Core Insights - The Bonhoeffer Fund focused on selling slower-growth firms and acquiring durable, faster-growing companies in depressed sectors, aligning with long-term growth themes such as consolidation and financial compounders [7][11] - The fund achieved a net gain of 8.7% in Q2 2025, underperforming compared to the MSCI World ex-US and S&P 500, which returned 12.1% and 10.8% respectively [9][10] - The portfolio's projected earnings/free cash flow growth is approximately 16%, with a weighted average earnings/free cash flow yield of 12.5% [10][11] Investment Themes - **Distribution (49% of Portfolio)**: The fund holds high-velocity distributors in various markets, focusing on car dealerships and building product distributors, which have shown a quarterly performance of 6% [14] - **Real Estate/Construction/Finance (58% of Portfolio)**: Investments in construction firms are expected to benefit from government infrastructure programs and affordable housing financing, with banks showing sustainable ROEs and EPS growth rates above 15% [18][19] - **Public Leverage Buyouts (31% of Portfolio)**: The strategy involves growth through acquisitions, with firms like Builders First Source (BFS) utilizing local economies of scale to generate high returns [22][24] - **Compound Mispricings (15% of Portfolio)**: Investments in Korean preferred stocks and Asian real estate are characterized by governance improvements and liquidity, with Vistry facing challenges but still focusing on affordable housing [31][32] - **Telecom/Transaction Processing (3% of Portfolio)**: Companies like Millicom are positioned to benefit from reduced competition and favorable market conditions, with a focus on cost-cutting and dividend yields [33][35] - **Consumer Products (3% of Portfolio)**: Defensive consumer product firms are expected to perform well, with Academy Sports facing challenges but retaining potential for recovery [36][37] Financial Metrics - The Bonhoeffer Fund's portfolio has an average EV/EBITDA of 3.2 and a growth rate of 16% [9][10] - Arrow Electronics is projected to have a 27% EPS growth rate through 2029, with a future share price estimated at $39 [17] - Builders First Source (BFS) is expected to see a recovery in share price with a projected value of around $505 per share based on a 32% IRR [30]

Group 1 - Arrow Electronics has added AirBorn, a Molex company, to its interconnect, passive, and electromechanical (IP&E) components portfolio in North America and EMEA [1] - The addition of AirBorn enhances the long-standing cooperation between Arrow and Molex [1] - AirBorn, acquired by Molex in late 2024, specializes in providing solutions for defense, aerospace, commercial air, and space exploration [1]

Core Insights - Arrow Electronics reported Q2 2025 GAAP sales of $7.58 billion, exceeding consensus estimates of $7.16 billion, with non-GAAP earnings per share at $2.43, surpassing the $2.07 estimate [1][2] - Year-over-year revenue growth was 10.0%, while net income attributable to shareholders increased by 73.0% to $188 million [1][2] - Despite strong revenue and net income growth, operating income and earnings per share declined compared to Q2 2024, indicating mixed profitability metrics [1][2] Financial Performance - Non-GAAP EPS was $2.43, down 13.0% from $2.78 in Q2 2024 [2] - Revenue reached $7.58 billion, a 10.0% increase from $6.89 billion in Q2 2024 [2] - Net income rose to $188 million, up 72.5% from $109 million in the previous year [2] - Operating income fell by 9.9% to $191 million compared to $212 million in Q2 2024 [2] - Global Components revenue grew by 5.0% to $5.28 billion, while Global ECS revenue saw a significant increase of 23.3% to $2.295 billion [2][5][6] Business Segments Overview - Arrow operates two main segments: Global Components, which supplies electronic components, and Global Enterprise Computing Solutions (ECS), which provides IT products and services [3] - The ECS segment's growth was driven by demand for IT-as-a-Service offerings and the Arrowsphere cloud marketplace [5][8] - The Global Components segment experienced mixed performance, with revenue growth but a decline in operating income [6] Strategic Focus - The company emphasizes a diverse customer and supplier base to mitigate market volatility and prioritizes supply chain execution and digital marketplace expansion [4] - Continuous investment in technology solutions is critical for managing complex IT needs [4] - Efficient inventory management and capital allocation are highlighted as key success factors [4] Future Guidance - For Q3 FY2025, Arrow expects consolidated sales between $7.30 billion and $7.90 billion, with Global Components projected at $5.30 billion to $5.70 billion and ECS at $2.00 billion to $2.20 billion [9] - Non-GAAP EPS is anticipated to range from $2.16 to $2.36, indicating a potential decline in profitability despite strong revenue expectations [9] - Management expects currency trends to positively impact sales and earnings per share compared to the prior year [9]

Financial Data and Key Metrics Changes - Consolidated sales for Q2 2025 were $7.6 billion, exceeding guidance and up 10% year-over-year, or 8% on a constant currency basis [15] - Non-GAAP gross margin for Q2 was 11.2%, down approximately 110 basis points year-over-year, primarily due to regional and customer mix in Global Components and product mix in ECS [16][17] - Non-GAAP diluted EPS for Q2 was $2.43, above the guided range, mainly due to favorable sales results and a lower tax rate [18] Business Line Data and Key Metrics Changes - Global Components sales were $5.3 billion, up 11% versus the prior quarter and 8% year-over-year in constant currency [15] - Enterprise Computing Solutions (ECS) sales were $2.3 billion, 23% higher than the prior year, or 20% higher year-over-year in constant currency [15] - ECS billings grew 15% in Q2 compared to the same period last year [11] Market Data and Key Metrics Changes - Book-to-bill ratios are above parity in all three regions, indicating strong demand [8] - Inventory levels among large OEM customers are normalizing, providing visibility into real demand [9] - Backlog improved for a second consecutive quarter, reflecting promising demand trends [12] Company Strategy and Development Direction - The company is focused on helping customers navigate complexities in the evolving trade environment while leveraging its global supply chain assets [10] - Continued investment in working capital is anticipated to support growth as market conditions improve [26] - The company expects to benefit from ongoing productivity initiatives, which will enhance scale and operating leverage [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about a modest recovery in the market, with expectations of mid-single-digit sales growth and operating margin stability for Q3 [10] - The company noted that while the current trade environment is uncertain, it does not expect material impacts on Q3 guidance [10] - Management highlighted that the evidence of cyclical recovery suggests better-than-seasonal sales patterns for the remainder of the year [14] Other Important Information - Cash flow used for operating activities in Q2 was $206 million, with a year-to-date cash flow from operations of $146 million [19] - The company repurchased $50 million of shares in Q2, with a remaining repurchase authorization of approximately $225 million [19] Q&A Session Summary Question: Understanding demand dynamics relative to inventory - Management indicated that inventories are down significantly from late 2023 peaks and that they are managing inventory effectively throughout the correction [24][25] Question: Margin guidance for September - Management clarified that margins are expected to remain stable, with some mix shift due to growth in the APAC region [28][29] Question: Customer inventory levels and demand - Management noted that customer inventories are normalizing, especially among larger OEMs, while destocking is still occurring in the mass market [36][37] Question: Supply side lead times - Lead times have remained stable and have not extended beyond pre-pandemic levels [40] Question: ECS segment margins and future outlook - Management explained that ECS margins are stable on a billings basis and expect further improvement as transactional volume scales [46][48]

Q2 2025 Financial Performance - Consolidated sales reached $7.6 billion[7], exceeding the high end of the guidance range[9], representing a 10% year-over-year increase compared to $6.893 billion in Q2 2024[49] and an 11% increase compared to $6.814 billion in Q1 2025[49] - Non-GAAP operating income was $215 million[9], with an operating margin of 2.8%[7] - Non-GAAP diluted earnings per share (EPS) stood at $2.43[7] - Operating cash flow was negative $(206) million[9] - $50 million was spent on share repurchases[9] Segment Performance - Global Components sales were $5.3 billion[22], up 5% year-over-year[50] - Enterprise Computing Solutions (ECS) sales were $2.3 billion[22], a 23% increase year-over-year[50] - Americas components sales reached $1.708 billion[50], a 9% year-over-year increase[50] - EMEA components sales reached $1.427 billion[50], a 1% year-over-year decrease[50] - Asia Pacific components sales reached $2.150 billion[50], a 6% year-over-year increase[50] Q3 2025 Guidance - The company projects consolidated sales between $7.30 billion and $7.90 billion[42] - Global Components sales are expected to be between $5.30 billion and $5.70 billion[42] - Global ECS sales are projected to be between $2.00 billion and $2.20 billion[42] - Non-GAAP diluted earnings per share are forecasted to be between $2.16 and $2.36[42]

Core Insights - Arrow Electronics reported revenue of $7.58 billion for the quarter ended June 2025, a 10% year-over-year increase, with an EPS of $2.43 compared to $2.78 a year ago, exceeding Zacks Consensus Estimate by 6.16% [1] - The company delivered an EPS surprise of 19.7%, with the consensus EPS estimate being $2.03 [1] Financial Performance - Revenue from the Americas was $2.76 billion, surpassing the estimated $2.57 billion [4] - EMEA revenue was $2.67 billion, exceeding the $2.56 billion estimate, with ECS sales at $1.24 billion, significantly up by 38.5% year-over-year [4] - Asia components sales reached $2.15 billion, above the estimated $1.96 billion, marking a 6.5% year-over-year increase [4] - Global ECS net sales were $2.3 billion, exceeding the $2.06 billion estimate, reflecting a 23.3% year-over-year change [4] - Global components net sales were $5.28 billion, compared to the $5.08 billion estimate, indicating a 5% year-over-year increase [4] Market Performance - Arrow Electronics shares returned -1.6% over the past month, while the Zacks S&P 500 composite increased by 2.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Viewpoint - Arrow Electronics reported quarterly earnings of $2.43 per share, exceeding the Zacks Consensus Estimate of $2.03 per share, but down from $2.78 per share a year ago, indicating an earnings surprise of +19.70% [1][2] Financial Performance - The company achieved revenues of $7.58 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 6.16% and up from $6.89 billion year-over-year [2] - Over the last four quarters, Arrow Electronics has consistently surpassed consensus EPS estimates [2] Stock Performance - Arrow Electronics shares have increased approximately 14.7% since the beginning of the year, outperforming the S&P 500's gain of 8.2% [3] Future Outlook - The company's earnings outlook will be crucial for assessing future stock performance, with current consensus EPS estimates at $2.56 for the coming quarter and $10.14 for the current fiscal year [4][7] - The estimate revisions trend for Arrow Electronics was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Electronics - Parts Distribution industry, to which Arrow Electronics belongs, is currently ranked in the bottom 13% of over 250 Zacks industries, suggesting potential challenges ahead [8]

[Arrow Electronics Q2 2025 Earnings Release](index=1&type=section&id=Arrow%20Electronics%20Reports%20Second-Quarter%202025%20Results) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) The company reported strong Q2 2025 results with sales and GAAP EPS exceeding guidance, though non-GAAP results declined - **Consolidated sales, segment sales, and earnings per share all surpassed the high end of the company's guidance** for Q2 2025[2](index=2&type=chunk)[3](index=3&type=chunk) Consolidated Financial Results (Q2 2025 vs Q2 2024) | (in millions except per share data) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Consolidated sales** | $7,580 | $6,893 | 10% | | **Net income attributable to shareholders** | $188 | $109 | 73% | | **Net income per diluted share** | $3.59 | $2.01 | 79% | | **Non-GAAP net income attributable to shareholders** | $127 | $150 | (15)% | | **Non-GAAP net income per diluted share** | $2.43 | $2.78 | (13)% | - Changes in foreign currencies had a positive year-over-year impact, increasing sales by approximately **$123.3 million** and diluted EPS by **$0.07**[4](index=4&type=chunk) [Business Segment Performance](index=1&type=section&id=Business%20Segment%20Performance) Both Global Components and Global ECS segments reported sales above guidance, with ECS showing particularly strong top-line growth [Global Components](index=1&type=section&id=Global%20Components) The Global Components segment sales grew 5% year-over-year, driven by the Americas and Asia, despite a decline in operating income - The company observed sequential growth across all three operating regions, and leading indicators suggest a **modest cyclical recovery is in progress**[5](index=5&type=chunk) Global Components Financials (Q2 2025 vs Q2 2024) | (in millions) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Global components sales** | $5,285 | $5,032 | 5% | | **Global components operating income** | $187 | $210 | (11)% | | **Global components non-GAAP operating income** | $189 | $218 | (13)% | - Regional Sales Performance (YoY): - Americas: **+9%** - Asia-Pacific: **+6%** - EMEA: **-1%** (-6% in constant currency)[5](index=5&type=chunk) [Global Enterprise Computing Solutions (ECS)](index=2&type=section&id=Global%20Enterprise%20Computing%20Solutions) The Global ECS segment delivered robust 23% year-over-year sales growth, fueled by strong performance in EMEA and its Arrowsphere platform - The company saw year-over-year growth in billings and gross profit, with **robust growth in its IT as-a-service backlog** and continued adoption of its digital platform, Arrowsphere[7](index=7&type=chunk) Global ECS Financials (Q2 2025 vs Q2 2024) | (in millions) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Global ECS sales** | $2,295 | $1,861 | 23% | | **Global ECS operating income** | $97 | $103 | (5)% | | **Global ECS non-GAAP operating income** | $98 | $104 | (6)% | - Regional Sales Performance (YoY): - EMEA: **+39%** (+31% in constant currency) - Americas: **+9%**[8](index=8&type=chunk) [Other Financial Information](index=2&type=section&id=Other%20Financial%20Information) The company improved operational efficiency, enhanced returns on capital, and continued its share repurchase program in Q2 2025 - Key operational improvements in Q2 include **increased inventory turns, a reduced cash conversion cycle, and improved returns on capital**[9](index=9&type=chunk) - The company repurchased **$50 million** of its shares during the second quarter[9](index=9&type=chunk) [Third-Quarter 2025 Outlook](index=3&type=section&id=Third-Quarter%202025%20Outlook) The company projects Q3 2025 consolidated sales between $7.30 billion and $7.90 billion and non-GAAP EPS of $2.16 to $2.36 Q3 2025 Guidance | Metric | Q3 2025 Outlook | | :--- | :--- | | **Consolidated sales** | $7.30B - $7.90B | | - Global components sales | $5.30B - $5.70B | | - Global ECS sales | $2.00B - $2.20B | | **GAAP diluted EPS** | $1.49 - $1.69 | | **Non-GAAP diluted EPS** | $2.16 - $2.36 | | **Interest expense** | Approx. $65M | | **Average tax rate** | 23% - 25% | - Foreign currency changes are expected to increase Q3 2025 sales by approximately **$135 million** and diluted EPS by **$0.11** compared to Q3 2024[15](index=15&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) The financial statements show increased sales but lower operating income, with a significant use of cash from operations [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) Sales rose 10% year-over-year, but operating income declined, while a large gain on investments boosted net income Q2 2025 Statement of Operations Highlights (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sales | $7,579,947 | $6,892,868 | | Gross Profit | $848,657 | $846,444 | | Operating Income | $190,586 | $212,275 | | Gain on investments, net | $103,976 | $(4,615) | | Net income attributable to shareholders | $187,749 | $108,698 | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $24.3 billion, driven by a significant increase in accounts receivable and a corresponding rise in liabilities Balance Sheet Highlights (in thousands) | Line Item | June 28, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $20,846,420 | $18,401,413 | | Accounts receivable, net | $15,271,349 | $13,030,991 | | Inventories | $4,749,431 | $4,709,706 | | **Total assets** | $24,252,578 | $21,757,707 | | **Total current liabilities** | $14,978,258 | $12,636,162 | | Accounts payable | $13,213,323 | $11,047,470 | | **Total shareholders' equity** | $6,333,890 | $5,761,151 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a significant negative swing in operating cash flow, primarily due to a large increase in accounts receivable Q2 2025 Cash Flow Highlights (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash (used for) provided by operating activities | $(205,896) | $320,181 | | Net cash provided by (used for) investing activities | $106,240 | $(20,788) | | Net cash used for financing activities | $(73,832) | $(317,247) | | Net decrease in cash and cash equivalents | $(9,912) | $(29,801) | [Supplemental and Non-GAAP Information](index=12&type=section&id=Supplemental%20and%20Non-GAAP%20Information) This section reconciles GAAP to non-GAAP metrics, adjusting for items like amortization and restructuring to clarify core performance - Management uses non-GAAP financial measures to better assess operating performance by excluding items like **intangible amortization, restructuring charges, and foreign currency impacts**[19](index=19&type=chunk)[21](index=21&type=chunk) Q2 2025 GAAP to Non-GAAP Reconciliation Highlights (in millions) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Operating income | $190.6 | $24.8 | $215.4 | | Net income attributable to shareholders | $187.7 | $(60.4) | $127.4 | | Net income per diluted share | $3.59 | $(1.16) | $2.43 | - Global ECS Gross Billings, a key operational metric, **increased 15% year-over-year** to $5.14 billion in Q2 2025[35](index=35&type=chunk)

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]