Avnet(AVT) - 2024 Q4 - Annual Results

Executive Summary and Key Highlights Summarizes Avnet's fiscal Q4 and full year 2024 financial performance, key metrics, and CEO commentary Fiscal Fourth Quarter 2024 Highlights Avnet's Q4 FY24 sales decreased to $5.6 billion, with diluted EPS $0.91 and adjusted EPS $1.22, generating $274 million operating cash flow - Fourth quarter sales were $5.6 billion, a 15.1% decrease from $6.6 billion in the prior year quarter[3] - Diluted EPS was $0.91 (vs. $1.68 prior year) and adjusted diluted EPS was $1.22 (vs. $2.06 prior year)[3] - Operating income margin was 3.0% (adjusted 3.5%), down from 4.3% in the prior year quarter[3] - Generated $274 million in cash flow from operations[3] - Returned $107 million to shareholders, comprising $79 million in share repurchases (1.6% of shares outstanding) and $28 million in dividends[3] Fiscal Year 2024 Highlights Avnet's FY24 sales were $23.8 billion, diluted EPS $5.43, adjusted EPS $5.34, and $690 million operating cash flow - Sales were $23.8 billion, a 10.5% decrease from $26.5 billion in the prior year[2] - Diluted earnings per share (EPS) of $5.43, compared with $8.26 in the prior year, and adjusted diluted EPS of $5.34, compared with $8.06 in the prior year[2] - Operating income margin of 3.6% (adjusted 3.8%), compared with 4.5% in the prior year[2] - Electronic Components operating income margin was 4.3% and Farnell operating income margin was 4.1%[2] - Generated $690 million of cash flow from operations[4] - Returned $277 million to shareholders, including $165 million from share repurchases (3.6% of shares outstanding) and $112 million in dividends[4] CEO Commentary CEO Phil Gallagher highlighted strong FY24 execution despite market challenges, exceeding Q4 guidance, and expressed confidence for FY25 - Avnet is satisfied with its fiscal 2024 performance, demonstrating strong execution despite challenging market conditions[1] - The team prioritized supporting partners, growing market share, controlling costs, and managing working capital to enhance operating cash flow[1] - Exceeded the upper range of fourth-quarter sales and earnings guidance[1] - Avnet is well-positioned for fiscal year 2025 with a robust team and strategy to capitalize on an eventual market recovery[1] Detailed Financial Performance Details Avnet's GAAP and non-GAAP financial results, covering segment and geographical performance Fourth Quarter 2024 Financial Results (GAAP & Non-GAAP) Avnet's Q4 FY24 GAAP sales decreased 15.1% to $5.56 billion, diluted EPS $0.91; adjusted non-GAAP operating income $193.4 million, EPS $1.22 Fourth Quarter Results (GAAP) | Metric | Jun – 24 | Jun – 23 | Change Y/Y | Mar – 24 | Change Q/Q | | :-------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Sales | $5,563.0 | $6,554.6 | (15.1)% | $5,653.6 | (1.6)% | | Operating Income | $164.2 | $283.7 | (42.1)% | $190.2 | (13.7)% | | Operating Income Margin | 3.0% | 4.3% | (138)bps | 3.4% | (41)bps | | Diluted EPS | $0.91 | $1.68 | (45.8)% | $0.97 | (6.2)% | Fourth Quarter Results (Non-GAAP) | Metric | Jun – 24 | Jun – 23 | Change Y/Y | Mar – 24 | Change Q/Q | | :-------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Adjusted Operating Income | $193.4 | $312.6 | (38.1)% | $202.7 | (4.6)% | | Adjusted Operating Income Margin | 3.5% | 4.8% | (129)bps | 3.6% | (11)bps | | Adjusted Diluted EPS | $1.22 | $2.06 | (40.8)% | $1.10 | 10.9% | Fiscal Year 2024 GAAP Financial Results Avnet's FY24 GAAP sales were $23.76 billion (down from FY23), operating income $844.4 million, and diluted EPS $5.43 Fiscal Year 2024 GAAP Financial Results | Metric | FY 2024 | FY 2023 | | :------------------------------------------ | :----------- | :----------- | | Sales | $23,757,129 | $26,536,881 | | Cost of sales | 20,990,687 | 23,354,738 | | Gross profit | 2,766,442 | 3,182,143 | | Operating income | 844,367 | 1,186,800 | | Income before taxes | 632,263 | 982,876 | | Net income | $498,699 | $770,828 | | Diluted EPS | $5.43 | $8.26 | Segment and Geographical Performance (Q4 & FY24) Q4 FY24: EC sales declined 15.1% to $5.19 billion, Farnell sales 15.8% to $375.2 million, Americas and EMEA saw significant declines Q4 FY24 Sales by Segment | Segment | Jun – 24 | Jun – 23 | Change Y/Y | Mar – 24 | Change Q/Q | | :-------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Electronic Components (EC) Sales | $5,187.8 | $6,109.2 | (15.1)% | $5,245.8 | (1.1)% | | Farnell Sales | $375.2 | $445.4 | (15.8)% | $407.8 | (8.0)% | Q4 FY24 Operating Income Margin by Segment | Segment | Jun – 24 | Jun – 23 | Change Y/Y | Mar – 24 | Change Q/Q | | :-------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | | EC Operating Income Margin | 4.1% | 5.1% | (103)bps | 4.1% | (8)bps | | Farnell Operating Income Margin | 4.0% | 8.1% | (406)bps | 4.0% | 3 bps | Q4 FY24 Sales by Geographic Area | Region | Jun – 24 | Jun – 23 | Change Y/Y | Mar – 24 | Change Q/Q | | :-------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Americas Sales | $1,353.8 | $1,732.7 | (21.9)% | $1,403.4 | (3.5)% | | EMEA Sales | $1,920.3 | $2,450.6 | (21.6)% | $2,053.1 | (6.5)% | | Asia Sales | $2,288.9 | $2,371.3 | (3.5)% | $2,197.1 | 4.2% | Financial Outlook Outlines Avnet's financial projections for Q1 FY25, including sales and diluted EPS guidance First Quarter Fiscal 2025 Guidance Avnet projects Q1 FY25 sales between $5.25 billion and $5.55 billion, diluted EPS $0.80 to $0.90, anticipating regional sales shifts Q1 Fiscal 2025 Guidance | Metric | Guidance Range | Midpoint | | :-------------------------- | :--------------- | :------- | | Sales | $5.25B – $5.55B | $5.40B | | Diluted EPS | $0.80 – $0.90 | $0.85 | - Guidance implies sequential sales change of flat to down approximately 5%, with anticipated declines in western regions and growth in Asia[6] - Guidance assumes interest expense similar to Q4 FY24 and an effective tax rate between 21% and 25%[6] Q1 Fiscal 2025 Average Currency Exchange Rates | Currency | Q1 Fiscal 2025 Guidance | Q4 Fiscal 2024 | Q1 Fiscal 2024 | | :-------------------------- | :---------------------- | :------------- | :------------- | | Euro to U.S. Dollar | $1.08 | $1.08 | $1.09 | | GBP to U.S. Dollar | $1.27 | $1.27 | $1.27 | Company Information Provides an overview of Avnet, conference call details, and forward-looking statement disclosures About Avnet Avnet is a global technology distributor and solutions provider with over a century of experience, accelerating product lifecycle stages - Avnet is a leading global technology distributor and solutions provider, serving customers for over a century[12] - Supports customers across the entire product lifecycle, from initial concept to design, prototype, and production[12] - Its unique position in the technology value chain accelerates design and supply, enabling faster revenue realization for customers[12] Conference Call and Webcast Details Avnet held a conference call and webcast on August 8, 2024, to discuss financial results, with replay and webcast details - Avnet hosted a conference call and webcast on August 8, 2024, at 9:00 a.m. PT / Noon ET[9] - Live conference call details: 877-407-8112 (domestic) or 201-689-8840 (international)[9] - Conference call replay was available through August 15, 2024, using Conference ID: 13747493[9] - Live and archived webcast is accessible via Avnet's Investor Relations web page at: https://ir.avnet.com[9](index=9&type=chunk) Forward-Looking Statements This document contains forward-looking statements subject to various risks and uncertainties, with no obligation to update - This document contains forward-looking statements as defined by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934[10] - These statements are subject to numerous assumptions, risks, and uncertainties that could cause future results to differ materially[10] - Key risk factors include geopolitical events, competitive pressures, semiconductor industry down-cycles, supplier relationships, international operational risks, acquisitions, supply chain disruptions, cybersecurity, economic conditions, and regulatory changes[10] - The Company assumes no obligation to update any forward-looking statement to reflect subsequent events or circumstances, except as legally required[11] Consolidated GAAP Financial Statements Presents Avnet's consolidated GAAP financial statements: operations, balance sheets, and cash flows Consolidated Statements of Operations Avnet's GAAP statements show declines in Q4 and FY24 sales, gross profit, operating income, and net income; FY24 sales $23.76 billion Consolidated Statements of Operations (GAAP) | Metric | Q4 FY24 | Q4 FY23 | FY24 | FY23 | | :------------------------------------------ | :----------- | :----------- | :----------- | :----------- | | Sales | $5,562,977 | $6,554,608 | $23,757,129 | $26,536,881 | | Cost of sales | 4,920,097 | 5,736,586 | 20,990,687 | 23,354,738 | | Gross profit | 642,880 | 818,022 | 2,766,442 | 3,182,143 | | Selling, general and administrative expenses | 450,274 | 506,322 | 1,869,525 | 1,967,305 | | Restructuring, integration, and other expenses | 28,417 | 28,038 | 52,550 | 28,038 | | Operating income | 164,189 | 283,662 | 844,367 | 1,186,800 | | Income before taxes | 101,324 | 190,393 | 632,263 | 982,876 | | Income tax expense | 18,659 | 35,138 | 133,564 | 212,048 | | Net income | $82,665 | $155,255 | $498,699 | $770,828 | | Diluted EPS | $0.91 | $1.68 | $5.43 | $8.26 | Cash Dividends Paid Per Common Share | Period | Q4 FY24 | Q4 FY23 | FY24 | FY23 | | :-------------------------- | :------ | :------ | :----- | :----- | | Cash dividends paid per common share | $0.31 | $0.29 | $1.24 | $1.16 | Condensed Consolidated Balance Sheets As of June 29, 2024, Avnet's total assets were $12.21 billion, liabilities $7.28 billion, shareholders' equity $4.93 billion, with increased short-term debt Condensed Consolidated Balance Sheets (GAAP) | Asset/Liability/Equity | June 29, 2024 | July 1, 2023 | | :----------------------------------- | :------------ | :----------- | | ASSETS | | | | Cash and cash equivalents | $310,941 | $288,230 | | Receivables | 4,391,187 | 4,763,788 | | Inventories | 5,468,730 | 5,465,031 | | Total current assets | 10,370,552 | 10,750,853 | | Property, plant and equipment, net | 568,169 | 441,557 | | Goodwill | 780,984 | 780,629 | | Total assets | $12,209,147 | $12,477,159 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Short-term debt | $492,711 | $70,636 | | Accounts payable | 3,345,510 | 3,373,820 | | Total current liabilities | 4,465,269 | 4,249,378 | | Long-term debt | 2,406,629 | 2,988,029 | | Total liabilities | 7,283,643 | 7,725,490 | | Shareholders' equity | 4,925,504 | 4,751,669 | Consolidated Statements of Cash Flows Avnet generated $689.98 million in FY24 operating cash flow, a significant improvement from FY23, ending with $310.94 million cash Consolidated Statements of Cash Flows (GAAP) | Cash Flow Activity | FY 2024 | FY 2023 | | :--------------------------------------------------- | :---------- | :---------- | | Net income | $498,699 | $770,828 | | Net cash flows provided by (used for) operating activities | 689,984 | (713,703) | | Net cash flows (used for) provided by financing activities | (433,799) | 1,054,756 | | Net cash flows used for investing activities | (225,484) | (211,551) | | Effect of currency exchange rate changes on cash and cash equivalents | (7,990) | 5,035 | | Cash and cash equivalents at end of period | $310,941 | $288,230 | Non-GAAP Financial Measures and Reconciliations Explains Avnet's non-GAAP financial measures and provides detailed GAAP reconciliations for FY24-FY23 Explanation of Non-GAAP Financial Measures Avnet uses non-GAAP measures like adjusted operating income and diluted EPS to clarify underlying performance by excluding specific non-recurring or non-cash items - Avnet discloses non-GAAP financial information including adjusted operating income, adjusted other income (expense), adjusted income before income taxes, adjusted income tax expense (benefit), and adjusted diluted earnings per share[20] - Sales in 'constant currency' are used to evaluate performance and understand underlying trends by adjusting for foreign currency exchange rate changes[21] - Adjusted operating income excludes restructuring, integration, other expenses, and amortization of acquired intangible assets, deemed outside normal operations or non-cash[22] - Adjusted net income and diluted EPS offer a more comparable measure of profitability by excluding specific items such as legal settlements, foreign currency gains/losses, and certain tax adjustments[23] - Non-GAAP analysis should complement and be used in conjunction with GAAP results[24] Non-GAAP Reconciliations for Fiscal Year 2024 and Quarters Details GAAP to non-GAAP reconciliations for FY24 and its quarters, adjusting for restructuring and amortization; FY24 GAAP diluted EPS $5.43 adjusted to $5.34 Non-GAAP Reconciliations (Fiscal Year 2024 and Quarters) | Metric | Fiscal Year 2024 | Q4 FY24 | Q3 FY24 | Q2 FY24 | Q1 FY24 | | :--------------------------------------------------- | :--------------- | :-------- | :-------- | :-------- | :-------- | | GAAP operating income | $844,367 | $164,189 | $190,151 | $236,257 | $253,769 | | Adjusted operating income | 900,047 | 193,434 | 202,710 | 242,204 | 261,698 | | GAAP income before income taxes | $632,263 | $101,324 | $101,948 | $153,558 | $275,432 | | Adjusted income before income taxes | 629,174 | 131,249 | 132,357 | 168,705 | 196,862 | | GAAP net income | $498,699 | $82,665 | $88,834 | $117,931 | $209,268 | | Adjusted net income | 489,979 | 111,555 | 100,592 | 128,215 | 149,616 | | GAAP diluted earnings per share | $5.43 | $0.91 | $0.97 | $1.28 | $2.25 | | Adjusted diluted EPS | 5.34 | 1.22 | 1.10 | 1.40 | 1.61 | Non-GAAP Reconciliations for Fiscal Year 2023 and Quarters Provides detailed GAAP to non-GAAP reconciliations for FY23 and its quarters; GAAP diluted EPS $8.26 adjusted to $8.06 Non-GAAP Reconciliations (Fiscal Year 2023 and Quarters) | Metric | Fiscal Year 2023 | Q4 FY23 | Q3 FY23 | Q2 FY23 | Q1 FY23 | | :--------------------------------------------------- | :--------------- | :-------- | :-------- | :-------- | :-------- | | GAAP operating income | $1,186,800 | $283,662 | $313,629 | $298,973 | $290,537 | | Adjusted operating income | 1,220,891 | 312,578 | 314,505 | 300,514 | 293,296 | | GAAP income before income taxes | $982,876 | $190,393 | $243,587 | $303,134 | $245,762 | | Adjusted income before income taxes | 979,931 | 243,978 | 244,463 | 242,970 | 248,521 | | GAAP income tax expense | $212,048 | $35,138 | $56,161 | $59,248 | $61,501 | | Adjusted income tax expense | 227,157 | 52,763 | 59,893 | 57,341 | 57,160 | | GAAP diluted earnings per share | $8.26 | $1.68 | $2.03 | $2.63 | $1.93 | | Adjusted diluted EPS | 8.06 | 2.06 | 2.00 | 2.00 | 2.00 | Sales in Constant Currency Foreign currency fluctuations impacted Avnet's reported sales; Q4 FY24 constant currency sales declined 14.2% YoY, Asia grew 4.8% QoQ Sales Growth Rates (Reported vs. Constant Currency) | Metric | Q4 FY24 Reported YoY % Change | Q4 FY24 Constant Currency YoY % Change | Q4 FY24 Reported QoQ % Change | Q4 FY24 Constant Currency QoQ % Change | FY24 Reported YoY % Change | FY24 Constant Currency YoY % Change | | :----------------------------------- | :---------------------------- | :------------------------------------- | :---------------------------- | :------------------------------------- | :------------------------- | :------------------------------------ | | Avnet | (15.1)% | (14.2)% | (1.6)% | (1.0)% | (10.5)% | (10.9)% | | Americas | (21.9)% | (21.9)% | (3.5)% | (3.5)% | (13.1)% | (13.1)% | | EMEA | (21.6)% | (20.7)% | (6.5)% | (5.6)% | (9.0)% | (11.4)% | | Asia | (3.5)% | (1.9)% | 4.2% | 4.8% | (10.1)% | (9.0)% | | EC | (15.1)% | (14.1)% | (1.1)% | (0.5)% | (10.7)% | (11.0)% | | Farnell | (15.8)% | (15.4)% | (8.0)% | (7.5)% | (7.9)% | (9.3)% | Historical Segment Financial Information Presents historical sales and operating income data by segment and geographic area for FY24 and FY23, showing consistent FY24 declines Historical Sales by Segment and Geographic Area (FY24 & Quarters) | Metric | FY 2024 | Q4 FY24 | Q3 FY24 | Q2 FY24 | Q1 FY24 | | :-------------------------- | :-------- | :-------- | :-------- | :-------- | :-------- | | Sales: | | | | | | | Electronic Components | $22,160.0 | $5,187.8 | $5,245.8 | $5,812.1 | $5,914.4 | | Farnell | 1,597.1 | 375.2 | 407.8 | 392.8 | 421.2 | | Avnet sales | $23,757.1 | $5,563.0 | $5,653.6 | $6,204.9 | $6,335.6 | | Sales by geographic area: | | | | | | | Americas | $5,919.2 | $1,353.8 | $1,403.4 | $1,588.5 | $1,573.5 | | EMEA | 8,395.0 | 1,920.3 | 2,053.1 | 2,113.6 | 2,308.0 | | Asia | 9,442.9 | 2,288.9 | 2,197.1 | 2,502.8 | 2,454.1 | Historical Operating Income by Segment (FY24 & Quarters) | Metric | FY 2024 | Q4 FY24 | Q3 FY24 | Q2 FY24 | Q1 FY24 | | :-------------------------- | :-------- | :-------- | :-------- | :-------- | :-------- | | Operating income: | | | | | | | Electronic Components | $947.6 | $210.1 | $216.9 | $247.9 | $272.8 | | Farnell | 64.8 | 15.1 | 16.3 | 15.7 | 17.7 | | Avnet operating income | $844.4 | $164.2 | $190.2 | $236.3 | $253.8 | Historical Sales by Segment and Geographic Area (FY23 & Quarters) | Metric | FY 2023 | Q4 FY23 | Q3 FY23 | Q2 FY23 | Q1 FY23 | | :-------------------------- | :-------- | :-------- | :-------- | :-------- | :-------- | | Sales: | | | | | | | Electronic Components | $24,802.6 | $6,109.2 | $6,059.6 | $6,309.5 | $6,324.2 | | Farnell | 1,734.3 | 445.4 | 455.0 | 408.0 | 425.9 | | Avnet sales | $26,536.9 | $6,554.6 | $6,514.6 | $6,717.5 | $6,750.1 | | Sales by geographic area: | | | | | | | Americas | $6,807.7 | $1,732.7 | $1,714.9 | $1,681.2 | $1,678.9 | | EMEA | 9,229.4 | 2,450.6 | 2,393.4 | 2,255.9 | 2,129.5 | | Asia | 10,499.8 | 2,371.3 | 2,406.3 | 2,780.4 | 2,941.7 | Historical Operating Income by Segment (FY23 & Quarters) | Metric | FY 2023 | Q4 FY23 | Q3 FY23 | Q2 FY23 | Q1 FY23 | | :-------------------------- | :-------- | :-------- | :-------- | :-------- | :-------- | | Operating income: | | | | | | | Electronic Components | $1,179.6 | $310.4 | $305.2 | $296.7 | $267.3 | | Farnell | 165.5 | 36.1 | 40.9 | 36.9 | 51.6 | | Avnet operating income | $1,186.8 | $283.7 | $313.6 | $299.0 | $290.5 | Guidance Reconciliation Avnet reconciles non-GAAP adjusted diluted EPS guidance to GAAP for Q1 FY25, with GAAP diluted EPS guided between $0.63 and $0.82 Q1 Fiscal 2025 Guidance Reconciliation (Non-GAAP to GAAP Diluted EPS) | Metric | Low End of Guidance Range | High End of Guidance Range | | :--------------------------------------------------- | :------------------------ | :------------------------- | | Adjusted diluted earnings per share guidance | $0.80 | $0.90 | | Restructuring, integration, and other expenses (net of tax) | (0.17) | (0.08) | | GAAP diluted earnings per share guidance | $0.63 | $0.82 |