Avnet Q2 2026 Avnet Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 Avnet Inc Earnings Call
Speaker #1: Please stand by.
Speaker #1: Our presentation will now begin. Welcome to AVNET second quarter fiscal year 2026 earnings call. I would now like to turn the floor over to Lisa Mueller, Director of Investor Relations for AVNET.
Speaker #1: Please go ahead.
Speaker #2: Thank you, Operator. I'd like to welcome everyone to AVNET's second quarter fiscal year 2026 earnings conference call. This morning, AVNET released financial results for the second quarter of fiscal year 2026, 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.
Lisa Mueller: Thank you, operator. I'd like to welcome everyone to Avnet's Q2 fiscal year 2026 earnings conference call. This morning, Avnet released financial results for the Q2 of fiscal year 2026, 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. 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 a 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.
Lisa Mueller: Thank you, operator. I'd like to welcome everyone to Avnet's Q2 fiscal year 2026 earnings conference call. This morning, Avnet released financial results for the Q2 of fiscal year 2026, 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. 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 a 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.
Speaker #2: As a reminder, some of the information contained in the news release and on this conference call contains forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict.
Such forward-looking statements are not a 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 10Q and 10K, and subsequent filings with the SEC.
Speaker #2: 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.
Lisa Mueller: 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-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. 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?
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-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. 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?
Speaker #2: 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 #2: 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.
Speaker #2: Phil?
Speaker #3: Thank you, Lisa. And thank you, everyone, for joining us on our second quarter fiscal year 2026 earnings call. I am pleased to share that we delivered another quarter of financial results that exceeded the high end of our sales and EPS guidance.
Phil Gallagher: Thank you, Lisa, and thank you everyone for joining us on our Q2 fiscal year 2026 earnings call. I'm pleased to share that we delivered another quarter of financial results that exceeded the high end of our sales and EPS guidance. In the second quarter, we achieved sales of $6.3 billion, driving a 3.2% Operating Margin in our Electronic Components business and a 4.7% Operating Margin in our Farnell business. We also generated over $200 million of Cash Flow from Operations in the quarter and reduced inventory dollars and days as projected. Our double-digit year-over-year sales growth was led by record revenues in Asia, along with better than typical seasonal growth in the Americas, Europe, and Farnell. I wanna thank our team for delivering this performance while remaining focused on the areas we can control.
Phil Gallagher: Thank you, Lisa, and thank you everyone for joining us on our Q2 fiscal year 2026 earnings call. I'm pleased to share that we delivered another quarter of financial results that exceeded the high end of our sales and EPS guidance. In the second quarter, we achieved sales of $6.3 billion, driving a 3.2% Operating Margin in our Electronic Components business and a 4.7% Operating Margin in our Farnell business. We also generated over $200 million of Cash Flow from Operations in the quarter and reduced inventory dollars and days as projected. Our double-digit year-over-year sales growth was led by record revenues in Asia, along with better than typical seasonal growth in the Americas, Europe, and Farnell. I wanna thank our team for delivering this performance while remaining focused on the areas we can control.
Speaker #3: In the second quarter, we achieved sales of $6.3 billion, driving a 3.2% operating margin in our electronic components business and a 4.7% operating margin in our far-out business.
Speaker #3: We also generated over $200 million of cash flow from operations in the quarter and reduced inventory dollars and days as projected. Our double-digit year-on-year sales growth was led by record revenues in Asia, along with better-than-typical seasonal growth in the Americas, Europe, and far-out.
Speaker #3: I want to thank our team for delivering this performance while remaining focused on the areas we can control. In the quarter, we made solid strides in expanding operating margins optimizing inventory and generating cash flow while continuing to make necessary investments to best support future growth.
Phil Gallagher: In the quarter, we made solid strides in expanding operating margins, optimizing inventory, and generating cash flow, while continuing to make necessary investments to best support future growth. From a demand perspective, sales increased sequentially in most of the verticals we serve, and not surprisingly, were led by strong demand in compute and aerospace and defense. Year-over-year, we also saw a broad-based improvement across most verticals. Now, turning to today's market. Demand signals continue to reset globally, resulting in lead times trending higher across most product categories. This trend is still largely driven by the data center, artificial intelligence, but is also broadening as projected growth rates of all segments we track continue to improve. We're also seeing an increasing number of customers' orders being placed within lead times, along with higher instances of deliveries beyond lead times.
In the quarter, we made solid strides in expanding operating margins, optimizing inventory, and generating cash flow, while continuing to make necessary investments to best support future growth. From a demand perspective, sales increased sequentially in most of the verticals we serve, and not surprisingly, were led by strong demand in compute and aerospace and defense. Year-over-year, we also saw a broad-based improvement across most verticals. Now, turning to today's market. Demand signals continue to reset globally, resulting in lead times trending higher across most product categories. This trend is still largely driven by the data center, artificial intelligence, but is also broadening as projected growth rates of all segments we track continue to improve. We're also seeing an increasing number of customers' orders being placed within lead times, along with higher instances of deliveries beyond lead times.
Speaker #3: From a demand perspective, sales increased sequentially in most of the verticals we serve, and, not surprisingly, were led by strong demand in compute and aerospace and defense.
Speaker #3: Year over year, we also saw a broad-based improvement across most verticals. Now, turning to today's market, demand signals continue to reset globally, resulting in lead times trending higher across most product categories.
Speaker #3: This trend is still largely driven by the data center and artificial intelligence, but is also broadening as projected growth rates across all segments we track continue to improve.
Speaker #3: We're also seeing an increasing number of customers' orders being placed within lead times. Along with higher instances of deliveries beyond lead times, these factors are driving a mismatch, if you will, between customer request dates and supplier delivery dates.
Phil Gallagher: These factors are driving a mismatch, if you will, between customer request dates and supplier delivery dates. This creates opportunity for us to deliver our supply chain value to our customers by addressing those misalignments. The pricing environment remained stable during the quarter, but we have seen spot price increases with a few suppliers and commodities. The supply dynamics suggest there may be upward pricing pressure across many technologies going forward. We exited the quarter with robust book-to-bills in every region, led by Asia and EMEA. As momentum builds, we are coordinating closely with customers to effectively validate and manage our backlog, while continuing to encourage customers to provide us extended visibility that we can share with our supplier partners.
These factors are driving a mismatch, if you will, between customer request dates and supplier delivery dates. This creates opportunity for us to deliver our supply chain value to our customers by addressing those misalignments. The pricing environment remained stable during the quarter, but we have seen spot price increases with a few suppliers and commodities. The supply dynamics suggest there may be upward pricing pressure across many technologies going forward. We exited the quarter with robust book-to-bills in every region, led by Asia and EMEA. As momentum builds, we are coordinating closely with customers to effectively validate and manage our backlog, while continuing to encourage customers to provide us extended visibility that we can share with our supplier partners.
Speaker #3: This creates opportunity for us to deliver our supply chain value to our customers by addressing those misalignments. The pricing environment remains stable during the quarter, but we have seen spot price increases with a few suppliers and commodities.
Speaker #3: The supply dynamics suggest there may be upward pricing pressure across many technologies, going forward. We exited the quarter with robust book to bills in every region, led by Asia and EMEA.
Speaker #3: As momentum builds, we are coordinating closely with customers to effectively validate and manage our backlog. While continuing to encourage customers to provide us extended visibility that we can share with our supplier partners, the more visibility we can give to our supplier partners, the more supply chain expertise we can bring to bear to solve for the complexities in the market.
Phil Gallagher: The more visibility we can give to our supplier partners, the more supply chain expertise we can bring to bear to solve for the complexities in the market. With that, let me turn to highlights for our businesses. At the top line, our electronic components business drove year-over-year growth and sequential sales growth across all regions. In Asia, sales reached a record high of over $3 billion. This marks our sixth consecutive quarter of year-over-year sales growth in the region. Demand increased across most of the verticals and geographies we serve for both the year-over-year and sequential compares. In EMEA, we're seeing clear signs of recovery, with sales growing both sequentially and year-over-year. Most end markets showed year-over-year growth, including industrial, while compute, consumer, and transportation were the strongest end markets quarter-over-quarter. We are encouraged with the improving outlook in the region, especially given the continued market uncertainty.
The more visibility we can give to our supplier partners, the more supply chain expertise we can bring to bear to solve for the complexities in the market. With that, let me turn to highlights for our businesses. At the top line, our electronic components business drove year-over-year growth and sequential sales growth across all regions. In Asia, sales reached a record high of over $3 billion. This marks our sixth consecutive quarter of year-over-year sales growth in the region. Demand increased across most of the verticals and geographies we serve for both the year-over-year and sequential compares. In EMEA, we're seeing clear signs of recovery, with sales growing both sequentially and year-over-year. Most end markets showed year-over-year growth, including industrial, while compute, consumer, and transportation were the strongest end markets quarter-over-quarter. We are encouraged with the improving outlook in the region, especially given the continued market uncertainty.
Speaker #3: With that, let me turn to highlights for our businesses. At the top line, our electronic components business drove year-over-year growth and sequential sales growth across all regions.
Speaker #3: In Asia, sales reached a record high of over $3 billion, this marks our sixth consecutive quarter of year-on-year sales growth in the region. Demand increased across most of the verticals, and geographies we serve for both the year-on-year and sequential compares.
Speaker #3: In EMEA, we're seeing clear signs of recovery. With sales growing both sequentially and year-on-year, most end markets showed year-on-year growth, including industrial, while compute, consumer, and transportation were the strongest end markets quarter over quarter. We're encouraged with the improving outlook in the quarter.
Speaker #3: We are region, especially given the continued market uncertainty. I'm confident that EMEA's new leader, Jill Petron, will continue to drive profitable growth in the region.
Phil Gallagher: I'm confident that EMEA's new leader, Gilles Petron, will continue to drive profitable growth in the region. In the Americas, sales grew both sequentially and year-over-year, marking our second consecutive quarter of year-on-year growth. Most end markets showed sequential growth, led by aerospace and defense, while industrial, communication, and compute were the strongest end markets year-over-year. Our EC team is focused on several growth and margin expansion opportunities, including demand creation, supply chain services, embedded solution, and our interconnect, passive, and electromechanical business, or IP&E. Demand creation revenues increased sequentially by 7%, as our field application engineers continued to drive the funnel for converting design wins into revenues. Our design registrations and wins also increased sequentially, which is a positive indicator for future revenues.
I'm confident that EMEA's new leader, Gilles Petron, will continue to drive profitable growth in the region. In the Americas, sales grew both sequentially and year-over-year, marking our second consecutive quarter of year-on-year growth. Most end markets showed sequential growth, led by aerospace and defense, while industrial, communication, and compute were the strongest end markets year-over-year. Our EC team is focused on several growth and margin expansion opportunities, including demand creation, supply chain services, embedded solution, and our interconnect, passive, and electromechanical business, or IP&E. Demand creation revenues increased sequentially by 7%, as our field application engineers continued to drive the funnel for converting design wins into revenues. Our design registrations and wins also increased sequentially, which is a positive indicator for future revenues.
Speaker #3: In the Americas, sales grew both sequentially and year over year, marking our second consecutive quarter of year-on-year growth. Most end markets showed sequential growth, led by aerospace and defense, while industrial, communication, and compute, with the strongest end markets year over year.
Speaker #3: Our EC team is focused on several growth and margin expansion opportunities, including demand creation, supply chain services, embedded solution, and our interconnect passive and electromechanical business, or IP&E.
Speaker #3: Demand creation revenues increased sequentially by 7% as our field application engineers continue to drive the funnel for converting design wins into revenues. Our design registrations and wins also increased sequentially which is a positive indicator for future revenues.
Speaker #3: We continue to develop and invest in both digital tools and hardware solutions that will allow our design engineers to better support our customers' design requirements.
Phil Gallagher: We continue to develop and invest in both digital tools and hardware solutions that will allow our design engineers to better support our customers' design requirements. We are also pleased with the growth in our IP&E business, which had double-digit growth year-on-year. As a reminder, IP&E products carry higher gross margins, and there are many cross-selling opportunities with IP&E components that are complementary to our semiconductor business, including for our demand creation efforts. Now, turning to Farnell. Sales grew sequentially and year-on-year. Farnell's continued improvement reflects recovery across all three regions. We believe this is a sign engineers are working on developing new products, which we view as another indicator of the upturn in demand for electronic components. Operating margins improved sequentially in line with our expectations.
We continue to develop and invest in both digital tools and hardware solutions that will allow our design engineers to better support our customers' design requirements. We are also pleased with the growth in our IP&E business, which had double-digit growth year-on-year. As a reminder, IP&E products carry higher gross margins, and there are many cross-selling opportunities with IP&E components that are complementary to our semiconductor business, including for our demand creation efforts. Now, turning to Farnell. Sales grew sequentially and year-on-year. Farnell's continued improvement reflects recovery across all three regions. We believe this is a sign engineers are working on developing new products, which we view as another indicator of the upturn in demand for electronic components. Operating margins improved sequentially in line with our expectations.
Speaker #3: We are also pleased with the growth in our IP&E business, which had double-digit growth year on year. As a reminder, IP&E products carry higher gross margins, and there are many cross-selling opportunities with IP&E components that are complementary to our semi-electric business, including through our demand creation efforts.
Speaker #3: Now, turning to far-out. Sales grew sequentially and year on year. Far-out has continued improvement reflects recovery across all three regions. We believe this is a sign engineers are working on developing new products which we view as another indicator of the upturn in demand for electronic components.
Speaker #3: Operating margins improved sequentially in line with our expectations. We also continue to gain traction growing far-out sales of on-the-board components through our Power of One initiatives, which leverage the best of Avnet core and far-out digital platforms.
Phil Gallagher: We also continue to gain traction growing Farnell's sales of on-board components through our Power of One initiatives, which leverages the best of Avnet Core and Farnell digital platforms. Although we are seeing improvement in sales of higher margin on-board components, Farnell continues to have a higher relative sales mix of test and measurement, maintenance and repair, and single-board computers. As the recovery of demand for the on-board components continues, especially in Europe, we expect Farnell's gross and operating margins to continue to improve. So, here at the center of technology supply chain, as we look forward, there are many reasons why I'm optimistic about Avnet's future and our position in the marketplace. We have a diverse and high-quality supplier line card and customer base. We have a seasoned and stable leadership team and employee base.
We also continue to gain traction growing Farnell's sales of on-board components through our Power of One initiatives, which leverages the best of Avnet Core and Farnell digital platforms. Although we are seeing improvement in sales of higher margin on-board components, Farnell continues to have a higher relative sales mix of test and measurement, maintenance and repair, and single-board computers. As the recovery of demand for the on-board components continues, especially in Europe, we expect Farnell's gross and operating margins to continue to improve. So, here at the center of technology supply chain, as we look forward, there are many reasons why I'm optimistic about Avnet's future and our position in the marketplace. We have a diverse and high-quality supplier line card and customer base. We have a seasoned and stable leadership team and employee base.
Speaker #3: Although we are seeing improvement in sales of higher margin on-board components, far-out continues to have a higher relative sales mix of test and measurement, maintenance, and repair, and single-board computers.
Speaker #3: As the recovery of demand for the on-board components continues, especially in Europe, we expect far-out's growth and operating margins to continue to improve. So here at the center of technology supply chain, as we look forward, there are many reasons why I'm optimistic about AVNET's future and our position in the
Speaker #3: marketplace. We have a diverse and
Speaker #2: high-quality supplier line card and customer base. We have a seasoned and stable leadership team and employee base. We're the only global distributor that also has a high service distribution business.
Phil Gallagher: We're the only global distributor that also has a high service distribution business. We have the right resources and, more importantly, capacity in place with our sales teams, our engineers, and our technical capabilities. From an operating expense standpoint, we believe we are well positioned for future growth. Our model will create operating leverage over the next couple of years as we return to growth across the world. We're also well positioned with inventory, but continue to drive down areas of excess while we invest in areas of need. To conclude, we are pleased with the momentum we're seeing moving into the new calendar year. For those of you who attended CES this year, there was a lot of excitement at the show.
We're the only global distributor that also has a high service distribution business. We have the right resources and, more importantly, capacity in place with our sales teams, our engineers, and our technical capabilities. From an operating expense standpoint, we believe we are well positioned for future growth. Our model will create operating leverage over the next couple of years as we return to growth across the world. We're also well positioned with inventory, but continue to drive down areas of excess while we invest in areas of need. To conclude, we are pleased with the momentum we're seeing moving into the new calendar year. For those of you who attended CES this year, there was a lot of excitement at the show.
Speaker #2: We have the right resources and, more importantly, capacity in place with our sales teams, our engineers, and our technical capabilities. And from an operating expense standpoint, we believe we are well positioned for future growth.
Speaker #2: So, our model will create operating leverage over the next couple of years as we return to growth across the world. We're also well-positioned with inventory.
Speaker #2: We'll continue to drive down areas of excess while we invest in areas of need. To conclude, we are pleased with the momentum we're seeing moving into the new calendar year.
Speaker #2: For those of you who attended CES this year, there was a lot of excitement at the show. We had the opportunity to meet with leadership of many of our supplier partners and customers and we continue to be encouraged that 2026 will be a year of growth and margin expansion and improved returns for AVNET.
Phil Gallagher: We had the opportunity to meet with leadership of many of our supplier partners and customers, and we continue to be encouraged that 2026 will be a year of growth, margin expansion, and improved returns for Avnet. With that, I'll turn it over to Ken to dive deeper into our Q2 results. Ken?
We had the opportunity to meet with leadership of many of our supplier partners and customers, and we continue to be encouraged that 2026 will be a year of growth, margin expansion, and improved returns for Avnet. With that, I'll turn it over to Ken to dive deeper into our Q2 results. Ken?
Speaker #2: With that, I'll turn it over to results. Ken, to dive deeper into our second quarter—Ken.
Speaker #3: Thank you, Phil. And good morning, everyone. We appreciate your interest in AVNET and for joining our second quarter earnings call. Our sales for the second quarter were approximately $6.3 billion above the high end of our guidance range and up 12% year over year.
Ken Jacobson: Thank you, Phil, and good morning, everyone. We appreciate your interest in Avnet and for joining our second quarter earnings call. Our sales for the second quarter were approximately $6.3 billion, above the high end of our guidance range and up 12% year-over-year. On a sequential basis, sales were higher by 7%. Regionally, on a year-over-year basis, sales increased 17% in Asia, 8% in Europe, and 5% in the Americas. During the second quarter, sales from Asia grew to over 50% of total sales, compared to approximately 48% of sales last quarter. From an operating group perspective, electronic component sales increased 11% year-over-year and increased 7% sequentially. In constant currency, electronic component sales increased 9% year-over-year. Farnell sales increased 24% year-over-year and 7% sequentially.
Ken Jacobson: Thank you, Phil, and good morning, everyone. We appreciate your interest in Avnet and for joining our second quarter earnings call. Our sales for the second quarter were approximately $6.3 billion, above the high end of our guidance range and up 12% year-over-year. On a sequential basis, sales were higher by 7%. Regionally, on a year-over-year basis, sales increased 17% in Asia, 8% in Europe, and 5% in the Americas. During the second quarter, sales from Asia grew to over 50% of total sales, compared to approximately 48% of sales last quarter. From an operating group perspective, electronic component sales increased 11% year-over-year and increased 7% sequentially. In constant currency, electronic component sales increased 9% year-over-year. Farnell sales increased 24% year-over-year and 7% sequentially.
Speaker #3: On a sequential basis, sales were higher by 7%. Regionally, on a year-over-year basis, sales increased 17% in Asia, 8% in Europe, and 5% in the Americas.
Speaker #3: During the second quarter, sales from Asia grew to over 50% of total sales, compared to approximately 48% of sales last quarter. From an operating group perspective, electronic component sales increased 11% year over year and increased 7% sequentially.
Speaker #3: In constant currency, electronic component sales increased 9% year over year. Far-out sales increased 24% year over year and 7% sequentially. In constant currency, far-out sales increased 20% year over year.
Ken Jacobson: In constant currency, Farnell sales increased 20% year-over-year. For the second quarter, gross margin of 10.5% was flattish year-over-year and up slightly sequentially. EC gross margins are still being impacted by the Asia region growing faster than the West. From a regional perspective, EC gross margins were stable by region, with gross margin improvement in Europe compared to last quarter. From a Farnell perspective, gross margins were up over 100 basis points year-over-year, and were down 25 basis points sequentially. As Phil mentioned, we anticipate improvement in Farnell gross margins as we see more growth in on-the-board components relative to other product categories. As a reminder, Farnell's Europe region has the highest regional mix of on-the-board components and has been the slowest to recover. Gross margins at the product category level for Farnell continue to be stable.
In constant currency, Farnell sales increased 20% year-over-year. For the second quarter, gross margin of 10.5% was flattish year-over-year and up slightly sequentially. EC gross margins are still being impacted by the Asia region growing faster than the West. From a regional perspective, EC gross margins were stable by region, with gross margin improvement in Europe compared to last quarter. From a Farnell perspective, gross margins were up over 100 basis points year-over-year, and were down 25 basis points sequentially. As Phil mentioned, we anticipate improvement in Farnell gross margins as we see more growth in on-the-board components relative to other product categories. As a reminder, Farnell's Europe region has the highest regional mix of on-the-board components and has been the slowest to recover. Gross margins at the product category level for Farnell continue to be stable.
Speaker #3: For the second quarter, gross margin of 10.5% was flat-ish year over year and up slightly sequentially. EC gross margins are still being impacted by the Asia region growing faster than the West.
Speaker #3: From a regional perspective, EC gross margins were stable by region, with gross margin improvement in Europe compared to last quarter. From a far-out perspective, gross margins were up over 100 basis points year over year and were down 25 basis points sequentially.
Speaker #3: As Phil mentioned, we anticipate improvement in Far-Out gross margins as we see more growth in on-the-board components relative to other product categories. As a reminder, Far-Out's Europe region has the highest regional mix of on-the-board components and has been the slowest to recover.
Speaker #3: Gross margins of the product category level for far-out continue to be stable. Turning to operating expenses, SGN expenses were $492 million in the quarter, up 55 million year over year and 27 million sequentially.
Ken Jacobson: Turning to operating expenses, SG&A expenses were $492 million in the quarter, up $55 million year over year, and $27 million sequentially. The sequential increase in SG&A costs is primarily from a combination of higher sales volumes and increases in stock-based compensation expense. As a percentage of gross profit dollars, SG&A expenses were lower sequentially at 74%, compared to 76% last quarter. We anticipate that our operating expense to gross profit ratio will continue to improve as we grow our gross profit dollars. For the second quarter, we reported adjusted operating income of $172 million, and the total Avnet adjusted operating margin was 2.7%. By operating group, Electronic Components operating income was $187 million, and EC operating margin was 3.2%.
Turning to operating expenses, SG&A expenses were $492 million in the quarter, up $55 million year over year, and $27 million sequentially. The sequential increase in SG&A costs is primarily from a combination of higher sales volumes and increases in stock-based compensation expense. As a percentage of gross profit dollars, SG&A expenses were lower sequentially at 74%, compared to 76% last quarter. We anticipate that our operating expense to gross profit ratio will continue to improve as we grow our gross profit dollars. For the second quarter, we reported adjusted operating income of $172 million, and the total Avnet adjusted operating margin was 2.7%. By operating group, Electronic Components operating income was $187 million, and EC operating margin was 3.2%.
Speaker #3: The sequential increase in SGN costs is primarily from a combination of higher sales stock-based compensation volumes and increases in expense. As a percentage of gross profit dollars, SGN expenses were lower sequentially at 74% compared to 76% last quarter.
Speaker #3: We anticipate that our operating expense to gross profit ratio will continue to improve as we grow our gross profit dollars. For the second quarter, we reported adjusted operating income of $172 million and the total AVNET adjusted operating margin was 2.7%.
Speaker #3: By operating group, Electronic Components operating income was $187 million, and EC operating margin was 3.2%. The sequential increase in EC operating margin was primarily due to EC operating income growing more than two times greater than sales, driven primarily by the growth in the Americas and Europe.
Ken Jacobson: The sequential increase in EC operating margin was primarily due to EC operating income growing more than 2 times greater than sales, driven primarily by the growth in the Americas and Europe. Farnell operating income was $20 million, and operating income margin was 4.7%. Operating income margin was up nearly 40 basis points from last quarter. This is the highest operating margin Farnell has had since fiscal 2023. Turning to expenses below operating income, second quarter interest expense was $61 million, and our adjusted effective income tax rate was 23%, both consistent with expectations. Adjusted diluted earnings per share of $1.05 exceeded the high end of our guidance for the quarter. Adjusted diluted earnings per share grew nearly 4 times sales compared to last quarter. Turning to the balance sheet and liquidity.
The sequential increase in EC operating margin was primarily due to EC operating income growing more than 2 times greater than sales, driven primarily by the growth in the Americas and Europe. Farnell operating income was $20 million, and operating income margin was 4.7%. Operating income margin was up nearly 40 basis points from last quarter. This is the highest operating margin Farnell has had since fiscal 2023. Turning to expenses below operating income, second quarter interest expense was $61 million, and our adjusted effective income tax rate was 23%, both consistent with expectations. Adjusted diluted earnings per share of $1.05 exceeded the high end of our guidance for the quarter. Adjusted diluted earnings per share grew nearly 4 times sales compared to last quarter. Turning to the balance sheet and liquidity.
Speaker #3: Far-out operating income was $20 million, and operating income margin was 4.7%. Operating income margin was up nearly 40 basis points from last quarter. This is the highest operating margin Far-out has had since fiscal 2023.
Speaker #3: Turning to expenses below operating income, second-quarter interest expense was $61 million, and our adjusted effective income tax rate was 23%, both consistent with expectations.
Speaker #3: Adjusted diluted earnings per share of $1.05 exceeded the high end of our guidance for the quarter. Adjusted diluted earnings per share grew nearly four times sales compared to last quarter.
Speaker #3: Turning to the balance sheet and liquidity, during the quarter, working capital decreased by $42 million sequentially. Working capital days decreased seven days quarter over quarter to 88 days.
Ken Jacobson: During the quarter, working capital decreased by $42 million sequentially. Working capital days decreased 7 days quarter over quarter to 88 days. From an inventory perspective, we reduced inventory by $126 million, or 2.3% sequentially. At the end of the quarter, our EC business received approximately $150 million of high demand inventory related to memory and storage products, which partially offset some of the broader inventory reductions that took place across EC this quarter. Substantially, all of the memory and storage products received at the end of the quarter has already been shipped to customers in January. We ended the quarter with 86 days of inventory as we continue to make progress on reducing total Avnet inventory days to below 80. As a reminder, the inventory turns models are different between the EC business and Farnell.
Ken Jacobson: During the quarter, working capital decreased by $42 million sequentially. Working capital days decreased 7 days quarter over quarter to 88 days. From an inventory perspective, we reduced inventory by $126 million, or 2.3% sequentially. At the end of the quarter, our EC business received approximately $150 million of high demand inventory related to memory and storage products, which partially offset some of the broader inventory reductions that took place across EC this quarter. Substantially, all of the memory and storage products received at the end of the quarter has already been shipped to customers in January. We ended the quarter with 86 days of inventory as we continue to make progress on reducing total Avnet inventory days to below 80. As a reminder, the inventory turns models are different between the EC business and Farnell.
Speaker #3: From an inventory perspective, we reduced inventory by $126 million, or 2.3%, sequentially. At the end of the quarter, our EC business received approximately $150 million of high-demand inventory related to memory and storage products, which partially offset some of the broader inventory reductions that took place across EC this quarter.
Speaker #3: Substantially all of the memory and storage products received at the end of the quarter has already been shipped to customers in January. We ended the quarter with 86 days of inventory as we continue to make progress on reducing total AVNET inventory days to below 80.
Speaker #3: As a reminder, the inventory trends models are different between the EC business and Far-Out. Our EC business typically runs between 4 to 6 turns per year, whereas Far-Out typically runs between 1.5 to 2 turns per year.
Ken Jacobson: Our EC business typically runs between 4 to 6 turns per year, whereas Farnell typically runs between 1.5 to 2 turns per year. Farnell's high service value proposition requires a breadth of on-the-board test, and measurement, and maintenance, and repair product inventories. For further context on these inventory model differences, at the end of Q2, our EC business had less than 80 days of inventory, and our Farnell business had less than 230 days of inventory. Even with the overall inventory improvement, our team remains focused on reducing inventory levels where elevated, while still making inventory investments where needed. Our return on working capital improved over 100 basis points compared to last quarter, through a combination of operating income growth and the reduction in working capital days.
Our EC business typically runs between 4 to 6 turns per year, whereas Farnell typically runs between 1.5 to 2 turns per year. Farnell's high service value proposition requires a breadth of on-the-board test, and measurement, and maintenance, and repair product inventories. For further context on these inventory model differences, at the end of Q2, our EC business had less than 80 days of inventory, and our Farnell business had less than 230 days of inventory. Even with the overall inventory improvement, our team remains focused on reducing inventory levels where elevated, while still making inventory investments where needed. Our return on working capital improved over 100 basis points compared to last quarter, through a combination of operating income growth and the reduction in working capital days.
Speaker #3: Far-out's high service value proposition requires a breadth of on-the-board tests and measurement, and maintenance and repair product inventories. For further context on these inventory model differences, at the end of the second quarter, our EC business had less than 80 days of inventory and our Far-out business had less than 230 days of inventory.
Speaker #3: Even with the overall inventory improvement, our team remains focused on reducing inventory levels where elevated, while still making inventory investments where needed. Our return on working capital improved over 100 basis points compared to last quarter through a combination of operating income growth and the reduction in working capital days.
Speaker #3: We remain focused on continuing to improve our return on working capital, which will also drive improvements in our overall return on invested capital. In the second quarter, we generated $208 million of cash flow from operations.
Ken Jacobson: We remain focused on continuing to improve our return on working capital, which will also drive improvements in our overall return on invested capital. In the second quarter, we generated $208 million of cash flow from operations. Cash used for capital expenditure was $15 million. In line with our commitment to lower leverage in order to maintain a strong balance sheet, we paid down an incremental amount of debt from the prior quarter, and we ended the second quarter with a gross leverage of 3.9 times, with approximately $1.7 billion of available committed borrowing capacity. We still anticipate reducing our leverage to approximately 3 times over the next year. We continue to deploy cash in a manner that generates the greatest long-term return on investments for our shareholders.
We remain focused on continuing to improve our return on working capital, which will also drive improvements in our overall return on invested capital. In the second quarter, we generated $208 million of cash flow from operations. Cash used for capital expenditure was $15 million. In line with our commitment to lower leverage in order to maintain a strong balance sheet, we paid down an incremental amount of debt from the prior quarter, and we ended the second quarter with a gross leverage of 3.9 times, with approximately $1.7 billion of available committed borrowing capacity. We still anticipate reducing our leverage to approximately 3 times over the next year. We continue to deploy cash in a manner that generates the greatest long-term return on investments for our shareholders.
Speaker #3: Cash used for capital expenditures was $15 million. In line with our commitment to lower leverage in order to maintain a strong balance sheet, we paid down an incremental amount of debt from the prior quarter and we ended the second quarter with a gross leverage of 3.9 times, with approximately 1.7 billion of available committed borrowing capacity.
Speaker #3: We still anticipate reducing our leverage to approximately 3 times over the next year. We continue to deploy cash in a manner that generates the greatest long-term return on investments for our shareholders.
Speaker #3: In the second quarter, we paid our quarterly dividend of $0.35 per share, or $28 million. Turning to guidance, for the third quarter of fiscal 2026, we are guiding sales in the range of $6.2 billion to $6.5 billion and diluted earnings per share in the range of $1.20 to $1.30.
Ken Jacobson: In the second quarter, we paid our quarterly dividend of $0.35 per share, or $28 million. Turning to guidance. For the third quarter of fiscal 2026, we are guiding sales in a range of $6.2 to 6.5 billion, and diluted earnings per share in the range of $1.20 to $1.30. Our third quarter guidance assumes current market conditions persist and implies a sequential sales increase of approximately 1% of the midpoint. The sales guidance implies sales growth in the Americas and EMEA, and a less than seasonal sales decline in Asia due to the Lunar New Year. Our third quarter guidance also implies further recovery in our higher-margin Western regions, which accelerates the operating leverage in our business model.
In the second quarter, we paid our quarterly dividend of $0.35 per share, or $28 million. Turning to guidance. For the third quarter of fiscal 2026, we are guiding sales in a range of $6.2 to 6.5 billion, and diluted earnings per share in the range of $1.20 to $1.30. Our third quarter guidance assumes current market conditions persist and implies a sequential sales increase of approximately 1% of the midpoint. The sales guidance implies sales growth in the Americas and EMEA, and a less than seasonal sales decline in Asia due to the Lunar New Year. Our third quarter guidance also implies further recovery in our higher-margin Western regions, which accelerates the operating leverage in our business model.
Speaker #3: Our third quarter guidance assumes current market conditions persist and implies a sequential sales increase of approximately 1% of the in the Americas and EMEA and a less midpoint.
Speaker #3: The sales guidance implies sales growth than seasonal sales decline in Asia due to the Lunar New Year. Our third quarter guidance also implies further recovery in our higher margin Western regions, which accelerates the operating leverage in our business model.
Speaker #3: This guidance also assumes similar interest expense compared to the second quarter on effective tax rate of between 21% and 25% and 83 million shares outstanding on a diluted basis.
Ken Jacobson: This guidance also assumes similar interest expense compared to Q2, an effective tax rate of between 21% and 25%, and 83 million shares outstanding on a diluted basis. In closing, I want to thank our team for delivering a solid quarter of improved financial results, with our Q3 guidance giving us further confidence in the overall recovery of our business. 2026 should provide several opportunities for Avnet to help our customers and suppliers adapt to continually changing market conditions and will serve us well as we continue to create value for our stakeholders. With that, I will turn it over to the operator to open it up for questions. Operator?
This guidance also assumes similar interest expense compared to Q2, an effective tax rate of between 21% and 25%, and 83 million shares outstanding on a diluted basis. In closing, I want to thank our team for delivering a solid quarter of improved financial results, with our Q3 guidance giving us further confidence in the overall recovery of our business. 2026 should provide several opportunities for Avnet to help our customers and suppliers adapt to continually changing market conditions and will serve us well as we continue to create value for our stakeholders. With that, I will turn it over to the operator to open it up for questions. Operator?
Speaker #3: In closing, I want to thank our team for delivering a solid quarter of improved financial results with a third quarter guidance giving us further confidence in the overall recovery of our business.
Speaker #3: 2026 should provide several opportunities for AVNET to help our customers and suppliers adapt to continually changing market conditions and will serve us well as we continue to create value for our stakeholders.
Speaker #3: With that, I will turn it over to the operator to open it up for
Speaker #3: questions. Operator. Thank
Operator: Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from William Stein with Truist Securities. Please proceed.
Operator: Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Our first question is from William Stein with Truist Securities. Please proceed.
Speaker #2: you. Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad.
Speaker #2: A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.
Speaker #2: And for participants, you seek speaker equipment and may need to pick up your handset before pressing the star keys. One moment while we pull for questions.
Speaker #2: Our first question is from William Stein with Truist Securities. Please proceed.
William Stein: ... Hey, thanks for taking my question. I guess I'd like to squeeze in two, if I can. First, could you talk to us about the linearity of orders during the quarter? Anything unusual or noteworthy there? I think typically, new orders tend to fade as you go into December. Maybe I have that wrong, but whether it's right or wrong, maybe comment on that trend and also the duration of your backlog as it stands now. Do you have a bit more visibility? Are you seeing customers place it longer at a longer sort of time to request? Thank you.
William Stein: ... Hey, thanks for taking my question. I guess I'd like to squeeze in two, if I can. First, could you talk to us about the linearity of orders during the quarter? Anything unusual or noteworthy there? I think typically, new orders tend to fade as you go into December. Maybe I have that wrong, but whether it's right or wrong, maybe comment on that trend and also the duration of your backlog as it stands now. Do you have a bit more visibility? Are you seeing customers place it longer at a longer sort of time to request? Thank you.
Speaker #3: Hey, thanks for taking my question. I guess I'd like to squeeze in two if I can. First, could you talk to us about the linearity of orders during the quarter?
Speaker #3: Anything unusual or noteworthy there? I think typically new orders tend to fade as you go into December. Maybe I have that wrong, but whether right or wrong, maybe comment on that trend and the also the duration of your backlog as it stands now.
Speaker #3: visibility? Are you seeing Do you have a bit more customers place it longer at a longer sort of time to request? Thank
Speaker #3: you.
Speaker #4: Yeah, thanks,
Phil Gallagher: Yeah, thanks, Will. I appreciate you joining the call. So, I guess that was the 2 questions, right? So I'll go first, if Ken wants to add something. On the linearity, the second quarter, December quarter is always an interesting one, right? Because, you know, your billings continue through the quarter, but your bookings do tail off near the end of the, you know, the second half of December, let's say, give or take a few days. So yeah, it's definitely a stronger booking on, in this case, October, November, pretty good through December till about midway, then that booking start to trail off. But, you know, the billings continue, 'cause even if there's shutdowns through the holiday, you know, manufacturing starts up when they get back.
Phil Gallagher: Yeah, thanks, Will. I appreciate you joining the call. So, I guess that was the 2 questions, right? So I'll go first, if Ken wants to add something. On the linearity, the second quarter, December quarter is always an interesting one, right? Because, you know, your billings continue through the quarter, but your bookings do tail off near the end of the, you know, the second half of December, let's say, give or take a few days. So yeah, it's definitely a stronger booking on, in this case, October, November, pretty good through December till about midway, then that booking start to trail off. But, you know, the billings continue, 'cause even if there's shutdowns through the holiday, you know, manufacturing starts up when they get back.
Speaker #4: Will. I appreciate you joining the call. So I guess that was the two questions, right? So I'll go first if Kim wants to add something.
Speaker #4: On the linearity, the second quarter, December quarter is always an interesting one, right? Because your billings continue through the quarter, but your bookings do tail off near the end of the second half of December, let's say, give or take a few days.
Speaker #4: So, yeah, it's definitely a stronger booking in this case—October, November, pretty good through December until about midway. Then that booking starts to trail off.
Speaker #4: But the billings continue because even if there are shutdowns through the holiday, manufacturing starts up when they get back. So you do bill out some.
Phil Gallagher: So you do bill out some idea, a bit more than bookings. But even that said, the book-to-bills were positive on top of a pretty good billing quarter. So that was good news this far. And the other point, which really ties to your, the longer-term view we're getting, is the drop in orders inside of lead time from customers is increasing, or expedites are increasing. And what that tells us, and we don't know absolute will, that inventories are depleting, with lead times not going out until recently, right? Customers weren't pipelining and giving us enough visibility, and then when they go to the manufacturer, boom, they're coming in with drop-in. We call them drop-in inside, you know, like kind of a quote, book, ship, bill inside the 90 days.
So you do bill out some idea, a bit more than bookings. But even that said, the book-to-bills were positive on top of a pretty good billing quarter. So that was good news this far. And the other point, which really ties to your, the longer-term view we're getting, is the drop in orders inside of lead time from customers is increasing, or expedites are increasing. And what that tells us, and we don't know absolute will, that inventories are depleting, with lead times not going out until recently, right? Customers weren't pipelining and giving us enough visibility, and then when they go to the manufacturer, boom, they're coming in with drop-in. We call them drop-in inside, you know, like kind of a quote, book, ship, bill inside the 90 days.
Speaker #4: A bit more in bookings. But even that said, the book-to-bills were positive on top of a pretty good billing quarter. So that was good news this far.
Speaker #4: And the other point, which really ties to your the longer-term view we're getting, is the drop in orders. Inside of lead time, when customers have been increasing.
Speaker #4: Our expedites are increasing. And when that tells us, and we don't know absolute, Will, that inventories are depleting, with lead times not going out until recent, right?
Speaker #4: Customers weren't pipelining and giving us enough visibility. And then when they go to their manufacturer, boom, they're coming in with dropping. We call them dropping inside kind of a QuoteBookShip bill inside the 90 days.
Speaker #4: So that's a, again, a positive sign, which then leads to your last question or the second part of the question, is the visibility. It's improving.
Phil Gallagher: So that's a, again, a positive sign, which then leads to your last question or the second part of the question is the visibility. It's improving, Will. The suppliers, and a lot of them are on this call, they're banging us for backlogs. They wanna know what to build, and we're banging the customers for more visibility into the future, longer-term bookings, if you will, or forecast. And we're starting to see that increase. Still probably not at the level we would like to see it, but yeah, we're starting to get a bit more visibility into the future, which any customers on the call, and we'll see a lot of them next week here in Arizona, that's the message. Still, we still want that visibility and pipeline, so we can pipeline appropriately for them.
So that's a, again, a positive sign, which then leads to your last question or the second part of the question is the visibility. It's improving, Will. The suppliers, and a lot of them are on this call, they're banging us for backlogs. They wanna know what to build, and we're banging the customers for more visibility into the future, longer-term bookings, if you will, or forecast. And we're starting to see that increase. Still probably not at the level we would like to see it, but yeah, we're starting to get a bit more visibility into the future, which any customers on the call, and we'll see a lot of them next week here in Arizona, that's the message. Still, we still want that visibility and pipeline, so we can pipeline appropriately for them.
Speaker #4: Well, the suppliers—and a lot of them are on this call—they're banging us for backlogs. They want to know what to build, and we're banging the customers for more visibility into the future, longer-term bookings, if you will, or forecast.
Speaker #4: And we're starting to see that increase. Still probably not at the level we would like to see it, but yeah, we're starting to get a bit more visibility into the future, which customers on the call, and we'll see a lot of them next week here in Arizona, that's the message still.
Speaker #4: We still want that visibility and pipeline so we can pipeline appropriately for them. But it's improving. Not where it needs to be, quite
Phil Gallagher: But it's improving, not where it needs to be quite yet.
But it's improving, not where it needs to be quite yet.
Speaker #4: yet. Thank you. Okay.
William Stein: Thank you.
William Stein: Thank you.
Phil Gallagher: Okay. Answers your question.
Phil Gallagher: Okay. Answers your question.
Speaker #2: Our next question is from Joe Quattroci with Wells Fargo. Please proceed.
Operator: Our next question is from Joe Quattrocchi with Wells Fargo. Please proceed.
Operator: Our next question is from Joe Quattrocchi with Wells Fargo. Please proceed.
Speaker #5: Hey, thanks for taking the questions. I was wondering if we could go back to just kind of understand, maybe, the pricing commentary that you talked about in terms of—are there any end markets or end products that you can talk about where you're seeing the price inflation more than others?
Joe Quattrocchi: Hey, thanks for taking the question. I was wondering if you could go back to just kinda understand, you know, maybe the pricing commentary that you talked about in terms of, are there any end markets or end products that you can talk about that you're seeing, you know, the price inflation on more than others?
Joe Quatrochi: Hey, thanks for taking the question. I was wondering if you could go back to just kinda understand, you know, maybe the pricing commentary that you talked about in terms of, are there any end markets or end products that you can talk about that you're seeing, you know, the price inflation on more than others?
Speaker #4: Yeah, thanks, Joe. Yeah, I think we said there's upward pricing pressures in that, so I think it's going to continue. I think before we even get into the increased pricing—I mean, the good news is in this cycle, one of the positives, and it's been a long cycle, is pricing has kind of held up.
Phil Gallagher: Yeah, thanks, Joe. Yeah, I think we said, you know, there's upward pricing pressures in that, so I think, I think it's gonna continue. I think before we even get into that, increased pricing, I mean, the good news is, in this cycle, one of the positives, and it's been a long cycle, is pricing has kind of held up. ASPs overall have held up. But as lead times start to trend higher across some of their product categories, then you can anticipate some of it's already happening for sure, in memory, storage, controllers, certain capacitors in the IP&E space. We're starting to see some pricing inflation. And a lot of that's driven obviously by the activity around the data center increase in the hyperscalers.
Phil Gallagher: Yeah, thanks, Joe. Yeah, I think we said, you know, there's upward pricing pressures in that, so I think, I think it's gonna continue. I think before we even get into that, increased pricing, I mean, the good news is, in this cycle, one of the positives, and it's been a long cycle, is pricing has kind of held up. ASPs overall have held up. But as lead times start to trend higher across some of their product categories, then you can anticipate some of it's already happening for sure, in memory, storage, controllers, certain capacitors in the IP&E space. We're starting to see some pricing inflation. And a lot of that's driven obviously by the activity around the data center increase in the hyperscalers.
Speaker #4: ASPs overall have held up. But as lead times start to trend higher, across some of the product categories, I think you can anticipate some of it's already happening for sure.
Speaker #4: In memory, storage, controllers, certain capacitors—in the IPD space—we're starting to see some pricing inflation. And a lot of that's driven, obviously, by the activity around data centers, increase in the hyperscalers.
Speaker #4: But it's really a lot of our industrial customers are increasing demand based on their exposure to the data center, if you know what I mean.
Phil Gallagher: But it's really a lot of our industrial customers are increasing demand, based on their exposure to the data center, if you know what I mean. So overall, it's not across the board. Over pretty much through Q2 is stable, but we're starting to see some increases, and I think that will continue as we move forward.
But it's really a lot of our industrial customers are increasing demand, based on their exposure to the data center, if you know what I mean. So overall, it's not across the board. Over pretty much through Q2 is stable, but we're starting to see some increases, and I think that will continue as we move forward.
Speaker #4: So overall, it's not across the board. Over pretty much through Q2 is stable. But we're starting to see some increases. And I think that will continue as we move
Speaker #4: forward. And Joe, maybe just a point of clarity
Ken Jacobson: And Joe, maybe just a point of clarity. We've seen the increases announced, and we know they're coming, right? But the actual quarterly results didn't have a lot of impact from actual price increases in the quarter. So just to kind of clarify the timing of some of those things.
Ken Jacobson: And Joe, maybe just a point of clarity. We've seen the increases announced, and we know they're coming, right? But the actual quarterly results didn't have a lot of impact from actual price increases in the quarter. So just to kind of clarify the timing of some of those things.
Speaker #3: that we've seen the increases announced, and we know they're coming, right? But the actual quarterly results didn't have a lot of impact from actual price increases in the quarter.
Speaker #3: So just to kind of clarify the timing of some of those.
Speaker #3: things. Okay.
Joe Quattrocchi: Okay. That's helpful. And then just as I guess, as I'm thinking about the guidance on the revenue, you know, you talked about Americas and EMEA up and then Asia maybe a bit better than seasonal in terms of, like, the rate of decline. How do I think about just, like, Americas and EMEA relative to seasonality? Like, what's your expectation for the March quarter?
Joe Quatrochi: Okay. That's helpful. And then just as I guess, as I'm thinking about the guidance on the revenue, you know, you talked about Americas and EMEA up and then Asia maybe a bit better than seasonal in terms of, like, the rate of decline. How do I think about just, like, Americas and EMEA relative to seasonality? Like, what's your expectation for the March quarter?
Speaker #5: That's helpful. And then, just as I'm thinking about the guidance on the revenue, you talked about Americas and EMEA being up, and then Asia maybe a bit better than seasonal in terms of the rate of decline.
Speaker #5: How do I think about just America's and EMEA relative to seasonality? What's your expectation for the March quarter?
Speaker #4: Yeah. So the March quarter, I would kind of jump in. Typically, Joe, the west bounces back in the March quarter over December. And a lot of that's a math equation with just more days and whatnot.
Phil Gallagher: Yeah, so the March quarter, I let Ken jump in. Typically, Joe, the West bounces back in the March quarter over December, and a lot of that's, it's a math equation with just, you know, more days and, you know, and whatnot. But last year, it was an anomaly, you might recall, where the West did not increase over December quarter. That was kind of the first time that I saw that in ever, I think. So this year it's back to more, you know, typical seasonality, where the West will be up, which is positive, and obviously that's our, like, higher margin regions, as you know. And Asia, you know, it's gonna have a, you know, typical, well, maybe not typical. Lunar New Year, Chinese New Year is gonna have an impact.
Phil Gallagher: Yeah, so the March quarter, I let Ken jump in. Typically, Joe, the West bounces back in the March quarter over December, and a lot of that's, it's a math equation with just, you know, more days and, you know, and whatnot. But last year, it was an anomaly, you might recall, where the West did not increase over December quarter. That was kind of the first time that I saw that in ever, I think. So this year it's back to more, you know, typical seasonality, where the West will be up, which is positive, and obviously that's our, like, higher margin regions, as you know. And Asia, you know, it's gonna have a, you know, typical, well, maybe not typical. Lunar New Year, Chinese New Year is gonna have an impact.
Speaker #4: But last year, it was an anomaly, you might recall, where the west did not increase over December quarter. That was kind of the first time that I saw that in ever, I think.
Speaker #4: So this year, it's back to more typical seasonality, where the West will be up, which is positive. And obviously, that's our higher-margin region, as you know.
Speaker #4: And Asia, it's going to have a typical, well, maybe not typical. Lunar New Year, Chinese New Year is going to have an impact but not as significant as we've seen in the past, right?
Phil Gallagher: But not as significant as we've seen in the past, right? So that's also a positive. So our regional mix shift is in our favor this quarter as we get into March, which is good news. But Ken, anyone add to that?
But not as significant as we've seen in the past, right? So that's also a positive. So our regional mix shift is in our favor this quarter as we get into March, which is good news. But Ken, anyone add to that?
Speaker #4: So that's also positive. So our regional mix shift is in our favor this quarter as we get into March, which is good news. But can anyone?
Speaker #3: Yeah, I think steady, high single-digit is how I think about it in terms of the growth in the west, which is kind of as expected.
Ken Jacobson: Yeah, I think steady, you know, high single digit-
Ken Jacobson: Yeah, I think steady, you know, high single digit-
Phil Gallagher: Yeah
Phil Gallagher: Yeah
Ken Jacobson: is how I think about it in terms of the growth in the West, which is kind of as expected, so maybe slightly higher seasonality. But you know, I still think the West is ramping, you know, and the bookings continue to improve. And I guess what I'd point to in the guidance is, you know, because the revenues are up slightly, you know, normally what you'd see is Asia down even double digits and the West up, and so that mix shift usually created a nice gross profit margin boost. So we're not seeing that because of where Asia's at in terms of, you know, a low single digit down. But we are seeing the operating margin expansion from that seasonal mix shift, right? We're seeing good operating income growth from the West, you know, think about high teens.
Ken Jacobson: is how I think about it in terms of the growth in the West, which is kind of as expected, so maybe slightly higher seasonality. But you know, I still think the West is ramping, you know, and the bookings continue to improve. And I guess what I'd point to in the guidance is, you know, because the revenues are up slightly, you know, normally what you'd see is Asia down even double digits and the West up, and so that mix shift usually created a nice gross profit margin boost. So we're not seeing that because of where Asia's at in terms of, you know, a low single digit down. But we are seeing the operating margin expansion from that seasonal mix shift, right? We're seeing good operating income growth from the West, you know, think about high teens.
Speaker #3: So maybe slightly higher seasonality, but I still think the west is ramping in the bookings continuing to improve. And I guess what I point to in the guidance is because the revenues are up slightly, normally what you'd see is Asia down, even double digits.
Speaker #3: And the West up. And so that mix shift usually created a nice gross profit margin boost. So we're not seeing that because of where Asia's at in terms of low single-digit down.
Speaker #3: But we are seeing the operating margin expansion from that seasonal mix shift, right? We're seeing good operating income growth from the west, think about high teens, and so we're happy about the operating margin expansion implied in the guidance, even though gross margin is still being impacted by mix.
Speaker #3: But we are seeing the operating margin expansion from that seasonal mix shift, right? We're seeing good operating income growth from the West—think about high teens—and so we're happy about the operating margin expansion implied in the guidance, even though gross margin is still being impacted by mix.
Ken Jacobson: So, we're happy about, you know, the operating margin expansion implied in the guidance, even though, you know, gross margin is still being impacted by mix.
So, we're happy about, you know, the operating margin expansion implied in the guidance, even though, you know, gross margin is still being impacted by mix.
Speaker #5: That's really helpful. I appreciate the color.
Phil Gallagher: That's really helpful. I appreciate all the color. Thanks. You got it, Joe. Thank you.
Joe Quatrochi: That's really helpful. I appreciate all the color. Thanks.
Speaker #5: Thanks. Thanks, Joe.
Phil Gallagher: You got it, Joe. Thank you.
Speaker #4: Thank
Speaker #4: you. Our next
Operator: Our next question is from Ruplu Bhattacharya with Bank of America. Please proceed.
Operator: Our next question is from Ruplu Bhattacharya with Bank of America. Please proceed.
Speaker #2: Question is from Ruplu Bhattacharya with Bank of America. Please go ahead.
Speaker #5: Hi, thanks for taking my questions. Maybe I left a follow-up question on the guidance for the March quarter. Last couple of years, I mean, the March quarter has been sequentially down.
Ruplu Bhattacharya: Hi, thanks for taking my questions. Maybe I'll ask a follow-up question on the guidance for the March quarter. Last couple of years, I mean, the March quarter has been sequentially down. I mean, this year, given the regional mix, you're guiding to slightly up. And from the guidance, I mean, from what I can tell, it looks like the core business margins can be up year on year, depending upon how Farnell does and how the overall mix is. But can I, can I ask, do you think going forward, I mean, your core business margins can grow on a year-over-year basis, for the remaining quarters of this year? And do you think the seasonality in the March quarter being different than the past couple of years impacts the seasonality going forward for the rest of the quarter?
Ruplu Bhattacharya: Hi, thanks for taking my questions. Maybe I'll ask a follow-up question on the guidance for the March quarter. Last couple of years, I mean, the March quarter has been sequentially down. I mean, this year, given the regional mix, you're guiding to slightly up. And from the guidance, I mean, from what I can tell, it looks like the core business margins can be up year on year, depending upon how Farnell does and how the overall mix is. But can I, can I ask, do you think going forward, I mean, your core business margins can grow on a year-over-year basis, for the remaining quarters of this year? And do you think the seasonality in the March quarter being different than the past couple of years impacts the seasonality going forward for the rest of the quarter?
Speaker #5: I mean, this year, given the regional mix, you're guiding to slightly up. And from the guidance, I mean, from what I can tell, it looks like the core business margins can be up year on year.
Speaker #5: Depending upon how far Nell does and how the overall mix is. But can I ask, do you think going forward, I mean, your core business margins can grow on a year-over-year basis for the remaining quarters of this year?
Speaker #5: And do you think the seasonality in the March quarter being different than the past couple of years impacts the seasonality going forward for the rest of the quarter?
Speaker #5: So how are you thinking about as you go through the year, do you think you'll see more than seasonal growth either in revenues or year-over-year growth in margins?
Ruplu Bhattacharya: So, how are you thinking about, you know, as you go through the year, do you think we'll see more than seasonal growth either in revenues or year-over-year growth in margins?
So, how are you thinking about, you know, as you go through the year, do you think we'll see more than seasonal growth either in revenues or year-over-year growth in margins?
Speaker #3: So some Rupla, let me take the last part first. And I think there's no reason to believe seasonality would change in how we think about seasonality.
Ken Jacobson: So, Ruplu, let me take the last part first. And I think, you know, there's no reason to believe seasonality would change. And how we think about seasonality is simply just the number of shipping days. And if you had a traditional Lunar New Year with, you know, let's say, you know, 7 to 10 days, depending on the country, of shutdowns, you know, you have less shipping days to ship the product. I think what's offsetting that is just the fact that bookings are up and business is, you know, booming there in Asia. And I think, you know, similar to the West, it's just a matter of shipping days.
Ken Jacobson: So, Ruplu, let me take the last part first. And I think, you know, there's no reason to believe seasonality would change. And how we think about seasonality is simply just the number of shipping days. And if you had a traditional Lunar New Year with, you know, let's say, you know, 7 to 10 days, depending on the country, of shutdowns, you know, you have less shipping days to ship the product. I think what's offsetting that is just the fact that bookings are up and business is, you know, booming there in Asia. And I think, you know, similar to the West, it's just a matter of shipping days.
Speaker #3: It's simply just the number of shipping days. And if you had a traditional lunar new year, with, let's say, 10, 7 to 10 days, depending on the country, of shutdowns, you have less shipping days to ship the product.
Speaker #3: I think what's offsetting that is just the fact that bookings are up and business is booming there in Asia. And I think similar to the west, it's just a matter of shipping days.
Speaker #3: And so I think as we look forward into a more, let's say, normal mid- to high-single-digit growth environment, I think you will still see those normal swings within seasonality.
Ken Jacobson: And so I think as we look forward into a more, let's say, normal, you know, mid to high single digit growth environment, I think you will still see those normal swings within seasonality. You know, I guess, to answer your question about operating margin, I think, yeah, from an operating margin standpoint, we do expect continued momentum, especially as the West recovers, right? Our. The West is really our operating leverage horses in terms of profitability. And so, you know, although Asia is at record levels, which we're happy for, and it, it's really good signals over there, you know, we're still, you know, roughly 20 to 25% off the top line in the Americas, and probably 30 to 35% of the top line in Europe relative to their historical peak levels.
And so I think as we look forward into a more, let's say, normal, you know, mid to high single digit growth environment, I think you will still see those normal swings within seasonality. You know, I guess, to answer your question about operating margin, I think, yeah, from an operating margin standpoint, we do expect continued momentum, especially as the West recovers, right? Our. The West is really our operating leverage horses in terms of profitability. And so, you know, although Asia is at record levels, which we're happy for, and it, it's really good signals over there, you know, we're still, you know, roughly 20 to 25% off the top line in the Americas, and probably 30 to 35% of the top line in Europe relative to their historical peak levels.
Speaker #3: I guess to answer your question about operating margin, I think, yeah, from an operating margin standpoint, we do expect continued momentum, especially as the west recovers, right?
Speaker #3: The West is really our operating leverage horse in terms of profitability. And so, although Asia is at record levels, which we're happy for—and it's a really good signal over there—we're still roughly 20% to 25% off the top line in the Americas, and probably 30% to 35% off the top line in Europe relative to their historical peak levels.
Ken Jacobson: And so that's a lot of, you know, gross profit dollars that need to kind of come back. So I think as the West recovers, you'll start to see operating margin expansion. And I think to answer your question more specifically, you know, it kind of depends on how quickly the West continues to recover. But I think, you know, this last quarter, in terms of December quarter and the March guidance, you know, is good progress in terms of getting those EC margins back, which is really being led by the West.
And so that's a lot of, you know, gross profit dollars that need to kind of come back. So I think as the West recovers, you'll start to see operating margin expansion. And I think to answer your question more specifically, you know, it kind of depends on how quickly the West continues to recover. But I think, you know, this last quarter, in terms of December quarter and the March guidance, you know, is good progress in terms of getting those EC margins back, which is really being led by the West.
Speaker #3: of gross profit dollars that need to kind of come And so that's a lot back. So I think as the west recovers, you'll start to see operating margin expansion.
Speaker #3: And I think, to answer your question more specifically, it kind of depends on how quickly the West continues to recover. But I think this last quarter, in terms of the December quarter and the March guidance, it's good progress in terms of getting those EC margins back, which has really been led by—
Speaker #3: the west. Yeah,
Phil Gallagher: Yeah, Ruplu, Ken covered it well. I'll just add, you know, we don't guide outside, as you know, outside of the 90 days. So we're... But as we look at the, you know, I'm looking at it right now as I talk to you. As I look at the backlog in the 1 to 30, 30 to 90, 90 to 180, et cetera, and 180 and above days, it's encouraging. That's the word I'm using with the team. It's very. The signs are all very encouraging, but as you know, we don't guide out beyond the quarter. But we are encouraged and optimistic about the next, the next several quarters.
Phil Gallagher: Yeah, Ruplu, Ken covered it well. I'll just add, you know, we don't guide outside, as you know, outside of the 90 days. So we're... But as we look at the, you know, I'm looking at it right now as I talk to you. As I look at the backlog in the 1 to 30, 30 to 90, 90 to 180, et cetera, and 180 and above days, it's encouraging. That's the word I'm using with the team. It's very. The signs are all very encouraging, but as you know, we don't guide out beyond the quarter. But we are encouraged and optimistic about the next, the next several quarters.
Speaker #4: Rupla, can't cover it well. I'll just add, we don't guide outside, as you know, outside of the 90 days. So, but as we look at the—I'm looking at it right now as I talk to you—as I look at the backlog in the 1 to 30, 31 to 90, 91 to 180, etc., and 180 and above days, it's encouraging.
Speaker #4: That's the word I'm using with the team. The signs are all very encouraging but as you know, we don't guide out beyond the quarter.
Speaker #4: But we are encouraged and optimistic about the next several
Speaker #4: quarters. Okay, that's helpful.
Ruplu Bhattacharya: Okay, that's helpful. Can I ask a follow-up question on the pricing comment you made? Can you remind us how, like, if suppliers are raising prices, how does that impact Avnet's revenues and margins in the near term as well as in the more medium term? And Phil, I missed this if I might have missed this, but did you specify which product categories or areas you're seeing squad prices increases?
Ruplu Bhattacharya: Okay, that's helpful. Can I ask a follow-up question on the pricing comment you made? Can you remind us how, like, if suppliers are raising prices, how does that impact Avnet's revenues and margins in the near term as well as in the more medium term? And Phil, I missed this if I might have missed this, but did you specify which product categories or areas you're seeing squad prices increases?
Speaker #5: Can I ask a follow-up question on the pricing comment you made? Can you remind us how, if suppliers are raising prices, how does that impact AVNET's revenues and margins in the near term, as well as in the more medium term?
Speaker #5: And Phil, I missed this if I might have missed this, but did you specify which product categories or areas you're seeing spot prices
Speaker #5: increases? Yeah, thanks,
Phil Gallagher: Yeah. Thanks, Ruplu. So pricing, it really affects the average selling price, right? So we've. A lot of our business is under contract, and some of it's not, you know. Where it's not, and it's, let's call it spot buys, if you will, customers coming in, you know, time, place, utility, yeah, we can increase margins there, the price and the margins, particularly if the product's, you know, tough to get. We're not breaking and pillaging or anything, but, you know, just to kind of get a little bit unfair margin on that, which is positive for us.
Phil Gallagher: Yeah. Thanks, Ruplu. So pricing, it really affects the average selling price, right? So we've. A lot of our business is under contract, and some of it's not, you know. Where it's not, and it's, let's call it spot buys, if you will, customers coming in, you know, time, place, utility, yeah, we can increase margins there, the price and the margins, particularly if the product's, you know, tough to get. We're not breaking and pillaging or anything, but, you know, just to kind of get a little bit unfair margin on that, which is positive for us.
Speaker #3: Rupla. So pricing, it really affects the average selling price, right? So if we've a lot of our business is under contract and some of it's not.
Speaker #3: Where it's not—and it's, let's call it spot buys, if you will—customers coming in, time, place, utility—yeah, we can increase margins there, price and the margins.
Speaker #3: Particularly the products tough to get. We're not raking, pillaging, or anything, but just to kind of get a little bit of fair margin on that, which is positive for us.
Speaker #3: In the contract, with the customers, the price gets passed on. So, it doesn't have as much effect on the margin percent, but it can affect the revenue dollars and margin dollars, if that makes sense.
Phil Gallagher: In the contracted customers, you know, it's the price gets passed on, so it doesn't have as much effect on the margin percent, but it can affect the revenue dollars and margin dollars, if that makes sense. And similar to what we saw in the last tightness in the market, and the customers are, we can absorb it, that's for sure. But we're definitely starting to see that, particularly in certain areas, memory storage. Well, storage takes memory, so anything around memory storage. We will start seeing some more in the controllers, some of the high-end products in networking, and there's selected parts like antenna, capacitors, and things on those lines, we're starting to see some price increases.
In the contracted customers, you know, it's the price gets passed on, so it doesn't have as much effect on the margin percent, but it can affect the revenue dollars and margin dollars, if that makes sense. And similar to what we saw in the last tightness in the market, and the customers are, we can absorb it, that's for sure. But we're definitely starting to see that, particularly in certain areas, memory storage. Well, storage takes memory, so anything around memory storage. We will start seeing some more in the controllers, some of the high-end products in networking, and there's selected parts like antenna, capacitors, and things on those lines, we're starting to see some price increases.
Speaker #3: And similar to what we saw in the last tightness in the market. And the customers are we can't absorb it, that's for sure. But we're definitely starting to see that, particularly in certain areas, memory storage with storage takes memory.
Speaker #3: So anything around memory storage, we're going to start seeing some more in the controllers. Some of the high-end products in networking and are selected parts like antenna, capacitors, things along those lines we're starting to see some price increases.
Speaker #3: So some are modest right now, others a little bit more than modest based particularly in the memory space.
Phil Gallagher: So, some are modest right now, others a little bit, little bit more than modest, particularly in the memory space.
So, some are modest right now, others a little bit, little bit more than modest, particularly in the memory space.
Speaker #5: Okay, thanks for that. If I can sneak one more in, as Europe is recovering, right, I think you've said for now, maybe 50 basis points improvement every quarter, but as the region itself improves, do you think that can accelerate and you can see a faster recovery in far-end margins?
Ruplu Bhattacharya: Okay, thanks for that. If I can sneak one more in. As Europe is recovering, right? I think you said for Farnell, maybe 50 basis points improvement every quarter. But as the region itself improves, do you think that can accelerate and you can see a faster recovery in Farnell margins? I mean, how, just help us level set our expectations for where, where this can go from a margin standpoint by the end of the year. Thank you.
Ruplu Bhattacharya: Okay, thanks for that. If I can sneak one more in. As Europe is recovering, right? I think you said for Farnell, maybe 50 basis points improvement every quarter. But as the region itself improves, do you think that can accelerate and you can see a faster recovery in Farnell margins? I mean, how, just help us level set our expectations for where, where this can go from a margin standpoint by the end of the year. Thank you.
Speaker #5: I mean, just help us level set our expectations for where this can go from a margin standpoint by the end of the year. Thank
Speaker #5: you. Yeah, thanks, Rupla.
Phil Gallagher: Yeah. Thank you, Blue. Yeah, so you know, specific to Farnell, typically, their largest region and most profitable is Europe, okay? And that's not been the case here the last several quarters based on Europe's softness. Still doing well, but actually the Americas, which is a higher, I think we also pointed out, a higher mix in the Americas of test and measurement, which is really good business, just runs at a different margin level than the onboard components, being semiconductors and the IP&E. So any additional lift in Europe will further drive the drop through, if Farnell could possibly accelerate that. You're right, that 50 basis points of margin that we're looking to see them improve, improve on quarter on quarter.
Phil Gallagher: Yeah. Thank you, Blue. Yeah, so you know, specific to Farnell, typically, their largest region and most profitable is Europe, okay? And that's not been the case here the last several quarters based on Europe's softness. Still doing well, but actually the Americas, which is a higher, I think we also pointed out, a higher mix in the Americas of test and measurement, which is really good business, just runs at a different margin level than the onboard components, being semiconductors and the IP&E. So any additional lift in Europe will further drive the drop through, if Farnell could possibly accelerate that. You're right, that 50 basis points of margin that we're looking to see them improve, improve on quarter on quarter.
Speaker #3: Yeah, so specific to far-end, typically their largest region and most profitable is Europe, okay? And that's not been the case here the last several quarters based on Europe's softness.
Speaker #3: Still doing well, but actually the Americas—which is higher, I think—we also pointed out a higher mix in the Americas of test and measurement, which is really good business. It just runs at a different margin level than the onboard components, being semiconductors and the IP&E.
Speaker #3: So any additional lift in Europe will further drive the drop through if far-end could possibly accelerate that you're right, that 50 bips points of margin that we're looking to see them accrue improve on.
Speaker #3: And that's the message to the leadership team at Far-End with Lenovo on this call. We need to see them, and expect them, to continue to show incremental improvement in operating margin, and a lot of that can be accelerated, to your point, with higher revenues in the right mix.
Phil Gallagher: That's the message to the leadership team at Farnell, who I know are on this call. You know, we need to see them and expect them to continue to show incremental improvement in operating margin. A lot of that can be accelerated, to your point, with higher revenues in the right mix. Although we may not be projecting that, certainly, we would really like to see them accelerate that and beyond 50 to 100 bips. But that's our commitment at this point in time, while they continue to manage their expense line, right?
That's the message to the leadership team at Farnell, who I know are on this call. You know, we need to see them and expect them to continue to show incremental improvement in operating margin. A lot of that can be accelerated, to your point, with higher revenues in the right mix. Although we may not be projecting that, certainly, we would really like to see them accelerate that and beyond 50 to 100 bips. But that's our commitment at this point in time, while they continue to manage their expense line, right?
Speaker #3: And although we may not be projecting that, certainly we would really like to see them accelerate that beyond 50 to 100 bips. So that's our commitment at this point in time.
Speaker #3: While they continue to manage their expense line, right? So, there's still other things they're doing—we're all doing. We're always doing that as a company, and Farnell specifically as well.
Phil Gallagher: So there's still other things they're doing, we're all doing, we're always doing as a company, and for now, specifically as well, you know, driving out, more efficiencies, taking out costs where we need to take out costs, while making investments where we need to make investments, i.e., in digital, e-commerce, AI, et cetera. So, hope that answers your question, but we, we do see it as a continuing tailwind, for us, as we move forward, and we will look to accelerate getting to that double-digit operating margin.
So there's still other things they're doing, we're all doing, we're always doing as a company, and for now, specifically as well, you know, driving out, more efficiencies, taking out costs where we need to take out costs, while making investments where we need to make investments, i.e., in digital, e-commerce, AI, et cetera. So, hope that answers your question, but we, we do see it as a continuing tailwind, for us, as we move forward, and we will look to accelerate getting to that double-digit operating margin.
Speaker #3: Driving out more efficiencies, taking out costs where we need to take out costs, while making investments where we need to make investments—i.e., in digital, e-commerce, AI, etc.
Speaker #3: So hope that answers your question, but we do see it as a continuing tailwind for us as we move forward. And we will look to accelerate getting into that double-digit operating
Speaker #3: margin. Okay, thanks for the
Ruplu Bhattacharya: Okay, thanks for the details.
Ruplu Bhattacharya: Okay, thanks for the details.
Speaker #3: Yep, you got it, details.
Phil Gallagher: Yep, you got it, Ruplu.
Phil Gallagher: Yep, you got it, Ruplu.
Speaker #3: Rupla. Gentlemen, there
Operator: Gentlemen, there are no more questions at this time. I would like to turn the conference back over to Phil Gallagher for closing remarks.
Operator: Gentlemen, there are no more questions at this time. I would like to turn the conference back over to Phil Gallagher for closing remarks.
Speaker #1: are no more questions at this time. I would like to turn the conference back over to Phil Gallagher for closing
Speaker #1: remarks. Okay, thank you very much.
Phil Gallagher: Okay, thank you very much, and I want to thank everyone for attending today's earnings call. We look forward to speaking to you at upcoming conferences and at our Q3 fiscal year 2026 earnings report, in April. Okay? Have a great day. Thank you.
Phil Gallagher: Okay, thank you very much, and I want to thank everyone for attending today's earnings call. We look forward to speaking to you at upcoming conferences and at our Q3 fiscal year 2026 earnings report, in April. Okay? Have a great day. Thank you.
Speaker #4: And I want to thank everyone for attending today's earnings call. We look forward to speaking to you at upcoming conferences and at our third quarter fiscal year 2026 earnings report in April, okay?
Speaker #4: Have a great day. Thank you.
Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
