Arrow Electronics (ARW) Conference Call Summary Industry Overview - The semiconductor cycle has been one of the longest and most profound in recent history, with indications that the bottom has been reached and recovery is underway [5][6] - Leading indicators such as book-to-bill ratios are above parity across all regions, and backlogs are building, providing improved visibility [6][12] Company Insights Business Segments - Arrow Electronics operates in two main segments: Global Components and Enterprise Computing Solutions (ECS) [9] - The inventory correction phase is largely behind, with some pockets of excess inventory remaining [12] - The ECS segment focuses on cloud, hybrid cloud, and infrastructure software, targeting mid-market customers [48] Financial Performance - The company has seen growth in gross profit (GP) and operating income (OI) over the last three quarters, with expectations for continued growth [50] - Recurring revenue in the ECS business is approaching one-third of total volume, contributing positively to margins [53] Competitive Advantages - Arrow's competitive edge lies in its vast supply chain assets and engineering capabilities, allowing it to serve large multinationals and mass markets effectively [22][24] - The company has invested in value-added services, enhancing its market position beyond traditional distribution [25][29] Market Trends Demand by Region and Vertical - Key verticals include industrial, transportation (including automotive), and aerospace and defense, with varying demand trends across regions [18][19] - Asia, particularly China, is leading the recovery, impacting regional margins [19][20] Tariff Impact - Tariffs have a minimal impact on Arrow's top and bottom lines, estimated at 2-4% of global component sales, and are viewed as neutral overall [38][39] - The company is actively helping customers navigate tariff implications and optimize their supply chains [44][46] Margin Outlook - Operating margins are expected to improve as the market normalizes, driven by scale, return of mass market demand, and growth in value-added offerings [31][33] - The ECS segment's margin profile is stable, with expectations for gradual improvement as recurring revenue grows [56] Investment Thesis - Arrow Electronics is aligned with attractive end markets with healthy growth potential, aiming to grow at or above market rates [59] - The company prioritizes organic growth, selective M&A, and capital returns, with a focus on enhancing shareholder value [60] Conclusion - Arrow Electronics is positioned for recovery and growth, with a clear strategy to leverage its competitive advantages and navigate market challenges effectively [61]

Core Insights - Arrow Electronics' international operations are crucial for understanding its financial resilience and growth potential [1][2] - The company's reliance on international markets influences its earnings durability and growth capabilities [2][3] Revenue Performance - Total revenue for the recent quarter reached $6.81 billion, a decline of 1.6% year-over-year [4] - EMEA contributed $2.47 billion, accounting for 36.20% of total revenue, with a surprise increase of +15.23% compared to expectations [5] - Asia Pacific generated $1.87 billion, representing 27.43% of total revenue, with a surprise of +3.85% over consensus estimates [6] Future Revenue Forecasts - Analysts project total revenue of $7.18 billion for the current fiscal quarter, reflecting a 4.1% increase year-over-year, with EMEA expected to contribute 35.7% and Asia Pacific 28.5% [7] - For the full year, total revenue is anticipated to be $28.46 billion, indicating a rise of 1.9% from the previous year, with EMEA at 36.4% and Asia Pacific at 28.9% [8] Market Dynamics - The reliance on global markets presents both opportunities and challenges for Arrow Electronics, making the analysis of international revenue trends essential for forecasting future performance [9][10] - Financial analysts are closely monitoring international developments to refine earnings estimates, which are influenced by various factors including local market status [10] Stock Performance - Arrow Electronics' stock has increased by 21.8% over the past month, outperforming the Zacks S&P 500 composite's 9.1% rise [13] - Over the past three months, the company's shares gained 11.6%, contrasting with a 3.1% decline in the S&P 500 [13]

Core Viewpoint - Arrow Electronics reported adjusted earnings of $1.80 per share for Q1 2025, exceeding estimates but showing a year-over-year decline of 25.3% [1] - Revenues for the same period were $6.81 billion, a 1.6% decline year-over-year, yet surpassing estimates by 7.93% [1] Revenue Performance - Global Component sales decreased by 8% year-over-year to $4.78 billion, with a 7% decline at constant currency [2] - Region-wise, EMEA revenues fell by 16.8%, Americas by 1.7%, and Asia-Pacific by 3.1% at constant currency [2] - Global Enterprise Computing Solutions (ECS) revenues increased by 17.5% year-over-year to $2.04 billion, with a 19.4% increase at constant currency [3] - ECS revenues from America and EMEA grew by 1% and 40.1% respectively at constant currency [3] Operating Performance - Consolidated non-GAAP gross margin was 11.3%, down 120 basis points year-over-year [4] - Global Components segment gross margin was 11.6%, down 110 basis points, while Global ECS margin contracted by 150 basis points to 10.8% [4] - Non-GAAP operating income for Global Components was $173.4 million (down 28.5% year-over-year) and for Global ECS was $78.2 million (up 7.9% year-over-year) [5] - Overall non-GAAP operating income decreased by 28.7% year-over-year to $178.8 million, with a non-GAAP operating margin of 2.6% [5] Balance Sheet & Cash Flow - As of March 29, 2025, cash and cash equivalents were $231.9 million, up from $188.8 million at the end of 2024 [6] - Long-term debt decreased to $2.31 billion from $2.77 billion [6] - Cash flow from operations was $351.7 million, compared to $326.5 million in the previous quarter [6] - The company repurchased $50 million of shares during the quarter [6] Guidance - For Q2 2025, sales are projected between $6.70 billion and $7.30 billion [7] - Global Components sales are expected to be between $4.80 billion and $5.20 billion, while Global ECS sales are anticipated between $1.90 billion and $2.10 billion [7] - Interest expenses are expected to be $60 million, with non-GAAP earnings projected at $1.90-$2.10 per share [8]

Arrow Electronics Earnings Presentation First Quarter 2025 May 1, 2025 Safe harbor This presentation includes "forward-looking" statements, as the term is defined under the federal securities laws. Forward-looking statements are those statements which are not statements of historical fact. These forward-looking statements can be identified by forward-looking words such as "expects," "anticipates," "intends," "plans," "may," "will," "believes," "seeks," "estimates," and similar expressions. Such forward-look ...

Financial Data and Key Metrics Changes - Consolidated sales for Q1 2025 were $6.8 billion, exceeding guidance and down 2% year-over-year, or flat on a constant currency basis [15] - Global Components sales were $4.8 billion, above guidance and down 1% sequentially, or flat in constant currency [16] - Enterprise Computing Solutions (ECS) sales were $2 billion, above guidance and up 18% year-over-year, or 19% higher in constant currency [16] - Non-GAAP gross margin for Q1 was 11.3%, down approximately 120 basis points year-over-year [17] - Non-GAAP diluted EPS for Q1 was $1.8, above the guided range [18] Business Line Data and Key Metrics Changes - Global Components business showed stronger-than-expected sales across all three regions, with notable momentum in EMEA [5][6] - ECS business delivered year-over-year growth in billings, gross profit, and operating income, with a backlog growth of over 50% year-over-year [11][12] Market Data and Key Metrics Changes - Book-to-bill ratios improved throughout the quarter and are now at or above parity in all three regions [8] - Customer inventory levels are trending towards replenishment, indicating a potential cyclical turning point in demand [9] Company Strategy and Development Direction - The company is focused on leveraging its global supply chain network to navigate trade complexities and mitigate tariff impacts [10] - Continued emphasis on value-added offerings, such as supply chain management and integration services, to enhance operating results [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving demand trends and a return to more normal seasonal patterns [9] - The company is preparing for a transitional Q2, with expectations of stronger trends in Asia and among larger OEM customers [20] Other Important Information - The company repurchased $50 million of shares in Q1, with a remaining repurchase authorization of approximately $275 million [19] - Cash flow from operations was $352 million in Q1, marking the seventh consecutive quarter of positive cash flow generation [19] Q&A Session Summary Question: Clarification on tariff impact on guidance - Management explained that the 2% to 4% increase in component sales due to tariffs is not included in the baseline guidance, as it reflects potential surcharges that may arise [24][28] Question: Customer inventory trends - Management indicated that while there are pockets of excess inventory, overall inventory levels are normalizing in line with demand signals [32][41] Question: ECS business performance and order acceleration - Management confirmed that the ECS outlook does not reflect any order acceleration, with steady growth expected in cloud and hybrid cloud technologies [47][48] Question: Visibility into future quarters - Management noted improving visibility into Q3 and Q4, driven by decreasing industry-wide inventory levels and growing backlog [56][58]

Financial Data and Key Metrics Changes - Consolidated sales for Q1 2025 were $6.8 billion, exceeding guidance and down 2% year-over-year, or flat on a constant currency basis [16] - Global Components sales were $4.8 billion, above guidance and down 1% sequentially, or flat in constant currency [16] - Enterprise Computing Solutions (ECS) sales were $2 billion, above guidance and 18% higher year-over-year, or 19% higher in constant currency [16] - Non-GAAP gross margin for Q1 was 11.3%, down approximately 120 basis points year-over-year [17] - Non-GAAP diluted EPS for Q1 was $1.8, above the guided range due to favorable sales results [18] Business Line Data and Key Metrics Changes - Global Components experienced stronger-than-expected sales across all three regions, with notable momentum in EMEA [5][6] - ECS delivered year-over-year growth in billings, gross profit, and operating income, with a backlog growth of over 50% year-over-year [12] - Global Components gross margin was 11.6%, while ECS gross margin was 10.8%, both on a non-GAAP basis [17] Market Data and Key Metrics Changes - Book-to-bill ratios improved throughout the quarter and are now at or above parity in all three regions [9] - Customer inventory levels are trending towards replenishment, indicating a potential cyclical turning point in demand [10] Company Strategy and Development Direction - The company is focused on leveraging its global supply chain network to mitigate the impacts of tariffs and improve supply chain visibility for customers [11] - The second quarter outlook reflects continued momentum in both business segments, with expectations for year-over-year growth in billings, gross profit, and operating income [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about modestly improving demand trends and the resilience of the company's teams during a cyclical correction [14] - The company anticipates stronger trends in Asia and across the larger OEM customer base as it moves into Q2 [10] Other Important Information - The company repurchased $50 million of shares in Q1, with a remaining repurchase authorization of approximately $275 million [19] - The impact of recent tariffs is uncertain, but the company has not factored them into its revenue guidance [20] Q&A Session Summary Question: Clarification on tariff impact on guidance - Management explained that the 2% to 4% increase in component sales due to tariffs is not included in the baseline guidance, as it reflects potential surcharges that could arise from tariffs [24][30] Question: Customer inventory trends - Management indicated that while there are pockets of excess inventory, overall inventory levels are normalizing in line with demand signals [33][41] Question: ECS business outlook - Management confirmed that the ECS outlook does not reflect any order acceleration and that growth is steady across cloud and traditional data center segments [48] Question: Visibility into future quarters - Management noted improving visibility into Q3 and Q4, driven by improved book-to-bill ratios and backlog growth [58]

Core Insights - Arrow Electronics reported $6.81 billion in revenue for Q1 2025, a year-over-year decline of 1.6%, with EPS of $1.80 compared to $2.41 a year ago, indicating a significant drop in earnings [1] - The revenue exceeded the Zacks Consensus Estimate by 7.93%, while the EPS surprised by 22.45% over the consensus estimate [1] Financial Performance - The company’s shares returned +5.9% over the past month, outperforming the Zacks S&P 500 composite, which saw a -0.7% change [3] - Arrow Electronics holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3] Geographic Revenue Breakdown - Americas revenue was $2.48 billion, surpassing the $2.38 billion estimate [4] - Asia Pacific revenue was $1.87 billion, slightly above the $1.80 billion estimate, reflecting a -3.6% year-over-year change [4] - EMEA revenue reached $2.47 billion, exceeding the $2.14 billion estimate, with a -0.6% change year-over-year [4] - EMEA ECS sales were reported at $1.13 billion, significantly above the $865.11 million estimate, showing a +36.5% year-over-year increase [4] - Global ECS net sales were $2.04 billion, exceeding the $1.76 billion estimate, with a +17.5% year-over-year change [4] - Global components net sales were $4.78 billion, surpassing the $4.55 billion estimate, but reflecting an -8% year-over-year decline [4] Operating Income - Global ECS non-GAAP operating income was $78.24 million, above the $75.20 million estimate [4] - Global components non-GAAP operating income was $173.36 million, exceeding the $155.75 million estimate [4]

Core Viewpoint - Arrow Electronics reported quarterly earnings of $1.80 per share, exceeding the Zacks Consensus Estimate of $1.47 per share, but down from $2.41 per share a year ago, indicating a 25.37% year-over-year decline in earnings [1] - The company achieved revenues of $6.81 billion for the quarter, surpassing the Zacks Consensus Estimate by 7.93%, although this represents a slight decrease from $6.92 billion in the same quarter last year [2] Financial Performance - Arrow Electronics has consistently surpassed consensus EPS estimates over the last four quarters, with an earnings surprise of 22.45% in the latest report [1][2] - The company has also topped consensus revenue estimates four times in the past four quarters, demonstrating strong performance in revenue generation [2] Stock Performance and Outlook - Arrow Electronics shares have declined approximately 1.6% since the beginning of the year, while the S&P 500 has decreased by 5.3%, indicating relative outperformance [3] - The current consensus EPS estimate for the upcoming quarter is $2.21, with expected revenues of $6.59 billion, and for the current fiscal year, the EPS estimate is $10.20 on revenues of $27.13 billion [7] Industry Context - The Electronics - Parts Distribution industry, to which Arrow Electronics belongs, is currently ranked in the top 38% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact Arrow Electronics' stock performance [5]

Financial Performance - Consolidated sales for Q1 2025 were $6.814 billion, a decrease of 2% year-over-year, and flat on a constant currency basis[3] - Global components sales were $4.778 billion, down 8% year-over-year, and down 7% on a constant currency basis[5] - Global ECS sales increased to $2.036 billion, representing an 18% year-over-year growth and a 19% increase on a constant currency basis[8] - Net income attributable to shareholders was $80 million, with a diluted EPS of $1.51, compared to $84 million and $1.53 in Q1 2024[3] - Non-GAAP net income attributable to shareholders was $95 million, with a non-GAAP diluted EPS of $1.80, down from $132 million and $2.41 in Q1 2024[3] - For Q2 2025, the company expects GAAP sales of $4.80 billion to $5.20 billion for global components and $1.90 billion to $2.10 billion for global ECS[15] - Consolidated sales for the quarter ended March 29, 2025, were $6,814,017, a decrease of 1.6% compared to $6,924,260 for the same period in 2024[25] - Gross profit for the quarter was $773,992, down from $857,826 in the prior year, reflecting a decline of approximately 9.8%[25] - Operating income decreased to $158,553 from $185,917, representing a decline of 14.7% year-over-year[25] - Net income attributable to shareholders was $79,720, down 4.5% from $83,601 in the previous year[25] - For the three months ended March 29, 2025, consolidated net income was $95,077,000, a decrease from $131,490,000 for the same period in 2024, representing a decline of approximately 27.7%[41] - Operating income for the first quarter of 2025 was $158,553,000, down from $185,917,000 in the first quarter of 2024, reflecting a decrease of about 14.7%[41] Cash Flow and Capital Management - The company generated approximately $350 million in cash flow from operations and repurchased $50 million of shares in Q1 2025[9] - Total net working capital was reduced by approximately $340 million, and gross balance sheet debt decreased by approximately $280 million[9] - Cash and cash equivalents at the end of the period were $231,882, an increase from $188,807 at the beginning of the period[31] - The company reported a net cash provided by operating activities of $351,679, down from $403,210 in the previous year[31] Sales and Market Trends - Global Enterprise Computing Solutions (ECS) gross billings increased to $4,638,954, up 5.2% from $4,408,418 in the prior year[34] - EMEA ECS sales saw a significant increase of 36.5%, reaching $1,126,392 compared to $825,095 in the same quarter last year[38] - Global components sales decreased to $4,777,722,000 in Q1 2025 from $5,191,417,000 in Q1 2024, a decline of approximately 7.9%[45] - Global ECS sales increased to $2,036,295,000 in Q1 2025 from $1,732,843,000 in Q1 2024, representing a growth of approximately 17.5%[45] Tax and Liabilities - The average tax rate is projected to be in the range of 23% to 25% for Q2 2025[15] - The effective tax rate for the first quarter of 2025 was 22.6%, compared to 21.0% in the same quarter of 2024[41] - Total current liabilities slightly decreased to $12,603,036 from $12,636,162, a reduction of about 0.3%[28] Restructuring and Integration Costs - The company incurred restructuring and integration charges of $17,313,000 in Q1 2025, compared to $46,856,000 in Q1 2024, indicating a reduction in restructuring costs[46] - Corporate operating loss for Q1 2025 was $90,146,000, an improvement from a loss of $111,104,000 in Q1 2024[45] Profitability Metrics - Global components gross profit as a percentage of sales was 11.6% in Q1 2025, down from 12.4% in Q1 2024[49] - Non-GAAP operating income for global components in Q1 2025 was $173,356,000, down from $242,509,000 in Q1 2024, a decrease of about 28.5%[49] - Net income per diluted share for Q1 2025 was $1.80, compared to $2.41 in Q1 2024, a decrease of about 25.4%[41]

Core Insights - Edge Total Intelligence Inc. (edgeTI) has appointed immixGroup, a subsidiary of Arrow Electronics, as its first public sector distributor, targeting U.S. federal defense and civilian agencies [1][2] - The partnership aims to enhance the availability of edgeTI's Digital Twin platform, edgeCore™, to government agencies, facilitating a subscription pricing model based on the number of interfaces and concurrent users [2][3] Group 1: Partnership and Distribution - The agreement allows immixGroup to incorporate edgeTI's Digital Twin platform into its purchasing vehicles for federal agencies, creating new opportunities for value-added resellers [2][5] - This collaboration is expected to accelerate the adoption of edgeTI's solutions within government sectors, leveraging previous investments in channel development [3][4] Group 2: Product Features and Capabilities - edgeCore™ is recognized for its ability to securely integrate data sets, modernize operations, and improve situational awareness while reducing costs associated with traditional contracts [3][4] - The platform includes advanced features such as bidirectional data fabric, composable applications, AI orchestration, and zero-trust security capabilities [6] Group 3: Market Position and Recognition - edgeTI's Digital Twin solution has been acknowledged by Gartner® over 20 times in the past year, highlighting its industry-leading status [3] - The partnership with immixGroup positions edgeTI to better serve government agencies, which have a history of successful implementations in large enterprises [5][8]