Group 1 - Avnet, Inc. is one of the largest electronic component distributors globally, yet it remains relatively under the radar in the tech industry [1] - The company operates in a sector that is crucial for the supply chain of various technology products, indicating its significant role in the market [1] Group 2 - The article emphasizes the importance of understanding how businesses grow and how markets react, particularly in the tech, infrastructure, and internet services sectors [2] - It highlights the value of strong fundamentals paired with real potential in investment opportunities [2]

Core Viewpoint - Alvotech and Advanz Pharma announced a positive opinion from the European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP) recommending approval for AVT06, a proposed biosimilar to Eylea® [1][5] Company Overview - Alvotech is a global biotech company focused on developing and manufacturing biosimilar medicines, aiming to be a leader in the biosimilar space with a pipeline that includes eight disclosed candidates targeting various therapeutic areas [11][12] - Advanz Pharma is a UK-based global pharmaceutical company specializing in specialty, hospital, and rare disease medicines, with a commercial presence in over 90 countries [13] Product Details - AVT06 is intended for treating adults with neovascular (wet) age-related macular degeneration (AMD), visual impairment due to macular edema secondary to retinal vein occlusion, diabetic macular edema, and myopic choroidal neovascularization [4][8] - In 2024, global sales of Eylea® were approximately US$9 billion, with one-third of these sales occurring in Europe [5] Clinical Study Results - A confirmatory clinical study (AVT06-GL-C01) demonstrated therapeutic equivalence between AVT06 and Eylea®, meeting its primary endpoint [6] Commercialization Rights - Alvotech is responsible for the development and commercial supply of AVT06, while Advanz Pharma holds exclusive commercialization rights for most European countries [5][7]

Core Viewpoint - Alvotech and Advanz Pharma have received a positive opinion from the European Medicines Agency's Committee for Medicinal Products for Human Use (CHMP) recommending approval for AVT06, a proposed biosimilar to Eylea® [1][5]. Company Overview - Alvotech is a global biotech company focused on developing and manufacturing biosimilar medicines, aiming to be a leader in the biosimilar space with a pipeline that includes eight candidates targeting various diseases [11][12]. - Advanz Pharma is a UK-based global pharmaceutical company specializing in specialty, hospital, and rare disease medicines, with a commercial presence in over 90 countries [13]. Product Details - AVT06 is intended for treating several eye disorders, including neovascular age-related macular degeneration (AMD) and diabetic macular edema (DME) [4][8]. - The global sales of Eylea® were approximately US$9 billion in 2024, with one-third of these sales occurring in Europe [5]. Clinical Study Results - A confirmatory clinical study (AVT06-GL-C01) demonstrated therapeutic equivalence between AVT06 and Eylea®, meeting its primary endpoint [6]. Commercialization Rights - Alvotech is responsible for the development and commercial supply of AVT06, while Advanz Pharma holds exclusive commercialization rights in most European countries [5][7].

Core Insights - Avnet has been actively supporting the overseas expansion of domestic semiconductor companies since early 2020, recognizing the growing demand for domestic chips and the increasing scale of the domestic semiconductor industry [2][4] - The company has established a comprehensive local management structure in China, focusing on nurturing local talent to better adapt to the rapidly growing and diversifying market [5] Group 1: Domestic Semiconductor Industry - The domestic semiconductor industry has reached a significant scale, becoming an important force in the market, which prompted Avnet to introduce the "domestic line" to meet customer demand [2] - Despite the current low proportion of the "domestic line" in Avnet China's overall revenue, its annual growth rate is accelerating, indicating a positive trend for domestic semiconductor manufacturers [4] Group 2: Global Market Expansion - Avnet has leveraged its extensive global sales network to assist domestic semiconductor manufacturers in expanding their reach, enabling them to access opportunities in Asia, Europe, and the Americas [4] - The company has successfully helped several domestic semiconductor firms, such as a leading analog device manufacturer, to rapidly enter the European market, doubling their revenue within a year [1] Group 3: Focus on AI and New Energy Vehicles - Avnet is keen on expanding its customer base and product applications in the AI sector, with a goal to deepen engagement in AI-related industries by 2025, as the demand for AI products continues to rise [5] - The company recognizes the competitive pressures in the new energy vehicle sector and aims to provide value through innovative supply chain management and new product introduction to help manufacturers enhance their competitiveness [5]

Core Insights - The performance of Avnet's international operations is crucial for understanding its financial strength and growth potential [1][2] - The company's total revenue for the quarter ending March 2025 was $5.32 billion, a decrease of 6% year-over-year [4] International Revenue Analysis - Asia contributed 46.70% of total revenue, amounting to $2.48 billion, with a surprising increase of 7.29% compared to expectations [5] - EMEA generated $1.56 billion, representing 29.33% of total revenue, which was an 8.58% shortfall from analyst projections [6] Future Revenue Expectations - Analysts forecast total revenue of $5.38 billion for the current fiscal quarter, a decline of 3.3% year-over-year, with Asia and EMEA expected to contribute 45.5% ($2.45 billion) and 31.6% ($1.7 billion) respectively [7] - For the entire year, total revenue is projected to be $21.98 billion, a reduction of 7.5% from the previous year, with Asia contributing 45.8% ($10.08 billion) and EMEA 30.3% ($6.65 billion) [8] Strategic Considerations - Avnet's reliance on international markets presents both opportunities and risks, making it essential to monitor international revenue trends for forecasting [9][10]

Core Viewpoint - The global semiconductor sales continue to grow in Q1 2025, but there is a significant performance divergence among major chip manufacturers, influenced by market and product differences, particularly in AI and storage sectors, while automotive chip manufacturers are struggling [1]. Chip Design (Including IDM) - Texas Instruments (TI) reported Q1 revenue of $4.07 billion, a year-over-year increase of 11% and a sequential increase of 2%. The company expects Q2 revenue between $4.17 billion and $4.53 billion [3]. - STMicroelectronics (ST) reported Q1 revenue of $2.52 billion, a year-over-year decline of 27.3%, with a net profit of $56 million, down 89.1% [5]. - NXP's Q1 revenue was $2.84 billion, down 9% year-over-year, with a significant decline in automotive market revenue [6]. - Qualcomm's Q1 revenue reached $10.98 billion, a year-over-year increase of 16.9%, driven by growth in mobile, automotive, and IoT sectors [8]. - MediaTek's Q1 revenue was NT$153.31 billion, up 14.9% year-over-year, exceeding operational targets due to increased market demand [9]. Semiconductor Manufacturing - TSMC's Q1 revenue was $25.53 billion, a year-over-year increase of 35.3%, with a gross margin of 58.8% [42]. - UMC reported Q1 revenue of NT$57.86 billion, a year-over-year increase of 5.9%, with a focus on 22/28nm process technology [46]. - World Advanced's Q1 revenue was NT$11.949 billion, a year-over-year increase of 24%, achieving a net profit of NT$2.414 billion [48]. Chip Distribution - WPG Holdings reported Q1 revenue of NT$248.83 billion, a year-over-year increase of 36.8%, driven by demand from AI and related sectors [58]. - Winstek Technology's Q1 revenue was NT$247.4 billion, a year-over-year increase of 28% [60]. - Arrow Electronics reported a 6% year-over-year decline in sales, totaling $5.3 billion [64]. Domestic Semiconductor Companies - Over 70% of semiconductor companies listed in A-shares reported year-over-year revenue growth in Q1 2025, with 60.63% of companies showing profit increases [35]. - Weir Shares reported a 14.68% year-over-year revenue increase in Q1, with a net profit increase of 55.25% [38]. - Zhaoyi Innovation's Q1 revenue was 1.909 billion yuan, a year-over-year increase of 17.32% [40].

[General Information](index=1&type=section&id=General%20Information) [Form 10-Q Filing Details](index=1&type=section&id=Form%2010-Q%20Filing%20Details) The company filed its Form 10-Q for the quarterly period ending March 29, 2025, as a large accelerated filer - Filing Type: **Quarterly Report (Form 10-Q)** for the period ended March 29, 2025[2](index=2&type=chunk) - Registrant Status: **Large Accelerated Filer**[5](index=5&type=chunk) [Company Identification](index=1&type=section&id=Company%20Identification) Avnet, Inc trades on Nasdaq (AVT) and had 83.9 million common shares outstanding as of April 25, 2025 | Title of Each Class | Trading Symbol | Name of Each Exchange on Which registered: | | :--- | :--- | :--- | | Common stock, par value $1.00 per share | AVT | Nasdaq Global Select Market | - Total Common Stock Outstanding (as of April 25, 2025): **83,857,315 shares**[7](index=7&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the company's unaudited consolidated financial statements for the periods ended March 29, 2025 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $11.71 billion, driven by reductions in cash, receivables, and inventories | Metric | March 29, 2025 (Thousands) | June 29, 2024 (Thousands) | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and cash equivalents | $188,912 | $310,941 | | Receivables | 4,095,480 | 4,391,187 | | Inventories | 5,270,451 | 5,468,730 | | Total current assets | 9,795,355 | 10,370,552 | | Total assets | $11,712,330 | $12,209,147 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Short-term debt | $144,542 | $492,711 | | Accounts payable | 3,319,033 | 3,345,510 | | Total current liabilities | 4,014,382 | 4,465,269 | | Long-term debt | 2,494,387 | 2,406,629 | | Total liabilities | 6,827,363 | 7,283,643 | | Total shareholders' equity | 4,884,967 | 4,925,504 | | Total liabilities and shareholders' equity | $11,712,330 | $12,209,147 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) Quarterly sales decreased 6.0% year-over-year to $5.32 billion, leading to a 24.7% drop in operating income | Metric | Q3 2025 (Thousands) | Q3 2024 (Thousands) | 9M 2025 (Thousands) | 9M 2024 (Thousands) | | :--- | :--- | :--- | :--- | :--- | | Sales | $5,315,423 | $5,653,591 | $16,582,959 | $18,194,153 | | Gross profit | 587,853 | 669,273 | 1,791,271 | 2,123,562 | | Operating income | 143,251 | 190,151 | 440,802 | 680,177 | | Net income | $87,919 | $88,834 | $234,128 | $416,033 | | Diluted Earnings per share | $1.01 | $0.97 | $2.65 | $4.52 | | Cash dividends paid per common share | $0.33 | $0.31 | $0.99 | $0.93 | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Quarterly total comprehensive income increased significantly to $171.0 million due to positive foreign currency translation | Metric | Q3 2025 (Thousands) | Q3 2024 (Thousands) | 9M 2025 (Thousands) | 9M 2024 (Thousands) | | :--- | :--- | :--- | :--- | :--- | | Net income | $87,919 | $88,834 | $234,128 | $416,033 | | Foreign currency translation and other | 108,071 | (89,686) | 41,162 | (27,559) | | Total other comprehensive income (loss) | 83,061 | (78,604) | 38,797 | (26,676) | | Total comprehensive income | $170,980 | $10,230 | $272,925 | $389,357 | [Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity slightly decreased to $4.88 billion, reflecting net income offset by share repurchases and dividends | Metric | June 29, 2024 (Thousands) | March 29, 2025 (Thousands) | | :--- | :--- | :--- | | Total Shareholders' Equity | $4,925,504 | $4,884,967 | | Net income (9 months) | N/A | $234,128 | | Cash dividends (9 months) | N/A | $(85,645) | | Repurchases of common stock (9 months) | N/A | $(253,490) | | Accumulated Other Comprehensive Loss | $(486,723) | $(447,926) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities increased to $585.0 million for the nine-month period, driven by working capital improvements | Metric | 9M 2025 (Thousands) | 9M 2024 (Thousands) | | :--- | :--- | :--- | | Net cash flows provided by operating activities | $585,028 | $415,730 | | Net cash flows used for financing activities | $(613,691) | $(284,487) | | Net cash flows used for investing activities | $(77,521) | $(199,581) | | Cash and cash equivalents at end of period | $188,912 | $218,473 | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail accounting policies and provide specifics on various financial statement line items [Note 1. Basis of presentation and new accounting pronouncements](index=10&type=section&id=Note%201.%20Basis%20of%20presentation%20and%20new%20accounting%20pronouncements) The company is evaluating the impact of new accounting standards for segment reporting, income taxes, and expense disaggregation - ASU 2023-07 (Segment reporting) will be adopted in FY2025, requiring enhanced disclosures but no impact on financial statements[24](index=24&type=chunk) - ASU 2023-09 (Income Taxes) will be effective in FY2026, with impact on disclosures currently being evaluated[25](index=25&type=chunk) - ASU 2024-03/2025-01 (Expense Disaggregation) will be effective in FY2028, with impact on disclosures currently being evaluated[26](index=26&type=chunk) [Note 2. Working capital](index=11&type=section&id=Note%202.%20Working%20capital) Both receivables and inventories decreased, with inventories of electronic components declining to $5.27 billion | Metric | March 29, 2025 (Thousands) | June 29, 2024 (Thousands) | | :--- | :--- | :--- | | Receivables | $4,205,593 | $4,499,691 | | Allowance for Credit Losses | $110,113 | $108,504 | - Inventories decreased from **$5.47 billion to $5.27 billion**[12](index=12&type=chunk)[28](index=28&type=chunk) Components held for supply chain services were **~6% of inventories** at March 29, 2025, down from ~7% at June 29, 2024[29](index=29&type=chunk) [Note 3. Goodwill](index=11&type=section&id=Note%203.%20Goodwill) Goodwill increased to $795.1 million, primarily due to foreign currency translation effects | Segment | Carrying value at June 29, 2024 (Thousands) | Foreign currency translation (Thousands) | Carrying value at March 29, 2025 (Thousands) | | :--- | :--- | :--- | :--- | | Electronic Components | $295,957 | $2,500 | $298,457 | | Farnell | $485,027 | $11,582 | $496,609 | | Total | $780,984 | $14,082 | $795,066 | [Note 4. Debt](index=13&type=section&id=Note%204.%20Debt) Total debt decreased to $2.64 billion, with a significant reduction in short-term debt and an increase in long-term debt | Debt Type | March 29, 2025 (Thousands) | June 29, 2024 (Thousands) | | :--- | :--- | :--- | | Short-term debt | $144,542 | $492,711 | | Long-term debt | $2,494,387 | $2,406,629 | | Total Debt (Carrying Value) | $2,638,929 | $2,899,340 | - Accounts receivable securitization program amended and extended to December 2026, allowing borrowings up to **$500 million**[33](index=33&type=chunk) - Five-year **$1.50 billion** revolving credit facility amended and extended to January 2030[34](index=34&type=chunk) [Note 5. Derivative financial instruments](index=15&type=section&id=Note%205.%20Derivative%20financial%20instruments) The company uses derivative instruments to manage foreign currency and interest rate risks - Company uses economic hedges (forward foreign currency exchange contracts) and a cross-currency swap to manage foreign currency and interest rate risks, **not for speculative purposes**[37](index=37&type=chunk)[38](index=38&type=chunk)[40](index=40&type=chunk) | Derivative Type | Q3 2025 (Thousands) | Q3 2024 (Thousands) | 9M 2025 (Thousands) | 9M 2024 (Thousands) | | :--- | :--- | :--- | :--- | :--- | | Economic hedges (Other expense, net) | $(636) | $(1,134) | $11,690 | $(21,867) | | Cross-currency swap (Interest and other financing expense, net) | $1,319 | $1,116 | $3,318 | $3,352 | [Note 6. Commitments and contingencies](index=16&type=section&id=Note%206.%20Commitments%20and%20contingencies) Legal proceedings are not expected to materially impact financial condition, and estimated liabilities have decreased - Management does not anticipate **material adverse effects** on financial condition or liquidity from legal proceedings[42](index=42&type=chunk)[43](index=43&type=chunk) | Metric | March 29, 2025 (Thousands) | June 29, 2024 (Thousands) | | :--- | :--- | :--- | | Estimated liabilities for compliance-related matters | $11,700 | $17,200 | - A gain of **$86.5 million** from legal settlements was recorded in the first nine months of fiscal 2024[45](index=45&type=chunk) [Note 7. Income taxes](index=17&type=section&id=Note%207.%20Income%20taxes) The effective tax rate for Q3 2025 was a benefit of 12.5%, favorably impacted by tax attribute carryforwards | Period | Effective Tax Rate | | :--- | :--- | | Q3 Fiscal 2025 | (12.5)% (benefit) | | Q3 Fiscal 2024 | 12.9% | | 9M Fiscal 2025 | 3.7% | | 9M Fiscal 2024 | 21.6% | - Pillar Two rules (OECD) are effective for the company in fiscal year 2025, but are **not expected to have a significant impact** on income tax expense[51](index=51&type=chunk) [Note 8. Pension plan](index=17&type=section&id=Note%208.%20Pension%20plan) The company reported a net periodic pension benefit and made $6.0 million in contributions during the first nine months | Metric | Q3 2025 (Thousands) | Q3 2024 (Thousands) | 9M 2025 (Thousands) | 9M 2024 (Thousands) | | :--- | :--- | :--- | :--- | :--- | | Net periodic pension benefit | $(99) | $(1,221) | $(297) | $(3,663) | - Contributions to the Plan: **$6.0 million** in 9M FY2025, with an additional **$2.0 million** expected in Q4 FY2025[52](index=52&type=chunk) [Note 9. Shareholders' equity](index=19&type=section&id=Note%209.%20Shareholders%27%20equity) The company repurchased 2.0 million shares for $101.3 million in Q3 2025 and approved a $0.33 quarterly dividend - Share Repurchase Program: Authorized up to **$600 million**; **$414.1 million remaining** as of March 29, 2025[53](index=53&type=chunk) - Q3 FY2025 Share Repurchases: **2.0 million shares for $101.3 million**[53](index=53&type=chunk) - Q3 FY2025 Common Stock Dividend: **$0.33 per share**, totaling **$28.2 million**[54](index=54&type=chunk) [Note 10. Earnings per share](index=19&type=section&id=Note%2010.%20Earnings%20per%20share) Diluted EPS for Q3 2025 increased to $1.01 from $0.97, driven by a reduction in weighted average shares | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (Thousands) | $87,919 | $88,834 | $234,128 | $416,033 | | Weighted average common shares for diluted EPS | 86,876 | 91,256 | 88,198 | 92,075 | | Diluted earnings per share | $1.01 | $0.97 | $2.65 | $4.52 | [Note 11. Additional cash flow information](index=19&type=section&id=Note%2011.%20Additional%20cash%20flow%20information) Supplemental cash flow data shows interest payments of $215.0 million and net income tax payments of $205.9 million | Metric | 9M 2025 (Thousands) | 9M 2024 (Thousands) | | :--- | :--- | :--- | | Capital expenditures incurred but not paid | $10,623 | $13,406 | | Interest payments | $215,022 | $263,735 | | Income tax payments, net | $205,881 | $173,387 | [Note 12. Segment information](index=21&type=section&id=Note%2012.%20Segment%20information) Both Electronic Components and Farnell segments reported decreased sales and operating income in Q3 2025 - Reportable segments: **Electronic Components (EC)** and **Farnell**[57](index=57&type=chunk) | Segment | Q3 2025 Sales (Thousands) | Q3 2024 Sales (Thousands) | Q3 2025 Operating Income (Thousands) | Q3 2024 Operating Income (Thousands) | | :--- | :--- | :--- | :--- | :--- | | Electronic Components | $4,948,759 | $5,245,771 | $172,179 | $216,837 | | Farnell | $366,664 | $407,820 | $10,974 | $16,321 | | Total Sales | $5,315,423 | $5,653,591 | | | | Total Operating Income | | | $143,251 | $190,151 | - Geographic Sales Mix (Q3 2025): Americas ($1.27B), EMEA ($1.56B), Asia ($2.48B)[58](index=58&type=chunk) **Asia showed sales growth** while Americas and EMEA decreased[58](index=58&type=chunk) [Note 13. Restructuring expenses](index=21&type=section&id=Note%2013.%20Restructuring%20expenses) The company incurred $35.0 million in restructuring expenses in the first nine months, primarily related to the Farnell segment | Restructuring Expense Category (9M FY2025) | Amount (Thousands) | | :--- | :--- | | Severance | $11,675 | | Facility Exit Costs | $5,329 | | Asset Impairments | $14,904 | | Other | $3,133 | | Total Fiscal 2025 Restructuring Expenses | $35,041 | - Fiscal 2025 restructuring expenses: $6.9 million for EC, **$28.1 million for Farnell**, primarily due to headcount reductions (over 250 employees)[60](index=60&type=chunk) - Remaining restructuring liabilities from fiscal 2024: **$7.17 million** at March 29, 2025[61](index=61&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance amid an industry downturn, detailing impacts on sales, profitability, and liquidity - The discussion includes non-GAAP financial measures like **'Adjusted operating income'** to provide a clearer view of operating performance, excluding restructuring and amortization of acquired intangibles[66](index=66&type=chunk)[67](index=67&type=chunk) [Overview](index=25&type=section&id=Overview) The company faces an industry downturn and geopolitical tensions, leading to decreased sales and higher inventory levels - Avnet is a global electronic component distributor and solutions provider, operating through **Electronic Components (EC)** and **Farnell** segments in Americas, EMEA, and Asia[69](index=69&type=chunk)[70](index=70&type=chunk) - Recent developments include global trade disruptions, geopolitical tensions, and potential tariff impacts, with **7% to 10% of Americas' annual sales** originating from China[71](index=71&type=chunk)[72](index=72&type=chunk) - Industry outlook: Experiencing a **downturn since H2 2023** due to elevated customer inventory and lower demand, resulting in decreased sales and operating income[75](index=75&type=chunk) Q4 FY2025 sales are expected to be **flat** compared to Q3 FY2025[75](index=75&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Sales and profitability declined significantly due to lower market demand and an unfavorable product mix | Metric | Q3 2025 | Q3 2024 | Variance | Variance % | 9M 2025 | 9M 2024 | Variance | Variance % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales ($ in millions) | $5,315 | $5,654 | $(338) | (6.0)% | $16,583 | $18,194 | $(1,611) | (8.9)% | | Gross profit ($ in millions) | 588 | 669 | (81) | (12.2)% | 1,791 | 2,124 | (332) | (15.7)% | | Operating income ($ in millions) | 143 | 190 | (47) | (24.7)% | 441 | 680 | (239) | (35.2)% | | Net income ($ in millions) | 88 | 89 | (1) | (1.0)% | 234 | 416 | (182) | (43.7)% | | Diluted earnings per share | 1.01 | 0.97 | 0.04 | 4.1% | 2.65 | 4.52 | (1.87) | (41.4)% | | Gross profit margin | 11.1% | 11.8% | (78)bps | (0.8)% | 10.8% | 11.7% | (87)bps | (0.9)% | | Operating income margin | 2.7% | 3.4% | (66)bps | (0.7)% | 2.7% | 3.7% | (108)bps | (1.1)% | [Sales](index=29&type=section&id=Sales) Total sales for Q3 FY2025 decreased by 6.0% to $5.32 billion, with Asia being the only region showing growth | Region/Operating Group | Q3 FY2025 YoY % Change | Q3 FY2025 Constant Currency % Change | 9M FY2025 YoY % Change | 9M FY2025 Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Avnet | (6.0)% | (4.9)% | (8.9)% | (8.5)% | | Americas | (9.2)% | (9.2)% | (13.0)% | (13.0)% | | EMEA | (24.1)% | (21.8)% | (25.7)% | (25.2)% | | Asia | 13.0% | 13.4% | 9.0% | 9.3% | | EC | (5.7)% | (4.6)% | (8.5)% | (8.2)% | | Farnell | (10.1)% | (8.5)% | (13.3)% | (13.1)% | - EC sales decreased due to **market downturn and unfavorable product mix**; Farnell sales decreased due to **lower demand for on-the-board electronic components**[81](index=81&type=chunk)[82](index=82&type=chunk) [Gross Profit](index=29&type=section&id=Gross%20Profit) Gross profit decreased by 12.2% in Q3 FY2025, with the margin contracting by 78 basis points to 11.1% - Gross profit decreased by **$81.4 million (12.2%)** in Q3 FY2025 and **$332.3 million (15.7%)** for 9M FY2025, driven by sales volume decreases and lower gross profit margins[83](index=83&type=chunk) - Gross profit margin decreased by **78 basis points to 11.1%** in Q3 FY2025, primarily due to geographic sales mix (western regions' sales share decreased from 61% to 53%)[84](index=84&type=chunk) - EC gross profit margin decreased due to **geographic mix**; Farnell gross profit margin decreased due to **lower sales of higher-margin on-the-board components**[85](index=85&type=chunk) [Selling, General and Administrative Expenses](index=31&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) SG&A expenses decreased by 6.8% in Q3 FY2025 due to cost reduction efforts, but increased as a percentage of gross profit - SG&A expenses decreased by **$31.8 million (6.8%)** in Q3 FY2025 and **$108.0 million (7.6%)** for 9M FY2025, driven by lower sales volumes, restructuring, building sale gain, and foreign currency effects[86](index=86&type=chunk) | Metric | Q3 FY2025 | Q3 FY2024 | 9M FY2025 | 9M FY2024 | | :--- | :--- | :--- | :--- | :--- | | SG&A as % of sales | 8.2% | 8.3% | 7.9% | 7.8% | | SG&A as % of gross profit | 74.1% | 69.8% | 73.2% | 66.8% | [Restructuring, Integration, and Other Expenses](index=31&type=section&id=Restructuring,%20Integration,%20and%20Other%20Expenses) The company incurred $9.1 million in restructuring expenses in Q3 FY2025, primarily within the Farnell segment - Q3 FY2025 restructuring, integration, and other expenses: **$9.1 million** (after-tax impact $6.6 million, $0.08/diluted share)[88](index=88&type=chunk)[89](index=89&type=chunk) - 9M FY2025 restructuring, integration, and other expenses: **$39.3 million** (after-tax impact $29.0 million, $0.33/diluted share), including severance for over 250 employees, facility exit costs, and asset impairments[90](index=90&type=chunk) [Operating Income](index=31&type=section&id=Operating%20Income) Operating income for Q3 FY2025 decreased by 24.7% to $143.3 million, with the operating margin falling to 2.7% | Metric | Q3 FY2025 (Millions) | Q3 FY2024 (Millions) | 9M FY2025 (Millions) | 9M FY2024 (Millions) | | :--- | :--- | :--- | :--- | :--- | | Operating income | $143.3 | $190.2 | $440.8 | $680.2 | | Operating income margin | 2.7% | 3.4% | 2.7% | 3.7% | | Adjusted operating income | $152.7 | $202.7 | $481.2 | $706.6 | | Adjusted operating income margin | 2.9% | 3.6% | 2.9% | 3.9% | - EC operating income decreased **20.6% to $172.2 million** in Q3 FY2025; Farnell operating income decreased **32.8% to $11.0 million**[93](index=93&type=chunk) [Interest and Other Financing Expenses, Net and Other Expense, Net](index=33&type=section&id=Interest%20and%20Other%20Financing%20Expenses,%20Net%20and%20Other%20Expense,%20Net) Interest expenses decreased due to lower outstanding borrowings, and other expenses fell due to reduced currency losses - Interest and other financing expenses decreased in Q3 FY2025 and 9M FY2025 due to **lower outstanding borrowings and average borrowing rates**[95](index=95&type=chunk) - Other expenses decreased in Q3 FY2025 and 9M FY2025 primarily due to **differences in foreign currency translation losses**[96](index=96&type=chunk) [Gain on Legal Settlements and other](index=33&type=section&id=Gain%20on%20Legal%20Settlements%20and%20other) The company recorded an $86.5 million gain from legal settlements in fiscal 2024, with no similar gain in fiscal 2025 - A gain of **$86.5 million** on legal settlements was recorded in the first nine months of fiscal 2024[97](index=97&type=chunk) [Income Tax](index=33&type=section&id=Income%20Tax) The company recorded an income tax benefit in Q3 FY2025, resulting in an effective tax rate of -12.5% | Period | Income Tax Expense (Millions) | Effective Tax Rate | | :--- | :--- | :--- | | Q3 Fiscal 2025 | $(9.8) | (12.5)% | | Q3 Fiscal 2024 | $13.1 | 12.9% | | 9M Fiscal 2025 | $9.0 | 3.7% | | 9M Fiscal 2024 | $114.9 | 21.6% | [Net Income](index=33&type=section&id=Net%20Income) Net income for Q3 FY2025 was $87.9 million, a slight decrease from the prior year, while nine-month net income fell sharply | Period | Net Income (Millions) | Diluted EPS | | :--- | :--- | :--- | | Q3 Fiscal 2025 | $87.9 | $1.01 | | Q3 Fiscal 2024 | $88.8 | $0.97 | | 9M Fiscal 2025 | $234.1 | $2.65 | | 9M Fiscal 2024 | $416.0 | $4.52 | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved with increased operating cash flow, while the company actively managed debt and returned capital to shareholders [Cash Flow](index=35&type=section&id=Cash%20Flow) Net cash from operating activities increased to $585.0 million, driven by improved working capital management - Operating Activities: Net cash provided increased by **$169.3 million to $585.0 million** (9M FY2025), driven by working capital improvements (inventory and receivables reductions)[103](index=103&type=chunk) - Financing Activities: Net cash used increased to **$613.7 million** (9M FY2025), including **$253.5 million** in common stock repurchases and **$270.3 million** in net debt repayments[104](index=104&type=chunk) - Investing Activities: Net cash used decreased by **$112.3 million to $77.5 million** (9M FY2025), primarily due to lower purchases of property, plant, and equipment[105](index=105&type=chunk) [Contractual Obligations](index=35&type=section&id=Contractual%20Obligations) No material changes to long-term debt and lease commitments occurred outside the normal course of business - No material changes to long-term debt and lease commitments outside of normal course of business[106](index=106&type=chunk) [Financing Transactions](index=35&type=section&id=Financing%20Transactions) The company remained in compliance with all debt covenants and utilized various credit facilities for working capital needs - Company was **in compliance with all covenants** under the Credit Facility and Securitization Program as of March 29, 2025[107](index=107&type=chunk) - Outstanding borrowings under various lines of credit and bank debt were **$99.1 million** at the end of Q3 FY2025[108](index=108&type=chunk) - Company sells certain trade accounts receivable on a **non-recourse basis** to financial institutions via factoring agreements, with proceeds classified as cash from operating activities[109](index=109&type=chunk) [Liquidity](index=37&type=section&id=Liquidity) The company maintains sufficient liquidity with $1.17 billion of total committed availability under its credit facilities | Metric | March 29, 2025 (Millions) | June 29, 2024 (Millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $188.9 | $310.9 | | Cash held outside U.S. | $177.2 | $179.6 | - Generated **$859.3 million** in cash flows from operating activities over the trailing four fiscal quarters ended March 29, 2025[111](index=111&type=chunk) - Total committed availability under Credit Facility and Securitization Program: approximately **$1.17 billion** as of March 29, 2025, from a combined total borrowing capacity of **$2.00 billion**[113](index=113&type=chunk) [Recently Issued Accounting Pronouncements](index=39&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Details on recently issued accounting pronouncements are available in Note 1 of the financial statements - Refer to Note 1 for details on recently issued accounting pronouncements[119](index=119&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages interest rate and foreign currency risks with a debt portfolio that is 63% fixed-rate - Company uses financial arrangements for **economic hedging** against interest rate and foreign currency exchange rate volatility[120](index=120&type=chunk) - As of March 29, 2025, **63% of debt is fixed-rate** and **37% is variable-rate**[122](index=122&type=chunk) - A hypothetical **1.0% increase in interest rates** would decrease income before taxes by **$2.4 million** for Q3 FY2025[122](index=122&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - Disclosure controls and procedures were **effective** as of March 29, 2025[123](index=123&type=chunk) - **No material changes** to internal control over financial reporting occurred during Q3 FY2025[124](index=124&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The resolution of various legal proceedings is not expected to have a material adverse effect on the company's financial position - No particular pending legal proceeding requires specific public disclosure[126](index=126&type=chunk) - Resolution of legal matters is **not expected to materially affect** financial position or liquidity, but could impact results of operations in a single reporting period[127](index=127&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors disclosed in the company's most recent Annual Report on Form 10-K - **No material changes** to risk factors since the Annual Report on Form 10-K for FY2024[128](index=128&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 2.0 million shares for $101.3 million in Q3 FY2025, with $414.1 million remaining under its plan - Share repurchase plan authorized up to **$600 million**[129](index=129&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares That May Yet Be Purchased under the Plans or Programs | | :--- | :--- | :--- | :--- | | December 29 – January 25 | 370,167 | $52.66 | $495,919,000 | | January 26 – February 22 | 730,459 | $51.03 | $458,642,000 | | February 23 – March 29 | 902,822 | $49.31 | $414,120,000 | [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL documents - Includes CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906) and XBRL taxonomy documents[133](index=133&type=chunk) [Signature Page](index=42&type=section&id=Signature%20Page) The report was signed on May 2, 2025, by the Chief Financial Officer on behalf of Avnet, Inc - Report signed by **Kenneth A. Jacobson, Chief Financial Officer**, on May 2, 2025[136](index=136&type=chunk)[137](index=137&type=chunk)

Core Viewpoint - Avnet reported a decline in earnings and sales for the third quarter of fiscal 2025, reflecting broader market pressures and margin contraction across its segments [1][2]. Financial Performance - Earnings per share for Q3 fiscal 2025 were 84 cents, exceeding the Zacks Consensus Estimate by 16.7%, but down 23.6% year-over-year [1]. - Net sales reached $5.32 billion, surpassing the Zacks Consensus Estimate by 0.46%, yet decreased by 6% compared to the same quarter last year [1]. - Adjusted operating income was $152.7 million, a decline of 24.7% year-over-year [4]. Segment Performance - The Electronic Components segment saw revenues decline by 5.7% year-over-year to $4.95 billion, slightly below estimates [3]. - Farnell sales decreased by 10.1% year-over-year but increased by 6.1% sequentially to $366.7 million, exceeding estimates [3]. Regional Sales - Year-over-year sales increased by 13% in Asia to $2.48 billion, while EMEA sales fell by 24.1% to $1.56 billion and Americas sales decreased by 9.2% to $1.27 billion [4]. Margin Analysis - Adjusted operating margin shrank by 70 basis points to 2.9% compared to the previous year [5]. - The Electronic Components adjusted operating margin contracted by 65 basis points to 3.5%, while Farnell's margin declined by 101 basis points to 3% [5]. Balance Sheet and Cash Flow - As of March 29, 2025, cash and cash equivalents were $188.9 million, up from $172.1 million at the end of the previous quarter [6]. - Long-term debt decreased to $2.49 billion from $2.57 billion in the prior quarter [6]. - The company generated $141 million in cash from operating activities during Q3 [6]. Shareholder Returns - Avnet repurchased approximately $101 million worth of shares, representing 2.3% of shares outstanding, and returned $28 million to shareholders in dividends [7]. Q4 Guidance - For Q4 fiscal 2025, Avnet anticipates revenues between $5.15 billion and $5.45 billion, with a midpoint of $5.30 billion, indicating a year-over-year decline of 6.41% [8]. - Expected non-GAAP earnings are projected to be between 65 and 75 cents per share, suggesting a year-over-year decline of 34.6% [9].

Financial Data and Key Metrics Changes - The company achieved sales of $5.3 billion for Q3 FY2025, which is down 6% year-over-year and sequentially, but near the high end of guidance [4][14] - Adjusted EPS was $0.84, exceeding guidance, and cash flow from operations was $141 million for the quarter [4][20] - Gross margin for the quarter was 11.1%, down 78 basis points year-over-year but up 54 basis points sequentially [15] Business Line Data and Key Metrics Changes - Electronic Components sales declined 6% year-over-year and 7% sequentially, while Farnell sales decreased 10% year-over-year but increased 6% sequentially [14][15] - Farnell's operating margin improved to 3%, up approximately 200 basis points quarter-over-quarter, reflecting better sales and gross margin [19] Market Data and Key Metrics Changes - Sales in Asia increased 13% year-over-year, marking the third consecutive quarter of growth, while EMEA sales declined 24% and The Americas declined 9% year-over-year [14][15] - The industrial end market in EMEA saw slight growth, while other verticals experienced declines [7] Company Strategy and Development Direction - The company is focused on optimizing inventory composition and reducing core inventory levels where necessary [6] - The management emphasized the importance of leveraging existing customer and supplier relationships to drive growth, encapsulated in the "Power of One" strategy [11][19] - The company is actively adjusting processes to mitigate the impact of tariffs on customers and financials [12][26] Management's Comments on Operating Environment and Future Outlook - Management noted that the current environment is one of the most challenging seen in over 40 years, with complex supply chains and geopolitical uncertainties [13] - The company expects to generate positive operating cash flows in the next quarter and remains committed to balancing debt paydown with shareholder returns [22][26] Other Important Information - The company reported a gross leverage of 3.2 times and had approximately $1.2 billion of available committed borrowing capacity [22] - Book value per share increased to approximately $56, primarily due to changes in foreign currency exchange rates [23] Q&A Session Summary Question: Understanding revenue guidance for June - Management explained that the guidance reflects a cautious approach, particularly due to weak performance in Europe, with expected growth primarily from Asia [28][30] Question: Inventory expectations - Management indicated that while they aim to reduce inventory, it is strategically important and not uniformly high across all SKUs [48][52] Question: Tariff impacts on order patterns - Management noted minimal changes in order patterns due to tariffs, with only modest pull-ins observed [59][62] Question: Visibility into AI-driven components - The company has some visibility into AI-related components, particularly in Asia, but it represents a small portion of overall business [74][76]

Financial Data and Key Metrics Changes - The company reported sales of $5.3 billion for the third quarter, which is a 6% decline both year-over-year and sequentially, but near the high end of guidance [4][16] - Adjusted EPS was $0.84, exceeding guidance, and cash flow from operations was $141 million for the quarter [4][21] - Gross margin was 11.1%, down 78 basis points year-over-year but up 54 basis points sequentially [17] Business Line Data and Key Metrics Changes - Electronic Components sales declined 6% year-over-year and 7% sequentially, while Farnell sales decreased 10% year-over-year but increased 6% sequentially [17][20] - Farnell's operating margin improved to 3%, up approximately 200 basis points quarter-over-quarter, indicating stabilization and modest improvement [20] Market Data and Key Metrics Changes - Asia was the only region with year-over-year sales growth of 13%, while EMEA and The Americas saw declines of 24% and 9% respectively [16] - The industrial end market in EMEA increased slightly, while other verticals experienced declines [8] Company Strategy and Development Direction - The company is focused on optimizing inventory composition and reducing core inventory levels while maintaining strategic inventory as a valuable asset [6][7] - The management emphasized the importance of adapting to evolving technologies and market cycles, indicating confidence in weathering current challenges [14] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing weaknesses in the West, particularly in Europe, while expressing optimism about performance in Asia [4][16] - The company is actively working to mitigate the impact of tariffs through adjustments in systems and processes, leveraging global logistics, and collaborating with suppliers [12][13][26] Other Important Information - The company generated $585 million in cash flow year-to-date and has a gross leverage of 3.2 times, with $1.2 billion of available committed borrowing capacity [23][24] - The fourth quarter guidance is set for sales between $5.15 billion and $5.45 billion, with diluted EPS expected between $0.65 and $0.75 [25] Q&A Session Summary Question: Understanding revenue guidance for June - The company maintains a cautious approach to guidance, with expected weakness in Europe impacting overall sales despite strength in Asia [28][30] Question: Inventory expectations - Management indicated a focus on reducing inventory while balancing the need for strategic inventory to remain competitive [48][50] Question: Tariff impacts on order patterns - There has been minimal change in order patterns due to tariffs, with only modest pull-ins observed in Asia [59][62] Question: Long-term expectations for Farnell - Management expressed encouragement regarding Farnell's performance, aiming for continuous improvement in operating margins [44][46] Question: Visibility into AI-driven components - The company has some visibility into AI-related components, particularly in Asia, but the impact is not yet significant [71][72]