price continues to trade below book value, which was $54 a share in the fourth quarter. Our capital allocation priorities have continued to include returning cash to shareholders. Since the start of fiscal year 2019, we have returned nearly $2 billion to shareholders, with nearly $600 million in dividends and nearly $1.4 billion in share repurchases.

Speaker Change: As we enter the new fiscal year, we have so far repurchased an additional $46 million of shares in July 2024.

Speaker Change: as our share price continues to trade below book value, which was $54 a share in the fourth quarter. ?

Ken Jacobson: Our capital allocation priorities have continued to include returning cash to shareholders. Since the start of fiscal year 2019, we have returned nearly $2 billion to shareholders, with nearly $600 million in dividends and nearly $1.4 billion of sharey purchases. We have repurchased 32 million shares over that timeframe, which has reduced our diluted share count by an average of 5% per year. Sharey purchases will continue to be an important part of our CAPEX allocation priorities in fiscal 2025 and beyond. We are targeting a reduction of shares outstanding by at least 5% as well as increasing our dividend during fiscal 2025, thereby continuing our commitment to provide consistent and dependable shareholder returns.

Speaker Change: Our capital allocation priorities have continued to include returning cash to shareholders. Since the start of fiscal year 2019, we have returned nearly two billion dollars to shareholders with nearly six hundred million dollars in dividends and nearly 1.4 billion dollars of share repurchases.

Ken Jacobson: We have repurchased 32 million shares over that time frame, which has reduced our diluted share count by an average of 5% per year. Sherry purchases will continue to be an important part of our capital allocation priorities in fiscal 2025 and beyond.

Speaker Change: We have repurchased 32 million shares over that time frame, which has reduced our diluted share count by an average of 5% per year.

Speaker Change: Share repurchases will continue to be an important part of our capital allocation priorities in fiscal 2025 and beyond. We are targeting a reduction of shares outstanding by at least 5%, as well as increasing our dividend during fiscal 2025, thereby continuing our commitment to provide consistent and dependable shareholder returns.

Ken Jacobson: We are targeting a reduction of shares outstanding by at least 5%, as well as increasing our dividend during fiscal 2025, thereby continuing our commitment to provide consistent and dependable shareholder returns. Turning to guidance, for the first quarter of fiscal 2025, we're guiding sales in the range of $5.25 billion to $5.55 billion and diluted earnings per share in the range of 80 cents to 90 cents. Our first quarter guidance assumes current market conditions persist and implies a sequential sales change of flat to down 5%, with greater-than-seasonal sales declines in the Western regions and lower-than-seasonal sales growth in Asia.

Ken Jacobson: Turning to guidance, for the first quarter of fiscal 2025, we are guiding sales in the range of $5.25 billion to $5.55 billion and diluted earnings per share in the range of 80 cents to 90 cents. Our first quarter guidance assumes current marking conditions persist and implies a sequential sales change of flat to down 5%, with greater than seasonal sales declines in the western regions and lower than seasonal sales growth in Asia. On a year-over-year basis, this guidance implies flat sales in Asia as we are close to returning to year-over-year growth in that region. Assumptions for the first quarter operating expenses include some headwind specific to variable compensation resets and seasonal increases in stock-based compensation, which will offset some of the cost reduction initiatives we have implemented at Farnall on the EC level.

Ken Jacobson: On a year-over-year basis, this guidance implies flat sales in Asia as we are close to returning to year-over-year growth in that region. Assumptions for the first quarter operating expenses include some headwinds specific to variable compensation resets and seasonal increases in stock-based compensation, which will offset some of the cost reduction initiatives we have implemented at Farnell and the EC level. This guidance also assumes similar interest expense compared to the fourth quarter, an effective tax rate of between 21% and 25%, and 90 million shares outstanding on a diluted basis.

Speaker Change: Turning to guidance for the first quarter of fiscal 2025, we're guiding sales on the range of 5.25 billion to 5.55 billion dollars and diluted earnings per share in the range of 80 cents to 90 cents.

Speaker Change: Our first quarter guidance assumes current market conditions persist and implies a sequential sales change of flat to down 5% with a greater than seasonal sales declines in the western regions and a lower than seasonal sales growth in Asia.

Speaker Change: On a year-over-year basis, this guidance implies flat sales in Asia as we are close to returning to year-over-year growth in that region.

Speaker Change: Assumptions for the first quarter operating expenses include some headwinds specific to variable compensation resets and seasonal increases in stock-based compensation, which will offset some of the cost reduction initiatives we have implemented at Farnell on the EC level.

Ken Jacobson: This guidance also assumes similar interest expense compared to the fourth quarter, an effective tax rate of between 21% and 25%, and 90 million shares outstanding on diluted cases. Despite our near-term outlook, we still have momentum entering our new fiscal year. We are well positioned and remain focused on capitalizing on growth opportunities once the market improves, which we expect to happen in the coming quarters. Our focus remains on execution over the things we can control as we continue to demonstrate the value that Avnet provides to our customer and supplier partners at the center of the technology supply chain.

Speaker Change: This guidance also assumes similar interest expense compared to the fourth quarter, an effective tax rate of between 21% and 25%, and 90 million shares outstanding on diluted basis.

Operator: Despite our near-term outlook, we still have momentum entering our new fiscal year. We are well-positioned and remain focused on capitalizing on growth opportunities once the market improves, which we expect to happen in the coming quarters. Our focus remains on execution over the things we can control as we continue to demonstrate the value that Avnet provides to our customer and supplier partners at the center of the technology supply chain. With that, I'll turn it over to the operator to open up for questions. Operator? Thank you. Ladies and gentlemen, we will now be conducting

Speaker Change: Despite our near-term outlook, we still have momentum entering our new fiscal year. We are well positioned and remain focused on capitalizing on growth opportunities once the market improves, which we expect to happen in the coming quarters.

Speaker Change: Our focus remains on execution over the things we can control as we continue to demonstrate the value that Avnet provides to our customer and supplier partners at the center of the technology supply chain.

Operator: With that, I'll turn it over to the operator to open up for questions. Operator. Thank you.

Speaker Change: With that, I'll turn it over to the operator to open up for questions. Operator?

Operator: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 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 start button. One moment, please, while we poll for questions. Our first question comes from William Stein with Truist Securities. Please proceed with your question.

Operator: Ladies and gentlemen, we will now be conducting a question-and-answer session. If you'd 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.

Speaker Change: Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: One moment please, while we poll for questions.

Speaker Change: One moment, please, while we poll for questions.

William Stein: Our first question comes from William Stein, with Truest Securities. Please proceed with your question. Great.

Speaker Change: Our first question comes from William Stein with Truist Securities. Please proceed with your question.

William Stein: Great. Can you confirm that you can hear me? Yeah, Will. We got you. Okay.

William Stein: Can you confirm that you can hear me? Yeah, well, we got you.

William Stein: Thanks for taking my question. Congratulations on the good quarterly results. I wanted to ask about a couple things.

William Stein: Great. Can you confirm that you can hear me?

William Stein: Great. Thanks for taking my question. Congrats on the good quarterly results.

Speaker Change: Yeah, Will, we got you. Great. Thanks for taking my question. Congrats on the good quarterly results.

William Stein: I wanted to ask about a couple of things. I'm going to ask you a question.

William Stein: Can you confirm that you can hear me?

William Stein: Yeah, well, we got you. Great.

William Stein: Thanks for taking my question. Congrats on the good quarterly results. I wanted to ask about a couple of things.

Philip Gallagher: Perhaps first inventory. I think in recent quarters, I'm not sure if you use this word, but I would call it spiky or not well dispersed by supplier and maybe also by region and market. Can you provide an update as to whether that condition improved and your inventory became a bit more dispersed. Dispersed by supplier or if we're still in that sort of spiky situation.

William Stein: I wanted to ask about a couple of things.

William Stein: Perhaps first, inventory. I think in recent quarters, I'm not sure if you use this word, but I would call it spiky or not well dispersed by supplier and maybe also by region and market. Can you provide an update as to whether that condition has improved and your inventory has become a bit more dispersed by supplier or if we're still in that sort of spiky situation?

Speaker Change: Perhaps first, inventory.

Speaker Change: I think in recent quarters, I'm not sure if you use this word, but I would call it spiky or not well dispersed by supplier and maybe also by region and market.

Speaker Change: Can you provide an update as to whether that condition improved and your inventory became a bit more dispersed by supplier or if we're still in that sort of spiky situation?

Philip Gallagher: Yeah, well, thanks. Well, and appreciate the comment.

Philip Gallagher: Yeah, well, thanks, Will, and I appreciate the comment. And this is Phil. I'll start, and then Ken can jump in.

Philip Gallagher: And this is Phil. I'll start, and I can jump in. I think what you refer into is when we talk about our inventory being up and it's higher than we wanted to be still, and we got goals to get it. Continue bringing down. Even with our own team, it's not up across the board. I think that's returns. It's not like it's up in every single commodity or every single product line. It tends to be a little bit more top heavy. Let's say in five or six lines where maybe it's a little bit more imbalanced, if you will.

Phil Gallagher: Yeah, thanks Will and appreciate the comment and this is Phil. I'll start and I can jump in. I think what you're referring to is when we talk about our inventory being up and it's higher than we want it to be still and we got goals to get it continue to bring down.

Philip Gallagher: I think what you're referring to is when we talk about our inventory being up, and it's higher than we want it to be still, and we have goals to get it, continue to bring it down. Even with our own team, it's not up across the board. I think that's what you're talking about. It's not like it's up in every single commodity or every single product line. It tends to be a little bit more top-heavy, let's say, in five or six lines where maybe it's a little bit more imbalanced, if you will, that we're working down.

Speaker Change: Even with our own team, it's not up across the board. I think that's what you're trying to say. It's not like it's up in every single commodity or every single product line. It tends to be a little bit more top-heavy, let's say.

Speaker Change: you know, five or six lines where maybe it's a little bit more imbalanced, if you will.

Philip Gallagher: And that we're working down and in the course we had, as we noted two quarters ago, it kind of a special by that we had as well. That started to come in, which was good for us and good for the customer. So see, I still a little spiky. I guess the right word.

Philip Gallagher: And of course, we had, as we've noted, two quarters ago, kind of a special buy that we had as well that started to come in, which was good for us and good for the customers. So yeah, it's still a little spiky, I guess, is the right word. I'll leave it at that. Ken, do you want to jump in?

Speaker Change: and that we're working down and of course we had, as we've noted, two quarters ago.

Speaker Change: Kind of a special buy that we had as well that started to come in, which was good for us and good, good for the customers. So, yeah, it's still a little spiky, I guess, is the right word.

Philip Gallagher: I'll leave it that. Can you want to jump so again, not all the inventory. Well, we're still investing in inventory. That's why we deliberately put that in the script source of Partisan. Hey, we know we still. Oh, you know, distribution got you got to have inventory, right? With just a little imbalance in certain certain commodities or certain lines.

Philip Gallagher: Again, not all the inventory will. We're still investing in inventory. That's why we deliberately put that in the script so our suppliers know, hey, we know we still, you know, distribution. You got to have inventory, right? We're just a little imbalanced in certain commodities or certain lines.

Ken: I'll leave it at that. Ken, you want to jump in? Again, not all the inventories will. We're still investing in inventory. That's why we deliberately put that in the script so our suppliers know, hey, we know we still, you know, distribution, you got to have inventory, right? We're just a little imbalanced in certain commodities or certain lines.

Philip Gallagher: Well, I just say each region is making progress, but each region has its own kind of situation, even though there are some similarities that cross through it. So again, everyone's got some progress to make, but certain regions have made better progress than others, and we'll continue to drive that through the end of the calendar year.

Philip Gallagher: Well, I just say each region is making progress, but it's it is each region at the tone kind of situation, even other, some similarities that cross through it. You know, so again, everyone's got some progress to make, that certain regions have had better progress than others, and we'll continue to drive it, you know, through the, through the end of the county.

Ken: Well, I just say each region is making progress, but each region has its own kind of situation even though there's some similarities that cross through it. So again, everyone's got some progress to make, but certain regions have had better progress than others, and we'll continue to drive it through the end of the calendar year.

William Stein: I appreciate that answer. Thank you.

Philip Gallagher: I appreciate that answer. Thank you.

William Stein: One other, as I listened to some of your suppliers or large semi-companies that may, some of them may be not even suppliers anymore, there were two interesting takeaways from my perspective. One was that demand conditions, both for orders and for bookings as well, were less dispersed by end market. Maybe if we take out our space defense, maybe that one in particular has been strong, but X that end market, it hasn't been as much of an end market story. It's been much more of a geo story, and the story that the semi-companies told has been that geographically they saw a meaningful recovery, a big snapback in China.

Speaker Change: Appreciate that answer. Thank you. One other

Philip Gallagher: As I listened to some of your comments, there were two interesting takeaways from my perspective. One was that demand conditions, both for orders and for bookings as well, were less dispersed by end market. Maybe if we take out aerospace defense, maybe that one in particular has been strong. But X that end market, it hasn't been as much of an end market story; it's been much more of a geo story. And the story that the semiconductor companies have told is that, geographically, they saw a meaningful recovery, a big snapback in China.

Speaker Change: As I listened to some of your

Speaker Change: Suppliers or large semi-companies that may, some of them may be not even suppliers anymore. There were two interesting takeaways from my perspective. One was that...

Speaker Change: Demand conditions, both for orders and for bookings as well.

Speaker Change: were less dispersed by

Speaker Change: by end market maybe if we take out a airospace defense

Speaker Change: itmaybe that one in particular has been strong but

Speaker Change: X that end market. It hasn't been as much of an end market story. It's been much more of a geo story. And the story that so many companies have told has been

Speaker Change: that, geographically, they saw a meaningful recovery, a big snapback in China.

Philip Gallagher: Have you begun to see a similar trend? It didn't sound quite like that in your prepared remarks, so I'm hoping you can clarify and if you can identify the maybe the difference between what you're seeing and what your suppliers are talking about, that might help us understand the broader picture. Thanks.

William Stein: Have you begun to see a similar trend that didn't sound quite like that in your prepared remarks?

Speaker Change: Have you begun to see a similar trend? It didn't sound quite like that in your prepared remarks, so I'm hoping you can clarify and if you can identify maybe the difference between what you're seeing and what your suppliers are talking about, that might help us.

William Stein: I'm hoping you can clarify, and if you can identify maybe the difference between what you're seeing and what your suppliers are talking about, that might help us understand the broader picture. Thanks. Yeah, thanks, Will. And your overall statement is correct. There's still the demand on bookings is still slower than we'd like it to be. I think most suppliers would have said that. We tracked them as well, but they want more visibility, right? Because the lead times are down, and there's this, I would say false assumption that everything's going to be available anytime anybody wants it. And we know what happens when the market starts to turn.

Philip Gallagher: Yeah, thanks, Will. And your overall statement is correct. There is still demand for bookings, but it's still slower than we'd like it to be. I think most suppliers would have said that. We track them as well.

Speaker Change: understand the broader picture. Thanks.

Speaker Change: Thanks, Will. Your overall statement is correct. The demand on bookings is still slower than we'd like it to be. I think most suppliers would have said that. We track them as well. They want more visibility, right, because the lead times are down.

Philip Gallagher: They want more visibility, right, because the lead times are down and there's this... I would say false assumption that everything's going to be available anytime anybody wants it, and we know what happens when the market starts to turn, so generally, slower. Defense arrow has been fine, actually good.

Speaker Change: I would say false assumption that everything is going to be available any time anybody wants it, and we know what happens when the market starts to turn.

Philip Gallagher: So generally slower, defense arrow has been fine, actually good. The big down market really right now is affecting us most, and most of the suppliers are industrial. If you're in a data center, hyper scale, or AI, you're probably in pretty good shape. As far as Asia Pac or China is specific. Yeah, we've seen a modest; I wouldn't say robust, but a modest recovery in China. We may or may not be playing in some of those suppliers and markets that you're referring to, particularly the lines that we don't have. Yeah, there might be more consumer-based. I'm not really sure.

Speaker Change: Generally slower. Defense arrow has been fine, actually good. The big down market, really, right now, it's affecting us most, and most as far as industrial. If you're in data center, hyperscalers, AI, you know, you're probably in pretty good shape. As far as Asia-Pac or China...

Philip Gallagher: The big down market, really, right now, it's affecting us most, and most as far as industrial. If you're in data center, hyperscalers, AI, you're probably in pretty good shape. As far as Asia-Pacific or China-specific, yeah, we've seen a modest, I wouldn't say robust, but a modest recovery in China. We may or may not be playing in some of those suppliers and markets that you're referring to, particularly the lines that we don't have. They might be more consumer-based; I'm not really sure.

Speaker Change: specific. Yeah, we've seen a modest, I wouldn't say robust, but a modest

Speaker Change: recovery in in China you know we may or may not be playing in some of those suppliers and markets that that you're referring to you know particular lines that we don't have you know they might be more consumer based I'm not really sure

Philip Gallagher: But we're holding on to the China. We're seeing, as we talked about in Asia, we saw those looking at the vertical markets. Now we did see some increase in transportation. We did see some increase in, although modest, in consumer space as well and sequentially in industrial. So at our Asia pack number in total, but Asia as we did talk about in the script, in total now, including Japan, we're going to see sequential growth in either in September or December, the pay and how strong September comes in. We'll begin to see year-on-year growth in Asia Pac, which was a good sign overall, as typically the recovery starts in Asia Pac and works its way west.

Philip Gallagher: But we're holding our own in China. We're seeing, as we talked about in Asia, we saw, just looking at the vertical markets now, we did see some increase in transportation. We did see some increase, although modest, in the consumer space as well, and sequentially in the industrial space. So that's our Asia-Pac number in total. But Asia, as we talked about in the script, in total now, including Japan, we're going to see sequential growth, and either in September or December, depending on how strong September comes in, we'll begin to see year-on-year growth in Asia-Pac, which is a good sign Overall, as typically, the recovery starts in Asia-Pac and works its way west.

Philip Gallagher: Hope that helps. Great. Yes.

Speaker Change: But we're holding our own in China. We're seeing, as we talked about, in Asia, we saw, I was looking at the vertical.

Speaker Change: Now, we did see some increase in transportation. We did see some increase in, although modest, in consumer space as well, and sequentially in industrial. So that's our Asia Pack number in total. But Asia, as we did talk about in the script.

Speaker Change: in total now, including Japan.

Speaker Change: We're going to see sequential growth.

Speaker Change: Either in September or December , depending on how strong September comes in, we'll begin to see year-on-year growth in Asia-Pac, which was a good sign overall as typically the recovery starts in Asia-Pac and works its way west.

William Stein: I hope that helps. Great. Yes, thank you.

Speaker Change: Hope that helps. Great. Yes, thank you.

Matt Sharon: Our next question comes from Matt Sharon with Steve. Please proceed with your question. Yes, thanks.

Matt Sheerin: Our next question comes from Matt Sheerin with Stiefel. Please proceed with your question.

Speaker Change: that

Speaker Change: Our next question comes from Matt Sheerin with Stiefel. Please proceed with your question.

Matt Sheerin: Yes, thanks. Hello everyone. Just following up on Will's question regarding demand, I know you're, and I appreciate you're just giving September quarter guidance, but it sounds like you're not ready to call the bottom yet, Phil, in North America or Europe. And so given that and what we're hearing from other suppliers, should we expect those two markets to be below seasonal, meaning down sequentially, offset a little bit by Asia, so that your overall business may be flat to down Is that the right way to think about it?

Ken Jacobson: Hello, everyone. Just following up on Will's question regarding demand. I know you're and I appreciate you're just giving September quarter guidance, but it sounds like you're not ready to call the bottom yet, Jill, in North America. Or Europe, and so I've given that, and what we're hearing from other suppliers. Should we expect those two markets to be below seasonal, meeting down sequentially, offset a little bit by Asia, so that your overall business may be maybe flat to down sequentially. Is that the right way to think about it at this point? Matthew Yes, I think when you think about the guidance, you see the sale decline from the last quarter, so obviously there's an impact there, but it would be a heavy mixed shift, primarily Asia from Amia. So we're seeing definitely lower than seasonal in Amia, and now typically September is the seasonally slow quarter for Amia, the vacation periods here in August. So August is usually a pretty weak month, so this is definitely lower than we had hoped or expected.

Matt Sheerin: Yes, thanks.

Matt Sheerin: Hello, everyone. Just following up on Will's question regarding demand, I know you're, and I appreciate you're just giving September quarter guidance.

Matt Sheerin: But it sounds like you're not ready to call the bottom yet, Phil, in North America.

Speaker Change: or Europe . And so given that and what we're hearing from other suppliers.

Speaker Change: Should we expect those two markets to be below seasonal, meaning down sequentially, offset a little bit by Asia so that your overall business may be flat to down sequentially? Is that the right way to think about it at this point?

Philip Gallagher: Yeah, Matt, I think when you think about the guidance, you see the sales decline from last quarter, so obviously there's an impact there, but it would be a heavy mix shift, you know, primarily Asia, you know, from EMEA. So we're seeing, you know, definitely lower than seasonality in EMEA. Now, typically September's the seasonally slow quarter for EMEA, you know, the vacation period's here in August, so August is usually a pretty weak month, so this is, you know, definitely lower than we had hoped or expected, but I don't think there's anything we necessarily see that says, you know, it's getting worse, but I don't think we're ready to call it a bottom yet either, right

Matt Sheerin: Yeah, Matt, I think when you think about the guidance, you know, you see the sales decline from last quarter, so obviously there's an impact there.

Speaker Change: but it would be a heavy makeshift, you know, primarily...

Matt Sheerin: Asia, you know, from EMEA.

Matt Sheerin: So we're seeing, you know, definitely lower than seasonal in EMEA. Now, typically, September's the seasonally slow quarter for EMEA. You know, the vacation period's here in August . So August is usually a pretty weak month. But this is, you know, definitely lower than we had hoped or expected. But I don't think there's anything we—

Philip Gallagher: But I don't think there's anything we necessarily see that says, you know, it's getting worse, but I don't think we're ready to call bottom bottom yet either, right again. Amia has been our strongest region, so they're having a little bit of, you know, softness, industrial transportation, right? But generally speaking, that business is still very healthy. I think if you call out things, yeah, actually, Phil, I was actually just talking about the December quarter, kind of looking past September based on your backlog, and my question was should you expect that to be below seasonal those two meetings.

Philip Gallagher: Again, EMEA has been our strongest region, so they're having a little bit of, you know, softness in the industrial and transportation sectors, but generally speaking, that business is still very healthy. I think if you call out, yeah, thanks, Ken. Yeah, actually, Phil, I was actually just talking about the December quarter, kind of looking past September based on your backlog, and my question was, should you expect that to be below seasonal

Matt Sheerin: necessarily see that says, you know, it's getting worse, but I don't think we're ready to call bottom yet either, right? Again, EMEA has been our strongest region, so they're having a little bit of, you know, softness.

Matt Sheerin: Industrial Transportation, right, but generally speaking that business is still very healthy.

Speaker Change: I was actually just talking about the December quarter, kind of looking past September based on your backlog, and my question was, should you expect that to be below seasonal, those two regions?

Philip Gallagher: Oh, December quarter. Okay, well, we don't have to be give guidance out that far. Matt, can you hear me okay? Matt, you can, right? Yeah, yeah, okay, all right, well, Asia, we call bottom, I mean, Asia, we see, and we call that last quarter that we think March was the bottom in Asia, and that's we believe going to hold true through the calendar year into March. America is actually pretty stable right now; sequentially, the view into December's still foggy, and I would say the same thing for Europe, so it's really just tough to some moving pieces. I would, I would like to believe September's, you know, pretty much nearing the bottom.

Philip Gallagher: Oh, December quarter. Okay. Well, we don't typically give guidance out that far, Matt. Can you hear me okay, Matt?

Speaker Change: Oh, December quarter. Okay, well we don't typically give guidance out that far, Matt. Can you hear me okay, Matt? You can, right? Yeah, yeah. Okay, all right.

Philip Gallagher: You can, right? Yeah. Yeah. Okay. All right.

Philip Gallagher: Well, it's. Asia, we call it bottom. I mean, Asia, we see, you know, we called that last quarter that we think March was the bottom in Asia, and that's, we believe, going to hold true through the calendar year into March. America's is actually pretty stable right now, sequentially, the view into December is still foggy, and I would say the same thing for Europe. So it's really just tough; there are so many moving pieces. I would like to believe September is pretty much nearing the bottom.

Speaker Change: Well,

Speaker Change: America's is actually

Speaker Change: pretty stable right now sequentially. The view into December is still foggy, and I would say the same thing for Europe . So it's really just tough. There's so many moving pieces. I would like to believe September is pretty much nearing the bottom.

Ken Jacobson: You know, you got to remember Europe will come off of June and September quarter is a year ago, there were all time record quarter, so we're coming against some tough compares on the year and year compares well, but I think it's safe to say the industrial market in particular in Europe is down and that's pretty consistent and that's a big that's a big play for us and many of our suppliers that industrial space in Europe. Got it, okay, thanks for that, and then regarding your margin or backing into your margin guidance, it looks like component margins would be below that 4% target that you have.

Philip Gallagher: You know, you've got to remember Europe, we're coming off of... June and September quarters a year ago that were all-time record quarters, so we're going to get some tough comparisons on the year-on-year comparison as well. I think it's safe to say the industrial market, in particular in Europe, is down, and that's pretty consistent, and that's a big play for us and many of our suppliers, that industrial space in Europe.

Speaker Change: You know, you've got to remember, Europe , we're coming off of...

Speaker Change: June and September quarters a year ago that were all-time record quarters, so we're going to get some tough compares on the year-on-year compare as well.

Speaker Change: I think it's safe to say the industrial market in particular in Europe is down and that's pretty consistent and that's a big play for us and many of our suppliers is that industrial space in Europe .

Welcome to the Avnet 4th quarter fiscal year 2024 earnings call.

Joseph Burke: I would now like to turn the floor by the Joe Burke Vice President, Treasurer, and Investor Relations for Avnet. Thank you, operator. I'd like to welcome everyone to the Avnet 4th quarter fiscal year 2024 earnings conference call. This morning, Avnet released financial results for the 4th quarter and fiscal year 2024, and the release is available on the Investor Relations section of Avnet's website, along with a slide presentation which you may access at your convenience.

Philip Gallagher: Got it. Okay. Thanks for that.

Speaker Change: Got it. Okay, thanks for that. And then regarding your margin or backing into your margin guidance...

Philip Gallagher: And then regarding your margin or back into your margin guidance, it looks like component margins would be below that 4% target that you have. And it also looks like gross margin will be down by at least 20 basis points sequentially. Is that really all mixed driven at this point, or are you seeing incremental pricing pressure as well?

Speaker Change: It looks like component margins would be below that 4% target that you have, and it also looks like gross margin will be down by at least 20 basis points sequentially. Is that really all mixed-driven at this point, or are you seeing incremental pricing pressure as well?

Ken Jacobson: And it also looks like gross margin will be down while at least 20 basis points sequentially. Is that really all mixed ribbon at this point, or are you seeing incremental pricing pressure as well? Yeah, that is mostly mixed. I think that that dip, you're right, it does dip below for we're hoping that's the, you know, the only quarter, but it may be a couple quarters. But again, that's a big makeshift, primarily to Asia from Europe, and that's what's driving a lot of it. You know, we did mention op X being up a little bit too from some, you know, change in the fiscal year and kind of timing difference kind of headwinds, but we feel overall really good about our expenses, but it will be up from last quarter.

Philip Gallagher: Yeah, Matt, it's mostly mixed. I think that that dip, you're right, it does dip below four. We're hoping that's the, you know, the only quarter, but it may be a couple quarters. But again, that's a big shift, primarily to Asia from Europe, and that's what's driving a lot of it. You know, we did mention OPEX being up a little bit too from some, you know, change in the fiscal year and kind of timing difference, kind of headwinds, but we feel overall really good about our expenses, but they will be up from last quarter.

Joseph Burke: As a reminder, some of the information contained in the news release and on this conference call contain forward-looking statements that involve risk, uncertainties, and assumptions that are difficult to predict. Such forward-looking statements are not the guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent form, TENQ and TENK and subsequent filings with the SEC.

Speaker Change: Yeah, Matt, it's mostly mixed. I think that that dip, you're right, it does dip below four. We're hoping that's the...

Speaker Change: You know, the only quarter, but it may be a couple quarters, but again, that's a big makeshift primarily to Asia from Europe , and that's what's driving a lot of it. You know, we did mention OPEX.

Speaker Change: Being up a little bit too from some you know change in the fiscal year and kind of timing difference kind of headwinds But we feel overall really good about our expenses But it but it will be up from last quarter

Matt Sharon: Okay, just on op X, can looking past the September quarter, or you talked about some incremental restructuring, so which should we expect op X to work out from there or not. Yeah, I think modestly, but not significantly, right? Okay, all right, thanks a lot.

Ken Jacobson: Okay, and just on that OPEX, Ken, looking past the September quarter, you talked about some incremental restructuring, so should we expect OPEX to work out from there or not?

Joseph Burke: 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. Please note, unless otherwise stated, all results provided will be non-gap measures. The full non-gap-to-gap reconciliation can be found in the press release issued today as well as in the appendix slides of today's presentation and posted on the Investor Relations website.

Speaker Change: Okay, just on that OPEX, Ken, looking past the September quarter, you talked about some incremental restructuring, so should we expect OPEX to work out from there or not?

Ken Jacobson: Yeah, I think modestly, but not, you know, significantly right.

Ken: Yeah, I think modestly, but not, you know, significantly, right?

Ken Jacobson: Okay, all right. Thanks a lot.

Melissa Fairbanks: Thanks, Matt. Our next question comes from Melissa Fairbanks with Raymond James. Please proceed with your question. Hey guys, thanks so much for taking my question. I've got one a little related to some of your commentary on the inventories. Just wondering what we can expect moving forward, either in terms of investment in end-of-life products. I know you've had some unique kind of strategic opportunities there. Or maybe some expansion of your supply chain services business.

Speaker Change: Okay. All right. Thanks a lot.

Melissa Fairbanks: Our next question comes from Melissa Fairbanks with Raymond James. Please proceed with your question.

Matt Sheerin: Thanks, Matt.

Matt Sheerin: Our next question comes from Melissa Fairbanks with Raymond James. Please proceed with your question.

Melissa Fairbanks: Hey guys, thanks so much for taking my question. I've got one a little related to some of your commentary on the inventories. Just wondering what we can expect moving forward, either in terms of investment in end-of-life products, I know you've had some unique kind of strategic opportunities there, or maybe some expansion of your supply chain services.

Joseph Burke: Today's call will be led by Phil Gallagher, Avnet's CEO and Ken Jacobson, Avnet's CFO. With that, let me turn the call over to Phil Gallagher. Phil?

Melissa Fairbanks: Hey guys, thanks so much for taking my question.

Melissa Fairbanks: I've got one a little related to some of your commentary on the inventories.

Melissa Fairbanks: Just wondering what we can expect moving forward.

Speaker Change: either in terms of investment in end-of-life products, I know you've had some unique kind of strategic opportunities there, or maybe some expansion of your supply chain services business.

Philip Gallagher: Thank you, Joe, and thank you, everyone, for joining us on our fourth quarter and fiscal year 2024 earnings call. For fiscal year 2024, we've delivered 23.8 billion hours in revenues and five hours and 43 cents of diluted earnings per share. Looking back on fiscal year 24, we began the year with great momentum from fiscal year 23, which was a record year both for revenues and earnings per share.

Ken Jacobson: Melissa, this is Ken. You're specifically to end-of-life. Yeah, I think there's several suppliers that are doing some, you know, we call it last time buyer end-of-life programs. You know, I think we don't necessarily love to hold product for those engagements for multiple years, right? We can do something for one, two years, but you start to talk about beyond that. You know, we look for alternative methods, so we do see that as a historical and current opportunity within our supply chain. You know, but a lot of stuff, you know, it's cheaper for the customers just to take it, right?

Ken Jacobson: Hey Melissa, this is Ken. Specifically, the end of life? Uh-huh. Yeah, I mean, I think there are several suppliers that are doing some, you know, we call them last-time buyer, end-of-life programs. You know, I think we don't necessarily love to hold products for those engagements for multiple years, right? We can do something for one, two years, but when you start to talk about beyond that, you know, we look for alternative methods.

Speaker Change: Hey Melissa, this is Ken. Specifically, the end of life.

Melissa Fairbanks: Uh-huh.

Melissa Fairbanks: Yeah, I mean, I think there's...

Speaker Change: several suppliers that are doing some, you know, we call it last time buyer end of life.

Speaker Change: programs.

Speaker Change: You know, I think we don't necessarily love to hold...

Philip Gallagher: As 2024 progressed, we faced a softening demand environment. I want to thank our team for their execution and perseverance in these challenging market conditions. Their continued efforts will allow us to emerge for the correction stronger as the market recovers. Turning to the completed fourth quarter, I'm pleased we delivered another quarter of financial results that exceeded our top line in EPS guidance. In the quarter, we achieved sales of 5.6 billion dollars and adjusted operating margins of 3.5 percent highlighted by a 4.1 percent operating margin in our electronic opponents business.

Speaker Change: We've been a product for those engagements for multiple years, right, you know, we can do something in one, two years, but you start to talk about beyond that, you know, we look for

Ken Jacobson: So we do see that as a, you know, historical and current opportunity within our supply chain, but a lot of stuff, you know, it's cheaper for the customers just to take it, right? So we see some of that as more temporary holds versus the longer term. But, you know, we are open to serving whatever the customer needs are, but again, we have to get a fair return for that. And with the cost of capital, it becomes more expensive to do those kind of last-time buy holds than it was a couple of years ago.

Melissa Fairbanks: We do see that as a historical and current opportunity within our supply chain, but a lot of stuff, it's cheaper for the customers just to take it, so we see some of that being more temporary holds versus the longer term.

Ken Jacobson: So we see some of that being more temporary holds versus the longer term. But, you know, we are open to serving whatever the customer needs are; but again, we've got to get a fair return for that. And with the cost of capital, it becomes more expensive to do those kind of last time buy holds than, you know, it was a couple years ago. But we're seeing pockets of opportunity. I wouldn't say anything meaningful. A lot of the stuff we're seeing on end-of-life is back-to-back type of things where we'll hold it for a little bit to pipeline it, but it gets shipped.

Speaker Change: We are open to serving whatever the customer needs are but again We got to get a fair return for that and with the cost of capital it becomes

Ken Jacobson: But we're seeing pockets of opportunity. I wouldn't say anything meaningful. A lot of the stuff we're seeing at end-of-life is back-to-back type of things where we'll hold it for a little bit to pipeline it, but it gets shipped.

Speaker Change: more expensive to do those kind of last-time buy holds than it was a couple years ago. But we're seeing pockets of opportunity. I wouldn't say anything meaningful. A lot of the stuff we're seeing on End of Life is back-to-back type of things where we'll hold it for a little bit to pipeline it, but it gets shipped.

Philip Gallagher: With the structural improvements we've made over the past few years, our EC business has now delivered 10 consecutive quarters of greater than 4 percent operating margin. We also had another good quarter of cash flow generation. Primarily, the result of executing sound working capital management as we navigate through the market correction.

Ken Jacobson: Okay, okay. On the supply chain services business, I think this may be going back to the December quarter or maybe even a conference in the December quarter. You had some opportunities, you onboarded some inventory, I believe it was for an industrial customer, and then you saw potentially some opportunities longer term in the auto space. Can you give us an update on that business?

Melissa Fairbanks: Okay, okay.

Ken Jacobson: On the supply chain services business, I think this may be going back to the December quarter or maybe even a conference in the December quarter. You had some opportunities; you onboarded some inventory. I believe it was for an industrial customer. And then you saw potentially some opportunities longer term in the auto space. Can you give us an update on that business? Yeah, I think just overall supply chain service is, you know, there's puts and takes. What I would say is, you know, we still see lots of opportunity, in particular, in transportation, but even more broadly.

Speaker Change: Okay, okay. On the supply chain services business, I think this may be going back to...

Speaker Change: the December quarter, or maybe even a conference in the December quarter, you had some opportunities, you onboarded some inventory, I believe it was for an industrial customer, and then you saw potentially some opportunities longer term in the auto space. Can you give us an update on that business?

Philip Gallagher: To sequentially, demand and client across most of the end markets we serve. On the year-and-year basis, aerospace and defense was the only end market with increased demand goal. Stanley Leverly Times have continued to decrease and remain relatively low for most technologies. And as I mentioned last quarter, the growth and data center build-outs surrounding cloud and artificial intelligence is driving longer lead times for certain products, and we would expect this to continue.

Ken Jacobson: Yeah, I think just the overall supply chain of the service is, you know, there's puts and takes. What I would say is, you know, we still see lots of opportunity, in particular in transportation, but even more broadly. You know, and I guess the other commentary I'd give is, you know, some of the legacy supply chain engagements more for, let's say, technology-type companies that have been buying components for years. You know, that's down with the broader market being down, right?

Speaker Change: Yeah, I think just overall supply chain of the service is, you know, there's puts and takes. What I would say is, you know, we still see lots of opportunity in particular in transportation.

Ken Jacobson: You know, and I guess the other commentary I'd give is, you know, some of the legacy supply chain engagements more for, let's say, technology type companies that have been buying components for years. You know, that's down with the broader market being down, right? So we're optimistic that some of that will start to recover. And then that'll be on top of some of the new wins, but again, these things take a little while to ramp. But, you know, progress being made, but not ready necessarily to give more specific financial metrics there outside of the percentage of inventory, which was roughly 8% this quarter, consistent with last quarter.

Speaker Change: but even more broadly, you know, and I guess the other commentary I'd give is, you know, some of the...

Speaker Change: Legacy Supply Chain Engagements more for let's say technology type companies.

Philip Gallagher: On the IPN side, lead times are generally stable and every turn of what I would characterize as a normal range, and we are seeing increasing demand for some interconnect products and capacitors for certain applications. Our global book to build ratio improved modestly over the last quarter, led by our Asia and America's regions, both finishing the quarter approaching parity. Our Amia business, which has a large portion of its business driven by the industrial and transportation and markets, is seeing softer bookings and buildings due to lower demand.

Speaker Change: that have been buying components for years. You know, that's down with the broader.

Ken Jacobson: So we're optimistic that some of that will start to recover, and then that'll be on top of some of the new wins. But again, these things take a little while to ramp up, but progress is being made, but not ready necessarily to give more specific financial metrics there outside of the percentage of inventory, which was roughly 8 percent this quarter, consistent with last quarter.

Speaker Change: Markit being down, right? So we're optimistic that some of that will start to recover.

Speaker Change: and then that'll be on top of some of the new wins. But again, these things take a little while to ramp.

Speaker Change: But, you know, progress being made, but not ready necessarily to give more specific financial metrics there outside of the percentage of inventory, which was roughly 8 percent this quarter consistent with last quarter.

Ken Jacobson: Yep, yep, okay. Love to see the good progress on the inventories, by the way. Maybe if I could squeeze in just one more quick one.

Melissa Fairbanks: Yep. Okay. Love to see the good progress on the inventory, by the way.

Speaker Change: Yep, yep, okay.

Melissa Fairbanks: Maybe if I could squeeze in just one more quick one. We've talked a lot about Asia today, but we've heard about some increasing competitive or pricing pressures in Asia. I'm wondering what you're seeing there. If that's impacting anything, obviously, Asia has been, you know, one of the better performing regions for you, but if you can comment on the competitive dynamics there.

Melissa Fairbanks: We've talked a lot about Asia today, but we've heard about some increasing competitive or pricing pressures in Asia. I'm wondering what you're seeing there, if that's impacting anything. Obviously, Asia has been, you know, one of the better performing regions for you, but if you could comment on the competitive dynamics.

Speaker Change: I'd love to see the good progress on the inventories, by the way. Maybe if I could squeeze in just one more quick one. We've talked a lot about Asia today, but we've heard about some increasing competitive or pricing pressures in Asia. I'm wondering what you're seeing there, if that's impacting anything. Obviously, Asia has been one of the better performing regions for you, but if you can comment on the competitive dynamics there.

Philip Gallagher: Our backlog is lower as a result of shorter lead times and customers working through their inventory on hand. Cancelations have remained at normal levels. I'm really pleased with the progress our team has made in improving our inventory position. This is a key focus area for our organization, and we still have some work to do. While we have more inventory than we need to support in your turn of demand in some areas, there are other areas where we want to make strategic investments. Having the right inventory is still a key growth enabler, and is an important part of our value proposition at the center of the technology supply chain.

Matthew Sheerin: Matthew Sheerin: Yeah, hey, Melissa. Thanks for the questions. Appreciate it. It's a spill. Nothing. You hear from a couple of suppliers and certain, you know, markets, maybe even in China, you know, you might have some more indigenous suppliers and whatnot. But overall, I mean, Asia is a competitive market all the time. So we're not seeing anything that's out of the norm affecting our business at this point. But we do hear about some of the pricing pressures and certain commodities from certain suppliers. Okay, again, net effect. That's been minimal. Okay, great.

Philip Gallagher: Yeah, hey, Melissa, thanks for the questions. I appreciate it. This is Phil.

Speaker Change: Yeah, hey, Melissa, thanks for the questions. Appreciate it. This is Phil.

Philip Gallagher: Nothing, you hear from a couple suppliers in certain markets, maybe even in China, you know; you may have some more indigenous suppliers and whatnot. But overall, I mean, Asia is a competitive market all the time. So we're not seeing anything that's out of the norm affecting our business at this point, but we do hear about some of the pricing pressures on certain commodities from certain suppliers. Again, the net effect on us has been minimal. Okay, great. Thanks so much, guys.

Speaker Change: Nothing, you hear from a couple suppliers in certain...

Phil Gallagher: Markets, maybe even in China, you may have some more indigenous suppliers and whatnot. But overall, I mean, Asia is a competitive market all the time. So we're not seeing anything that's out of the norm affecting our business at this point.

Philip Gallagher: Now with that, let me turn to the four quarter results. At the top line, our electronic components business declined on a global basis. In Amia, demand in the aerospace and defense end market increased sequentially and year on year as military budgets have increased across Europe. In the Americas, demand increased sequentially for aerospace and defense and industrial end markets, and aerospace and defense was strongest on a year on year basis. I mentioned on our last earnings call we were seeing signs of a bottoming in our Asia region, giving us reasons to be optimistic that the market correction may be nearing its final phase in Asia.

Speaker Change: But we do hear about some of the pricing pressures in certain commodities from certain suppliers. Net effect to us has been minimal.

Melissa Fairbanks: Okay, great. Thanks so much, guys.

Melissa Fairbanks: Thanks so much, guys. Thanks, Melissa.

Speaker Change: Okay, great. Thanks so much, guys.

Speaker Change: Thanks, boys.

Joe Quatrorochi: Our next question comes from Joe Quatrorochi with Wells Fargo. Please proceed with your question. Yeah, thanks for taking the question.

Joseph Quatrochi: Our next question comes from Joe Quatrochi with Wells Fargo. Please proceed with your question.

Speaker Change: Our next question comes from Joe Quatrochi with Wells Fargo. Please proceed with your question.

Joseph Quatrochi: Thanks for taking the question. I'm just kind of curious about the target of being sub-5 billion inventory. How long do you think that could take? And then, just to clarify, is that including the supply chain service inventory that you're holding as an agent for your customers or suppliers?

Joe Quatrorochi: I'm just kind of curious on the target of being five billion inventory. How long do you think that could take? And then just a couple of clarifies that, including the supply chain service inventory that you're holding as an agent for your customers or supplier. So, yeah, Joe, I think that goal, I would say that's a net goal. I think there'll be puts and takes, you know, throughout the fiscal year. So I'd say, as we, you know, get towards the end of our new fiscal year, you should see that be achieved. You know, I think we'll continue to kind of report out what percentage of supply chain is nothing. Near term, that we see would be a drastic increase there that would materially change the number, but there will be, you know, puts and takes within that number.

Joe Quatrochi: Yeah, thanks for taking the question. I'm just kind of curious on the target of being sub 5 billion inventory is how long do you think that could take? And then just to clarify, is that including the supply chain service inventory that you're holding as an agent for your customers, or suppliers, rather?

Philip Gallagher: So the notable that our Asia revenues increased sequentially as demand in the industrial, transportation, and consumer end markets all increased, with transportation showing the best growth on a year on year basis. We expect to return to overall year on year growth in Asia and out of the September or December quarter. On the demand creation side, our engineering teams continued to engage with our customers and suppliers on design winds and registrations. This growth increases in revenues on a sequential basis and validates the value proposition we can deliver in any type of market.

Ken Jacobson: Joe, I think that goal, I would say that's a net goal. I think there'll be puts and takes, you know, throughout the fiscal year. So I'd say as we, you know, get towards the end of our new fiscal year, you should see that achieved. I think we'll continue to kind of report out what percentage of the supply chain. There's nothing near term that we see that would be a drastic increase there that would materially change the number.

Speaker Change: Yeah Joe, I think that goal, I would say that's a net goal. I think there'll be puts and takes, you know, throughout the fiscal year. So I'd say as we, you know, get towards the end of our new fiscal year, you should see that be achieved. You know, I think we'll continue to kind of report out.

Speaker Change: What percentage of supply chain? There's nothing near term that we see would be a drastic

Ken Jacobson: But there will be, you know, puts and takes within that number, and we'll update accordingly. Again, Phil mentioned the kind of pockets that are elevated. That's what we're focused on reducing, and we'll continue to give progress updates on where that's at. But clearly, I think there's capacity to invest in inventory but still reduce overall is how we're kind of thinking about it.

Speaker Change: increase there that would materially change the number, but there will be, you know, puts and takes within that number.

Philip Gallagher: Before we get into the Fernelles results, I would like to highlight that Rebecca Obergon has been recently named president of Fernelle. In her time at AdNet, Rebecca has demonstrated the ability to develop and execute strategy and drive cultural alignment not only with our employees but with our customers and suppliers globally. I'm confident that her experience, relationships and collaborative approach will drive important synergies to accelerate Fernelles' profitable growth.

Ken Jacobson: You know, and we'll update accordingly again. We're still mentioned the kind of pockets that are elevated. That's what we're focused on reducing, and we'll continue to give progress updates on where that's at. But, but clearly, I think there's capacity to invest in inventory, but still reduce overall is how we're kind of thinking about it.

Speaker Change: and we'll update accordingly. Again, Phil mentioned the kind of pockets that are elevated. That's what we're focused on reducing and we'll continue to give.

Phil Gallagher: progress updates on where that's at. But clearly, I think there's capacity to invest in inventory, but still reduce overall, is how we're kind of thinking about it.

Joe Quatrorochi: Okay.

Philip Gallagher: Okay, and then on the data center side, just kind of curious, how big is that from a revenue perspective for you today? And how should we think about the margin profile relative to the corporate average?

Philip Gallagher: And then on the, you talked about the opportunity on the data center side, just kind of curious, how big is that from a revenue perspective for you today? And how should we think about the margin profile relative to the corporate average? Yeah, Joe, this is Phil. We're a little quantify the number relative basis to our total enterprise. It's relatively relatively small job. Okay. Well, we see increased opportunities there. And, you know, particularly out of our Asia business tied to some of the high for scalers. And the margin profile has been about average to our typical margin that we're getting from those suppliers or customers.

Speaker Change: Okay and then on the you talked about the opportunity on the data center side just kind of curious how big is that from a revenue perspective for you today and and how should we think about the margin profile relative to the corporate average?

Philip Gallagher: Fernelle is not immune to overall market softness and the fourth quarter sales were down sequentially and year on year similar to the sales trends in our to Elves for lower sequentially, mostly due to lower demand for semiconductors. Gross margin that for now have stabilized, and with the previously announced cost reductions, which are proceeding as planned, we expect margins to improve over the course of fiscal year 2025. We continue to expect for now's high service offerings to enhance the synergistic collaboration between for now and Avnet.

Philip Gallagher: Yeah, Joe. This is Phil.

Philip Gallagher: We don't quantify the number on a relative basis to our total enterprise. It's relatively small, Joe, but we see increased opportunities there, and you know, particularly in our Asia business tied to some of the hyperscalers. And the margin profile has been about average to our typical margin that we're getting from those suppliers or customers. I think the other opportunity we talked about in the last call, which makes it a little bit more difficult to measure, is whether we're selling directly to the hyperscalers, or a lot of our OEM customers sell into the hyperscalers and AI, right?

Speaker Change: Yeah Joe, this is Phil. We will quantify the number at a relative basis to our total enterprise. It's relatively relatively small, Joe. Okay, but we see increased opportunities there.

Speaker Change: And, you know, particularly out of our Asia business, tied to some of the hyperscalers. And the margin profile has been about average to our typical margin that we're getting from those suppliers or customers.

Philip Gallagher: I think the other opportunity we've talked about in the last call, which makes it a little bit more difficult to measure, is whether we're selling directly to the hyperscalers or a lot of our OEM customers selling to the hyperscalers and AI rights. And so we're, you know, in particular industrial space, we've got a lot of customers that we're doing business with that we're supporting that their end customers, you know, are the hyperscalers, if you will. So we're also benefiting from that. We're working to quantify that. It gets more difficult as you can, you can probably imagine.

Philip Gallagher: The combination allows us to serve our customers from new product introduction to mass production as one of them. Avnet is positioned as one of the only broadline global distributors that also has a global high service distribution business. As a key player in the global technology supply chain, we continue to leverage our value proposition and other areas such as demand creation, IP&E, and embedded computing. I've already mentioned our demand creation engineering capabilities.

Speaker Change: I think the other opportunity we talked about in the last call, which makes it a little bit more difficult to measure, is we're

Speaker Change: Whether we're selling directly to the hyperscalers or a lot of our OEM customers selling to the hyperscalers and AI, right? So we're...

Philip Gallagher: So we're, you know, in particular in the industrial space, we've got a lot of customers that we're doing business with that their end customers are the hyperscalers, if you will. So we're also benefiting from that. We're working to quantify that. It gets more difficult, as you can probably imagine. But either way, the overall ecosystem that gets built out there as time moves on, we will certainly benefit.

Speaker Change: In particular, in the industrial space, we've got a lot of customers that we're doing business with that we're supporting that their end customers are the hyperscalers, if you will. So we're also benefiting from that.

Speaker Change: We're working to quantify that. It gets more difficult, as you can probably imagine. But it's either way, the overall ecosystem that gets built out there, as time moves on, we will certainly benefit.

Philip Gallagher: IP&E continues to be a key focus for our team and in Q4 we saw a nice increase in this area, particularly in Asia, much of which is related to the build out of data centers. In addition to IP&E and demand creation, we're also focused on driving value for our embedded solutions offerings. OEMs are increasingly looked to move from chip-down manufacturing to using modular compute solutions into their products. Because of this trend, we recently announced the launch of the Tree of Brand for our business unit that designed to manufacture embedded compute modules and systems.

Philip Gallagher: But it's either way, the overall ecosystem gets built out there. As time goes on, we will certainly benefit.

Joe Quatrorochi: Oh, thank you.

Ruplu Bhattacharya: You got a job? Our next question comes from Ruplu Bhattacharya with Bank of America. Please proceed with your question. Hi, thanks for taking my questions. First one is on Farnel. So, what do you or Rebecca plan to do different to turn the Farnel business around? And Ken, you talked about margin improvement throughout the next fiscal year at Farnel. How should we think about the cadence of that? I mean, where do you think, you know, the margins in Farnel can get to by the end of the fiscal year? Yeah, thanks, Ruplu.

Speaker Change: Helpful. Thank you.

Ruplu Bhattacharya: Our next question comes from Ruplu Bhattacharya with Bank of America. Please proceed with your question.

Joe: You got it, Joe.

Speaker Change: Our next question comes from Ruplu Bhattacharya with Bank of America. Please proceed with your question.

Ruplu Bhattacharya: Hi, thanks for taking my questions. The first one is on Farnell. So, what do you or Rebecca plan to do differently to turn the Farnell business around? And Ken, you talked about margin improvement throughout the next fiscal year at Farnell. How should we think about the pace of that? I mean, where do you think, you know, the margins in Farnell can get to by the end of the fiscal year?

Philip Gallagher: The new distinct brand will improve our ability to compete with other standalone brands in embedded solutions business. The market opportunity we targeted through Tree of is just another example of how we have adapted to the changing needs of our customers and the technology offering of our suppliers over the past hundred and three years.

Ruplu Bhattacharya: Hi, thanks for taking my questions. First one is on Farnell.

Ruplu Bhattacharya: So, what do you or Rebecca plan to do different to turn the Farnell business around? And Ken, you talked about margin improvement throughout the next fiscal year at Farnell. How should we think about the cadence of that? I mean, where do you think, you know, the margins in Farnell can get to by the end of the fiscal year? Thank you. Thank you. Thank you.

Philip Gallagher: Yeah, thanks, Ruplu. I'll go first.

Philip Gallagher: I'll go first. I can't touch on the margin. We do have a plan there, and you can imagine we have a walk. So, yeah, just overall, certainly disappointed where we are with Farnel. That said, we're also excited about the opportunity because it becomes a complete tailwind for us as the market recovers. As you know, we've so we announced Rebecca in the role. She's a 25-year veteran of the industry, but with Avnet 18 months and has already jumped in with the team on resetting the strategy and the structure for Farnel. We talked a couple quarters ago about the affects adjustments at Farnel, which are, I think we talked about in the transcripts as well, that we are starting to see the net effect there.

Philip Gallagher: So stay tuned for future updates on our progress in embedded space.

Speaker Change: Yeah, thanks Ruplu. I'll go first. I'll let Ken touch on the margin. We do have a plan there and you can imagine we have a walk.

Philip Gallagher: I'll let Ken touch on the margin. We do have a plan there, and you can imagine we have a walk. So, yeah, just overall, certainly disappointed where we are with Farnell. That said, we're also excited about the opportunity because it becomes a complete tailwind for us as the market recovers. As you know, we announced Rebecca in the role.

Philip Gallagher: To conclude, I continue to feel optimistic about the long-term trends in the demand for technology and the pervasiveness of electronics in so many applications today and in the future. This includes those driven by AI adoption as companies explore innovative ways to leverage its capabilities in both the data center and ultimately edge computing applications. We are participating in the AI growth trends through sales of components into data centers as well as providing supply chain services surrounding the data center.

Speaker Change: So yeah, just overall, certainly disappointed where we are with Farnell. That said, we're also excited about the opportunity because it becomes a complete tailwind for us as the market recovers.

Speaker Change: We've, as you know, we announced Rebecca in the role, she's a 25 year veteran of the industry but with Avnet 18 months and has already jumped in with the team on the resetting the strategy and the structure for Farnell.

Philip Gallagher: She's a 25-year veteran of the industry, but she's been with Avnet for 18 months, and she has already jumped in with the team on resetting the strategy and the structure for Farnell. We talked a couple quarters ago about the OPEX adjustments at Farnell, which are, I think we talked about in the transcripts as well, that we are starting to see the net effect there. It's just that the effect of the OPEX did not show up as positive in the OI due to the further softening of the market, particularly in Europe, where Farnell's largest region is. So, we're going to continue to look at the strategy structure, continue to leverage the best of Avnet, okay, in total with Farnell. As we talked about in the script, we have a unique opportunity there.

Philip Gallagher: This participation is expected to grow over the next several quarters and should positively impact sales across several verticals. I'm excited that admins position at the center of the technology supply chain will allow us to continue to deliver increasing value to our customers and supplier partners. As the enter fiscal year 25, the prevailing belief is that the market correction seems to be in its last stages. Our Asia region appears to have bottomed and we are awaiting signs for somewhere bottoming or a flexion point to manifest in America's and Europe. Until then, we will continue to navigate through this market and control what we can control in anticipation of a brighter demand environment in the quarters to come.

Ruplu Bhattacharya: We talked a couple quarters ago about the OPEX adjustments at Farnell, which we talked about in the transcripts as well. We are starting to see the net effect there. It's just that that effect of the OPEX...

Philip Gallagher: It's just that that effect of the op-ex did not show up as positive in the OI due to the further softening of the market, particularly in New York, where Farnel's largest region. So, we're going to continue to look at the strategy structure to continue to leverage the best of Avnet, okay, in total with Farnell. As we talked about in the script, we have a unique opportunity there. I'll continue to invest in the digital front-end, the e-commerce front-end. We're not slowing down on that at all because we think it's critical for the long-term value prop that we see Farnell can bring Avnet and its shareholders.

Ruplu Bhattacharya: did not show up as positive in the OI due to the soft further softening of the market particularly in Europe where Fresnel's largest region.

Ruplu Bhattacharya: So we're going to continue to look at the strategy structure, continue to leverage the best of Avnet, okay, in total, with Farnell, as we talked about in the script, we have unique opportunity there.

Philip Gallagher: We'll continue to invest in the digital front end, the e-commerce front end. We're not slowing down on that at all because we think it's critical for the long-term value prop that we see Farnell can bring Avnet and its shareholders. So, stay tuned for more. I'm sure we'll get more in the one-on-ones with you.

Ruplu Bhattacharya: continue to invest in the digital front end, the e-commerce front end, we're not slowing down on that at all because we think it's critical for the long-term value prop that we see for now can bring Avnet and its shareholders.

Philip Gallagher: So, stay tuned for more, and I'm sure we'll get more in the one-on-ones with you.

Ken Jacobson: Now with that, I'll turn it over to Ken to dive deep into our fourth quarter results. Thank you, Phil. Good morning, everyone.

Ruplu Bhattacharya: So, stay tuned for more, and...

Ken Jacobson: Ken, anything on the... Yeah, Ruplu, I'd just say, I think on the operating margin, you know, improvement, when you're going to see it, I think it's pushed out a little bit. The sales, obviously, were softer than we anticipated going into the quarter, and, you know, and that's kind of the broader impact of the EMEA market. So, you know, at the current level of sales, we're not going to see a lot of improvement.

Ken Jacobson: Can anyone hear us? I just say, I think on the operating margin, you know, improvement when you're going to see it. I think it's pushed out a little bit. The sale of obviously were softer than we anticipated going into the quarter, and that's kind of the broader impact of the EME market. So, at the current level of sales, we're not going to see a lot of improvement. The good news is, you know, gross margin, we feel pretty good about it being stable, you know, and that's for on-the-board components as well as overall. And the op-ex actions are taking effect, right?

Ken: I'm sure we'll get more in the one-on-ones with you. Ken, anything on the... Yeah, Ruplu, I'd just say I think on the operating margin, you know, improvement, when you're going to see it, I think it's pushed out a little bit. The sales, obviously...

Ken Jacobson: We appreciate your interest in abdent and for joining our fourth quarter earnings call. Our sales for the fourth quarter were approximately $5.6 billion above guidance and down 15% at year-over-year or down 14% in cost and current. Ecclency. On a sequential basis, sales are down 1% in constant currency due to a sales decline in the western regions and below seasonal sales growth in Asia. On a year over your basis, sales decline in constant currency, 2% in Asia, 21% in Amia, and 22% in the Americas.

Speaker Change: We're softer than we anticipated going into the quarter. And, you know, and that's kind of the broader impact of the EMEA market. So, you know, at the current level of sales, we're not going to see a lot of improvement. The good news is, you know, gross margin, we feel pretty good about it being stable, you know, and that's for on the board components as well as overall.

Ken Jacobson: The good news is, you know, gross margin, we feel pretty good about it being stable, you know, and that's for on-the-board components as well as overall. And the OPEX actions are taking effect, right? We saw a pretty good sequential decline there, so we feel good about those things. We can control, you know, the top line being softer than we anticipated, and we expect that to continue for at least the next quarter or two. But, you know, everything else is in good shape for the recovery. Okay.

Ken Jacobson: We saw a pretty good sequential decline there. So, you feel good about those things we can control, you know, the top-line softer than anticipated, and we expect that to continue, you know, for at least the next quarter or two. But, you know, everything else is in good shape for the recovery.

Ruplu Bhattacharya: and the OPEX actions are taking effect, right? We saw a pretty good sequential decline there. So you feel good about those things we can control, you know, the top line softer than we anticipated, and we expect that to continue, you know, for at least the next quarter or two, but, you know, everything else is in good shape for the recovery.

Ken Jacobson: From an operating group perspective, electronic component sales decline, 15% year over year, and 14% in constant currency, EC sales decline less than 1% quarter of a quarter in constant currency. For an wholesale decline, 16% year over year, and 15% in constant currency. For an wholesale decline, 8% sequentially in constant currency. For the fourth quarter, gross margin of 11.6% was 92 basis points lower year over year, and 28 basis points lower sequentially.

Ruplu Bhattacharya: Okay, thanks for the details there. Maybe for my follow-up, if I can ask you about your capital allocation priorities. I mean, from the prepared remarks, Phil, it seemed like we're nearing the end of the inventory correction in the channel. So I mean, how many more quarters do you expect this correction to last? And in this environment, where would you focus your investments? And how should we think about the trade-off between buybacks or doing any M&A or any other type of investment that you may have? So if you can just kind of weave it in like, you know, how many more quarters of correction do you expect? And where do you focus your efforts in terms of investments and capital allocation? Thank you.

Ruplu Bhattacharya: Okay. Thanks for the details there. Maybe for my follow-up, if I can ask you on your capital allocation priorities, I mean, from the prepared remarks, Phil, it seemed like we're nearing the end of the inventory correction in the channel. So, I mean, how many more quarters do you expect of this correction? And in this environment, where would you focus your investment, and how should we think about the trade-off between buybacks or doing any M&A or any other type of investments that you may have? So, if you can just kind of weave in, like, you know how many more quarters of correction you expect, then where do you focus your efforts in terms of investments and capital allocation?

Speaker Change: Okay, thanks for the details there. Maybe for my follow-up, if I can ask you on your capital allocation priorities.

Speaker Change: I mean, from the prepared remarks, Phil, it seemed like we're nearing the end of the inventory correction in the channel.

Speaker Change: So, I mean, how many more quarters do you expect of this correction? And in this environment, where would you focus your investments? And how should we think about the trade-off between buybacks?

Ken Jacobson: Our fourth quarter gross margin benefited from the impact of some of the strategic inventory opportunities we mentioned last quarter. EC gross margin was down sequentially in year over year, the sequential decline was primarily due to the lower mix of sales from the western regions. For an L gross margin was down sequentially in year over year, largely due to continued weak market demand for on the board components. Turning to operating expenses, SGNA expenses were $450 million in the quarter, down $56 million or 11% year over year, and down $17 million or 4% sequentially.

Speaker Change: or doing any M&A or any other type of investments that you may have. So if you can just kind of weave in like, you know, how many more quarters of correction you expect, and where do you focus your efforts in terms of investment and capital allocation? Thank you.

Philip Gallagher: Thank you. Ruplu all start off by just saying, I think with some of the market turmoil here, we dropped below 50. We've been steadily trading below book value of about 54. So we feel buying back shares is the appropriate use of our capital right now. I think we've talked about it. We're not really pursuing M&A aggressively. We're open to listen to things, and a lot of things would be capabilities or tuck-in type of opportunities, but nothing transformational. And again, we have to support the dividend. We still see there's opportunity in inventory. So, although it's getting better with our customers, we wouldn't say across the board every inventory levels are where they should be at.

Ken Jacobson: Ruplu, I'll start off by just saying, I think with some of the market turmoil here, we dropped below 50. We've been steadily trading below book value of about 54. So we feel buying back shares is the appropriate use of our capital right now. I think we've talked about it.

Ruplu Bhattacharya: Ruplu, I'll start off by just saying you know I think our

Ken Jacobson: As a percentage of gross profit dollars, SGNA expenses were flat sequentially at 70%. In the fourth quarter, we incurred additional restructuring, integration and other costs for our previously communicated cost reduction actions at both for now and our EC business. These actions included a combination of permanent and temporary cost reductions across all regions. We saw some impact from these actions during the fourth quarter, including it for now. Moving to fiscal 2025, we expect to realize further benefits from those cost reduction actions.

Ken Jacobson: with some of the market turmoil here. We dropped below 50.

Speaker Change: We've been steadily trading below book value of about $54.

Ruplu Bhattacharya: So we feel buying back shares is the appropriate use of our capital right now. I think we've talked about it. We're not really pursuing M&A, you know, aggressively. We're open to listen to things, and a lot of things would be capabilities or...

Ken Jacobson: We're not really pursuing M&A aggressively. We're open to listening to things, and a lot of things would be capabilities or tuck-in type of opportunities, but nothing transformational. And again, we have to support the dividend. We still see that there's opportunity in inventory. So although it's getting better with our customers, we wouldn't say across the board that every inventory level is where they should be at. So it's still going to take a few quarters to get through the inventory side of things.

Speaker Change: tuck-in type of opportunities but nothing

Speaker Change: transformational. And, you know, again, we have to support the dividend. You know, we still see there's opportunity in inventory. So although it's getting better with our customers, we wouldn't say, you know, across the board, every inventory levels are, you know, where they should be at, right. So it's still going to take, you know, a few quarters to get through the inventory side of things. But, you know, we, we,

Ken Jacobson: However, some of the impact will be offset by operating expense headwinds driven by the start of the new fiscal year. For the fourth quarter, we reported adjusted operating income of $193 million and our adjusted operating margin was 3.5%. By operating group, electronic components operating income was $210 million and EC operating margin was 4.1%. For an operating income was $15 million and for now operating margin remained at 4%. For now, the expenses were lower this quarter by approximately $10 million, but this benefit was offset by the sequential sale of the client driven by the overall market correction as most of for now's business is in Amia and the Americas.

Philip Gallagher: So it's still going to take a few quarters to get through the inventory side of things. But we anticipate continuing to invest in ourselves. That's some combination of our own team. And then also, when it comes to the capital projects, we think that's kind of largely subsided up with the investment in Europe. So again, I think it's going to be mostly buybacks and dividends, some piece of debt paydown, depending on where the debt levels are at, and continue to drive improvements in the business.

Ken Jacobson: But we anticipate continuing to invest in ourselves. That's some combination of our own team and also when it comes to the capital projects, but we think that's kind of largely subsided with the investment into Europe. So again, I think it's going to be mostly buybacks and dividends, some piece of debt paydown, depending on where the debt levels are at, and continue to drive improvements in the business.

Speaker Change: anticipate continuing to invest in ourself that's some combination of our own

Ruplu Bhattacharya: Okay. Thank you for all the details. I appreciate it.

Ruplu Bhattacharya: team, and then also when it comes to, you know, the capital projects. But we think that's kind of largely subsided up with the investment into Europe . So again, I think it's going to be mostly buybacks and dividends, some piece of debt pay down, depending on where the debt levels are at, and continue to drive improvements in the business.

Ruplu Bhattacharya: Okay, thank you for all the details. Appreciate it.

Speaker Change: Okay, thank you for all the details, appreciate it.

Ken Jacobson: Turning to expenses below operating income, fourth quarter interest expense was $64 million, decreased by $11 million year over year and was down $9 million sequentially, primarily due to lower debt levels throughout the quarter. Our adjusted effective income tax rate at 15% was lower than expected in the quarter, driven by various factors including truing up the full year, adjusted effective tax rate of 22% during the fourth quarter. Adjust the diluted earnings per share of $1.22 exceeded our expectations for the quarter due to a combination of higher sales, lower interest expense and a lower tax rate.

Operator: Thank you.

Operator: Excuse me.

Philip Gallagher: Thank you, Ruplu. Excuse me. Gentlemen, there are no further questions at this time. I'll now turn it back to Phil Gallagher for closing remarks.

Philip Gallagher: Gentlemen, there are no further questions at this time.

Speaker Change: Thank you. You're welcome.

Philip Gallagher: I'll now turn it back to Phil Gallagher for closing remarks. Great. Thank you very much.

Speaker Change: Gentlemen, there are no further questions at this time. I'll now turn it back to Phil Gallagher for closing remarks.

Philip Gallagher: Great. Thank you very much. And I want to thank everyone for attending today's earnings call and look forward to speaking to you again at our first quarter fiscal year 2025 earnings report in October. Have a great rest of the day. Thank you.

Operator: And I want to thank everyone for attending today's earnings call and look forward to speaking to you again at our first quarter fiscal year 2025 earnings report in October. Have a great rest of the day. Thank you.

Philip Gallagher: Great. Thank you very much. And I want to thank everyone for attending today's earnings call. And I look forward to speaking to you again at our first quarter fiscal year 2025 earnings report in October . Have a great rest of the day. Thank you.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lives at this time. And we thank you for your.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.

Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and we thank you for your participation.

Ken Jacobson: The adjusted EPS benefit from the lower than expected interest expense and tax rate was approximately 18 cents. Turning to the balance sheet and liquidity during the quarter, working capital decreased $228 million sequentially, including a decrease in reported inventory of $283 million. A $71 million increase in received rules and a $16 million increase in pay-up. Coles, Working Capital Days Decreased 6 Days, Quarter of Recorder to 110 Days, Our Return on Working Capital was essentially flat quarter of Recorder.

Ken Jacobson: Our inventories were down 5% during the quarter reflecting decreases in the Americas and the Meere regions of E.C, and to a lesser extent across Farnal. The climbs in E.C, inventories were net of increases in inventories due to strategic opportunities we saw this quarter. As Phil previously mentioned, although our inventories are elevated in certain areas, we will be looking to invest in other areas where it makes sense for our business. Our goal continues to be to ensure we are well positioned to take advantage of the market recovery.

Ken Jacobson: We expect to make continued progress heading into fiscal 2025 by adjusting our inventories lower in the areas where they remain elevated. Our decrease in working capital led to a decrease in debt of $56 million. We generated $274 million of cash from operations in the quarter, $773 million over the past two quarters, and $690 million for the full fiscal year. We ended the quarter with a gross leverage of 2.7 times, and we had approximately $759 million of available committed borrowing capacity.

Ken Jacobson: With regards to our capital allocation, we continue to prioritize our existing business needs. During the quarter cash use for CAPEX was $26 million as expected. We expect CAPEX to remain at historical levels in fiscal 2025 of approximately $25 million to $35 million per quarter. In the fourth quarter, we paid our quarterly dividend a 31 cents per share or $28 million. We also repurchased approximately $79 million with the shares, which represented nearly 2% of shares outstanding.

Ken Jacobson: As we entered the new fiscal year, we have so far repurchased an additional $46 million of shares in July 2024. As our share price continues to trade below look value, which was $54 a share in the fourth quarter. Our capital allocation priorities have continued to include returning cash to shareholders. Since the start of fiscal year 2019, we have returned nearly $2 billion to shareholders with nearly $600 million in dividends and nearly $1.4 billion of share repurchases.

Ken Jacobson: We have repurchased 32 million shares over that timeframe, which has reduced our diluted share count by an average of 5% per year. Share repurchases will continue to be an important part of our CAPEX allocation priorities in fiscal 2025 and beyond.

Ken Jacobson: We are targeting a reduction of shares outstanding by at least 5% as well as increasing our dividend during fiscal 2025, thereby continuing our commitment to provide consistent and dependable shareholder returns.

Ken Jacobson: Turning to guidance, for the first quarter of fiscal 2025, we are guiding sales on the range of $5.25 billion to $5.55 billion and diluted earnings per share in the range of $0.80 to $0.90. Our first quarter guidance assumes current market conditions persist and implies a sequential sales change of flat to down 5%. With a greater than seasonal sales declines in the Western regions and the lower than seasonal sales growth in Asia.

Ken Jacobson: On a year-over-year basis, this guidance implies flat sales in Asia as we are close to returning to year-over-year growth in that region. Assumptions for the first quarter operating expenses include some headwind specific to variable compensation resets and seasonal increases in stock-based compensation, which will offset some of the cost reduction initiatives we have implemented at far now on the EC level. This guidance also assumes similar interest expense compared to the fourth quarter, an effective tax rate of between 21% and 25%, and 90 million shares outstanding on diluted basis.

Ken Jacobson: Francis. Despite our near-term outlook, we still have momentum entering our new fiscal year. We are well positioned and remain focused on capitalizing on growth opportunities once the market improves, which we expect to happen in the coming quarters. Our focus remains on execution over the things we could control as we continue to demonstrate the value that Avnet provides to our customer and supplier partners at the center of the technology supply chain.

Operator: With that, I'll turn it over to the operator to open up for questions.

Operator: Operator. Thank you. Ladies and gentlemen, we will now be conducting a question and answer session.

William Stein: If you'd 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. [inaudible] I appreciate that answer. Thank you.

William Stein: One other, as I listened to some of your suppliers or large semi companies that may, some of them may be not even suppliers anymore, there were two interesting takeaways from my perspective. One was that demand conditions both for orders and for bookings as well were less dispersed by end market. Maybe if we take out our space defense, maybe that one in particular has been strong, but X that end market, it hasn't been as much of an end market story. It's been much more of a geo story and the story that the semi companies have told has been that geographically they saw a meaningful recovery, a big snapback in China.

Philip Gallagher: Have you begun to see a similar trend that didn't sound quite like that in your prepare remarks, but I'm hoping you can clarify and if you can identify the maybe the difference between what you're seeing and what your suppliers are talking about that might help us understand the broader picture. Thanks. Yeah, thanks Will. And your overall statement is correct, there's still the demand on bookings is still slower than we'd like to be.

Philip Gallagher: I think most suppliers would would have said that. We tracked them as well that they want more visibility, right? Because the lead times are down and there's this, I would say false assumption that everything's going to be available anytime anybody wants it and we know what happens when the market starts to turn. So generally slower, the fence arrow has been fine, actually good. The big down market really right now is affecting us most and most of the suppliers are industrial.

Philip Gallagher: If you're in data center hyper scale or AI, you're probably in pretty good shape. As far as Asia pack or China is specific. Yeah, we've seen a modest, I wouldn't say robust, but a modest recovery in China. You know, we may or may not be playing in some of those suppliers and markets that you're referring to, you know, particularly the lines that we don't have. You know, there might be more consumer based.

Philip Gallagher: I'm not really sure. But we're holding on to China. We're seeing as we talked about in Asia, we saw those looking at the vertical markets. Now we did see some increase in transportation, we did see some increase in although modest in consumer space as well and sequentially in industrial. So that's our Asia pack number in total.

Matthew Sheerin: But Asia, as we did talk about in the script in total now, including Japan, we're going to see sequential growth and either in September or December, depending on how strong September comes in, we'll begin to see euro and euro in Asia pack, which was a good sign overall as typically the recovery starts in Asia pack and works its way west. I hope that helps. Great. Yes, thank you.

Matthew Sheerin: Our next question comes from Matt Sharon with Steve. Please proceed with your question. Yes, thanks. Hello, everyone. Just following up on Will's question regarding demand, I know you're and I appreciate you're just giving September quarter guidance, but it sounds like you're not ready to call the bottom yet till in North America or Europe. And so given that and what we're hearing from other suppliers, should we expect those two markets to be below seasonal meeting down sequentially offset a little bit by Asia so that euro world business may be maybe flat to down sequentially.

Matthew Sheerin: Is that the right way to think about it at this point? Matthew Sheerin Yeah, Matt, I think when you think about the guidance, you see the sale decline from the last quarter, so obviously there's an impact there, but it would be a heavy mixed shift, primarily Asia from Amia, so we're seeing, you know, definitely lower than seasonal in Amia, and now typically September is the seasonally slow quarter for Amia, the vacation periods here in August, so August is usually a pretty week month, so this is, you know, definitely lower than we had hoped or expected.

Matthew Sheerin: But I don't think there's anything we necessarily see that says, you know, it's getting worse, but I don't think we're ready to call bottom bottom yet either right again. Amia has been our strongest region, so they're having a little bit of, you know, softness, industrial transportation, right, but generally speaking, that business is still very healthy. I think if you could call out, yeah, thanks, Canada, Matt. Yeah, actually, Phil, I was actually just talking about the December quarter, kind of a looking past September based on your backlog, and my question was should you expect that to be below season all those two regions.

Matthew Sheerin: Oh, December quarter, okay, well, we don't have to be give guidance out that far, Matt. Can you hear me okay, Matt? You can, right? Yeah, yeah. Okay, all right. Well, Asia, we call bottom. I mean, Asia, we see, you know, we call that last quarter that we think March was the bottom in Asia, and that's we believe going to hold true through the through the calendar year into into the March. America is actually pretty stable right now, sequentially, the view into December's still foggy, and I would say the same thing for Europe.

Matthew Sheerin: So it's really just tough to, so I'm moving pieces. I would, I would like to believe September's, you know, pretty much nearing the bottom. You know, you got to remember Europe were coming off of June and September quarters a year ago that were all time record quarters. So we're going to get some tough compares on the year and year compares well, but I think it's safe to say the industrial market in particular in Europe is is down and that's pretty consistent and that's a big, that's a big play for us and many of our suppliers that industrial space in Europe.

Matthew Sheerin: Got it. Okay. Thanks for that. And then the regarding your margin or backing into your margin guidance. It looks like component margins would be below that that 4% target that you have. And it also looks like gross margin will be down well, at least 20 basis points sequentially. Is that really all mixed ribbon at this point or are you seeing incremental pricing pressure as well? Yeah, that is mostly mixed. I think that that dip, you're right.

Matthew Sheerin: It does dip below 4. We're hoping that's the, you know, the only quarter, but it may be a couple quarters, but but again, that's a big makeshift primarily to Asia from Europe. And that's what's driving a lot of it. You know, we did mention op X being up a little bit to from some, you know, change in the fiscal year and kind of timing difference kind of headwinds, but we feel overall really good about our expenses, but it will be up from last quarter.

Matthew Sheerin: Okay. And just on that op X can looking past the September quarter are, and you talked about some incremental restructuring so which should we expect op X to work out from there or or not. Yeah, I think modestly but not, you know, significantly, right? Okay, all right, thanks a lot. Thanks, Matt.

Melissa Fairbanks: Our next question comes from Melissa Fairbanks with Raymond James. Please proceed with your question. Hey guys, thanks so much for taking my question. I've got one a little related to some of your commentary on the inventories. Just wondering what we can expect moving forward, either in terms of investment in end-of-life products. I know you've had some unique kind of strategic opportunities there, or maybe some expansion of your supply chain services business.

Melissa Fairbanks: Melissa, this is Ken. You're specifically to end-of-life? Yeah. I think there's several suppliers that are doing some, you know, we call it last time buyer end-of-life programs. You know, I think we don't necessarily love to hold product for those engagements for multiple years, right? You know, we can do something for one, two years, but you start to talk about beyond that, you know, we look for alternative methods. So we do see that as a, you know, historical and current opportunity within our supply chain, you know, but a lot of stuff, you know, it's cheaper for the customers just to take it, right?

Melissa Fairbanks: So we see some of that being more temporary holds versus the longer term, but you know, we are open to serving whatever the customer needs are, but again, we've got to get a fair return for that, and with the cost of capital it becomes more expensive to do those kind of last time buy holds than, you know, it was a couple years ago, but we're seeing pockets of opportunity. I wouldn't say anything meaningful.

Melissa Fairbanks: A lot of the stuff we're seeing on end-of-life is back-to-back type of things where we'll hold it for a little bit to pipeline it, but it gets shipped. Okay. On the supply chain services business, I think this may be going back to the December quarter or maybe even a conference in the December quarter, you had some opportunities, you onboarded some inventory. I believe it was for an industrial customer, and then you stopped potentially some opportunities longer term in the auto space.

Melissa Fairbanks: Can you give us an update on that business? Yeah, I think just overall supply chain of the service is, you know, there's puts and takes what I would say is, you know, we still see lots of opportunity in particular in transportation, but even more broadly, you know, and I guess the other commentary I gave is, you know, some of the legacy supply chain engagements more for, let's say, technology type companies that have been buying components for years, you know, that's down with the broader market being down, right?

Melissa Fairbanks: So we're optimistic that some of that will start to recover, and then that'll be on top of some of the new wins, but again, these things take a little while to ramp, but, you know, progress being made, but not ready necessarily to give more specific financial metrics there outside of the percentage of inventory, which was roughly 8% this quarter, consistent with last quarter. Yep, yep, okay.

Melissa Fairbanks: Love to see the good progress on the inventory, by the way. Maybe if I could squeeze in just one more quick one, we've talked a lot about Asia today, but we've heard about some increasing competitive or pricing pressures in Asia. I'm wondering what you're seeing there, if that's impacting anything, obviously Asia has been, you know, one of the better performing regions for you, but if you can comment on the competitive dynamics there.

Melissa Fairbanks: Yeah, hey, Melissa, thanks for the questions. Appreciate it. It's a spill. Nothing, you hear from a couple of suppliers in certain markets, maybe even in China. You know, you may have some more indigenous suppliers and whatnot. But overall, I mean, Asia is a competitive market all the time. So we're not seeing anything that's out of the norm affecting our business at this point. But we do hear about some of the pricing pressures in certain commodities from certain suppliers. Okay. And net effect has been minimal. Okay, great. Thanks so much, guys. Thanks, Melissa.

Joseph Quatrochi: Our next question comes from Joe Quatrochi with Wells Fargo. Please proceed with your question. Yeah, thanks for taking the question.

Joe Quatrochi: I'm just kind of curious on the target of being set of five billion inventory is how long do you think that could take and then just to clarify, is that including the supply chain service inventory that you're holding as an agent for your customers or supplier service? Yeah, Joe, I think that goal, I would say that's a net goal. I think there'll be puts and takes, you know, throughout the fiscal year.

Joe Quatrochi: So I'd say as we, you know, get towards the end of our new fiscal year, you should see that be achieved. You know, I think we'll continue to kind of report out what percentages supply chain, there's nothing near term that we see would be a drastic increase there that would materially change the number, but there will be, you know, puts and takes within that number, you know, and we'll update accordingly. Again, we're, we'll mention the kind of pockets that are elevated, that's what we're focused on reducing and we'll continue to give, you know, progress updates on where that's at, but clearly, I think there's capacity to invest in inventory, but still reduce overall is how we're kind of thinking about it. Okay.

Philip Gallagher: And then on the, you talked about the opportunity on the data center side, just kind of curious how big is that from a revenue perspective for you today and how should we think about the margin profile relative to the corporate average? Yeah, Joe, this is Phil. We'll quantify the number in a relative basis to our total enterprise. It's relatively, relatively small, Joe. Okay. Well, we see increased opportunities there. And, you know, particularly out of, out of our Asia business tied to some of the high-for-scalers.

Philip Gallagher: And the margin profile has been about average to our typical margin that we're getting from those suppliers or customers. And the other opportunity, we've talked about in the last call, which makes it a little bit more difficult to measure. We're, whether we're selling directly to the high-for-scalers or a lot of our OEM customers selling to the high-for-scalers and AI rides, so we're, you know, in particular in the industrial space, we've got a lot of customers that we're doing business with that we're supporting that their end customers, you know, are the high-for-scalers if you will.

Philip Gallagher: So, we're also benefiting from that. We're working to quantify that. It gets more difficult, as you can probably imagine. But it's either way, the overall ecosystem it gets built out there as time goes on, we will certainly benefit.

Philip Gallagher: So, helpful. Thank you. You got a job?

Ruplu Bhattacharya: Our next question comes from Ruplu Bhattacharya with Bank of America. Please proceed with your question. Hi, thanks for taking my questions. First one is on Farnel. So what do you or Rebecca plan to do different to turn the Farnel business around? And Ken, you talked about margin improvement throughout the next fiscal year at Farnel. How should we think about the cadence of that? I mean, where do you think, you know, the margins and Farnel can get to by the end of the fiscal year?

Ruplu Bhattacharya: Yeah, thanks, Ruplu. I'll go first. I can't touch on the margin. We do have a plan there, and you can imagine we have a walk. So yeah, just certainly disappointed where we are with Farnel. That said, we're also excited about the opportunity because it becomes a complete tailwind for us as the market recovers. We've, as you know, we've, yeah, so we announced Rebecca in the role. She's a 25-year veteran of the industry, but with Avnet 18 months and has already jumped in with the team on the resetting the strategy and the structure for Farnel.

Ruplu Bhattacharya: We talked a couple quarters ago about the FX adjustments at Farnel, which are anything we talk about in the transcripts as well, that we are starting to see the net effect there. It's just that that effect of the FX did not show up as positive in the OI due to the further softening of the market, particularly in New York, where Farnel's largest region. So we're going to continue to look at the strategy structure to continue the leverage the best of Avnet, okay, in total with Farnel.

Ruplu Bhattacharya: As we talk about in the script, we have a unique opportunity there. I'll continue to invest in the digital front-end, the e-commerce front-end. We're not, we're not slowing down on that at all, because you think it's critical for the long term value prop that we see Farnel can bring Avnet and it's shareholders. So stay tuned for more, and I'm sure we'll get more in the one-on-ones with you. Can anything on the other side?

Ruplu Bhattacharya: I just say I think on the operating margin, you know, improvement when you're going to see it. I think it's pushed out a little bit. The sale, obviously, we're softer than we anticipated going into the quarter, and that's kind of the broader impact of the immune market. So, you know, at the current level of sales, we're not going to see. A lot of improvement. The good news is, you know, gross margin.

Ruplu Bhattacharya: We feel pretty good about it being stable, you know, and that's for on-the-board components as well as overall. And the op-x actions are taking effect, right? We saw a pretty good sequential decline there. So you feel good about those things. We can control, you know, the top line software that we anticipated, and we expect that to continue, you know, for at least the next quarter or two, but, but, you know, everything else is in good shape for the recovery.

Ruplu Bhattacharya: Okay. Thanks for the details there. Maybe for my follow-up, if I can ask you on your capital allocation priorities, I mean, from the prepared remarks, Phil, it seemed like we're nearing the end of the inventory correction in the channel. So, I mean, how many more quarters do you expect of this correction? And in this environment, where would you focus your investment? And how should we think about the trade-off between buybacks, or doing any M&A, or any other type of investments that you may have? So if you can just kind of weave in, like, you know, how many more quarters of correction you expect, then, and where do you focus your efforts in terms of investments in capital allocation? Thank you.

Philip Gallagher: Ruplu, I'll start off by just saying, I think with some of the market turmoil here, we drop below 50, we've been steadily trading below book value of about 54, so we feel buying back shares is the appropriate use of our capital right now. I think we've talked about it, we're not really pursuing M&A aggressively, we're open to listen to things and a lot of things would be capabilities or tuck-in type of opportunities, but nothing transformational and again we have to support the dividend, we still see there's opportunity in inventory, so although it's getting better with our customers, we wouldn't say across the board every inventory levels are where they should be at, so it's still going to take a few quarters to get through the inventory side of things, but we anticipate continuing to invest in ourselves, that's some combination of our own team and then also when it comes to the capital projects, but we think that's kind of largely subsided up with the investment in Europe, so again I think it's going to be mostly buybacks and dividends, some piece of debt pay down, depending on where the debt levels are at and continue to drive improvements in the business. Okay, thank you all the details, appreciate it.

Philip Gallagher: Thank you, gentlemen, excuse me, gentlemen there are no further questions at this time, I'll now turn it back to Phil Gallagher for closing remarks. Great, thank you very much and I want to thank everyone for attending today's earnings call and look forward to speaking to you again at our first quarter of fiscal year 2025 earnings report in October, have a great rest of the day, thank you.

Operator: Ladies and gentlemen, this does conclude today's teleconference, you may disconnect your lives at this time and we thank you for your...