Avnet(AVT) - 2025 Q3 - Quarterly Report

General Information Form 10-Q Filing Details 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] - Registrant Status: Large Accelerated Filer[5] Company Identification 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] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the company's unaudited consolidated financial statements for the periods ended March 29, 2025 Consolidated Balance Sheets 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 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 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 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 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 These notes detail accounting policies and provide specifics on various financial statement line items Note 1. Basis of presentation and new accounting pronouncements 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] - ASU 2023-09 (Income Taxes) will be effective in FY2026, with impact on disclosures currently being evaluated[25] - ASU 2024-03/2025-01 (Expense Disaggregation) will be effective in FY2028, with impact on disclosures currently being evaluated[26] Note 2. Working capital 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][28] Components held for supply chain services were ~6% of inventories at March 29, 2025, down from ~7% at June 29, 2024[29] Note 3. Goodwill 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 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] - Five-year $1.50 billion revolving credit facility amended and extended to January 2030[34] Note 5. Derivative financial instruments 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][38][40] | 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 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][43] | 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] Note 7. Income taxes 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] Note 8. Pension plan 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] Note 9. Shareholders' equity 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] - Q3 FY2025 Share Repurchases: 2.0 million shares for $101.3 million[53] - Q3 FY2025 Common Stock Dividend: $0.33 per share, totaling $28.2 million[54] Note 10. Earnings per share 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 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 Both Electronic Components and Farnell segments reported decreased sales and operating income in Q3 2025 - Reportable segments: Electronic Components (EC) and Farnell[57] | 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] Asia showed sales growth while Americas and EMEA decreased[58] Note 13. Restructuring expenses 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] - Remaining restructuring liabilities from fiscal 2024: $7.17 million at March 29, 2025[61] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance amid an industry downturn, detailing impacts on sales, profitability, and liquidity - The discussion includes non-GAAP financial measures like 'Adjusted operating income' to provide a clearer view of operating performance, excluding restructuring and amortization of acquired intangibles[66][67] Overview The company faces an industry downturn and geopolitical tensions, leading to decreased sales and higher inventory levels - Avnet is a global electronic component distributor and solutions provider, operating through Electronic Components (EC) and Farnell segments in Americas, EMEA, and Asia[69][70] - Recent developments include global trade disruptions, geopolitical tensions, and potential tariff impacts, with 7% to 10% of Americas' annual sales originating from China[71][72] - Industry outlook: Experiencing a downturn since H2 2023 due to elevated customer inventory and lower demand, resulting in decreased sales and operating income[75] Q4 FY2025 sales are expected to be flat compared to Q3 FY2025[75] Results of Operations Sales and profitability declined significantly due to lower market demand and an unfavorable product mix | Metric | Q3 2025 | Q3 2024 | Variance | Variance % | 9M 2025 | 9M 2024 | Variance | Variance % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales ($ 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 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][82] Gross Profit 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] - 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] - 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] Selling, General and Administrative Expenses 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] | 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 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][89] - 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] Operating Income 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] Interest and Other Financing Expenses, Net and Other Expense, Net 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] - Other expenses decreased in Q3 FY2025 and 9M FY2025 primarily due to differences in foreign currency translation losses[96] Gain on Legal Settlements and other 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] Income Tax 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 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 Liquidity improved with increased operating cash flow, while the company actively managed debt and returned capital to shareholders Cash Flow 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] - 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] - 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] Contractual Obligations 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] Financing Transactions 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] - Outstanding borrowings under various lines of credit and bank debt were $99.1 million at the end of Q3 FY2025[108] - 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] 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] - 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] Recently Issued Accounting Pronouncements 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] - As of March 29, 2025, 63% of debt is fixed-rate and 37% is variable-rate[122] - A hypothetical 1.0% increase in interest rates would decrease income before taxes by $2.4 million for Q3 FY2025[122] Item 4. Controls and Procedures 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] - No material changes to internal control over financial reporting occurred during Q3 FY2025[124] PART II. OTHER INFORMATION Item 1. Legal Proceedings 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] - 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] | 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 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] Signature Page 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][137]