Avnet(US:AVT)2025-08-14 21:51PART I Item 1. Business Avnet, Inc. is a global electronic component technology distributor and solutions provider operating for over a century, structured into two primary operating groups - Avnet, Inc. is a leading global electronic component technology distributor and solutions provider, serving customers in over 140 countries since 192117 - The company operates through two primary groups: Electronic Components (EC) for high/medium-volume customers and Farnell for lower-volume customers, both with global operations192129 Fiscal Year 2025 Net Sales by Operating Group | Operating Group | Net Sales (Approx.) | Primary Products | | :-------------- | :------------------ | :--------------- | | EC | 82% Semiconductors, 16% IP&E, 2% Computers | Semiconductors, IP&E, integrated/embedded components | | Farnell | 14% Semiconductors, 47% IP&E, 11% Single-board computers, 28% Other | Kits, tools, electronic components, industrial automation, test & measurement | Major Product Categories Sales (Millions USD) | Product Category | 2025 | 2024 | 2023 | | :--------------- | :---------- | :---------- | :---------- | | Semiconductors | $17,207.9 | $19,030.3 | $21,366.5 | | IP&E | $3,976.9 | $3,745.9 | $4,150.6 | | Computers | $528.9 | $382.8 | $520.8 | | Other | $487.1 | $598.1 | $499.0 | | Total Sales | $22,200.8 | $23,757.1 | $26,536.9 | - As of June 28, 2025, Avnet had approximately 14,869 employees globally across 48 countries, with 4,052 in the Americas, 6,185 in EMEA, and 4,632 in Asia42 - The Board of Directors as of June 28, 2025, was 40% women and 50% racially and ethnically diverse, reflecting the company's commitment to inclusion49 Item 1A. Risk Factors Avnet faces operational, financial, legal, and general risks from changing demands, supply chain disruptions, competition, and international operations - Changes in customer product demands and consumption models, including those driven by new technologies like AI, could negatively impact billings and financial results60 - The semiconductor industry's cyclical fluctuations, geopolitical uncertainties, and supply chain challenges significantly affect Avnet's sales, with semiconductors representing 78% of consolidated sales in fiscal 202561 - International operations, which accounted for approximately 77% of sales in fiscal 2025, are subject to risks such as tariffs, trade restrictions, foreign currency fluctuations, and non-compliance with various international laws67686972 - Cybersecurity threats, including phishing and ransomware, are increasing in frequency and sophistication, posing risks of significant liability, reputational harm, and operational disruption, despite implemented security measures767778 - Financial risks include potential inventory value declines due to technological change and market oversupply, and accounts receivable defaults, which are a significant portion of working capital7980 Item 1B. Unresolved Staff Comments This item is not applicable to the company Item 1C. Cybersecurity Avnet maintains a comprehensive cybersecurity program, overseen by its GC&C team, aligning with NIST and ISO27001 frameworks - Avnet's Global Cybersecurity & Compliance (GC&C) team manages a comprehensive cybersecurity program based on NIST Cyber Security Framework (CSF) and aligning with NIST 800-171 and ISO27001107 - The GC&C team provides quarterly updates and oversight to the Technology and Risk Committee on the cybersecurity program, incidents, and threat landscape109 - The company conducts regular penetration tests, maturity assessments, self-assessments, and internal audits of its cybersecurity systems; employee training includes annual tabletop exercises, policy distribution, and monthly phishing simulations113119 Item 2. Properties Avnet's corporate headquarters are in Phoenix, Arizona, with global facilities totaling 5.8 million square feet for operations - Avnet owns approximately 2.1 million square feet and leases 3.7 million square feet of space globally, totaling 5.8 million square feet, with 26% located in the United States115 Approximate Square Footage of Facilities by Region (Millions) | Region | Square Footage (Millions) | | :------- | :------------------------ | | Americas | 2.0 | | EMEA | 2.7 | | Asia | 1.1 | | Total | 5.8 | Item 3. Legal Proceedings Avnet is involved in various legal proceedings, with management believing current accruals are appropriate and outcomes will not materially affect financial position - Avnet regularly assesses legal proceedings, including environmental and compliance matters, and believes current accruals are appropriate116 - Management believes the resolution of current legal matters will not materially adversely affect the company's financial position or liquidity, but could be material to results of operations in a single reporting period117 Item 4. Mine Safety Disclosures This item is not applicable to the company PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Avnet's common stock is listed on Nasdaq, with the Board determining dividends and an active share repurchase program in place - Avnet's common stock is listed on the Nasdaq Global Select Market under the symbol AVT121 - As of August 7, 2025, there were 1,245 registered holders of record for Avnet's common stock123 Common Stock Performance and Cumulative Total Returns (June 27, 2020 = $100) | Date | Avnet, Inc. | Nasdaq Composite | Peer Group | | :---------- | :---------- | :--------------- | :--------- | | 6/27/2020 | $100 | $100 | $100 | | 7/3/2021 | $157.60 | $151.15 | $199.41 | | 7/2/2022 | $170.52 | $115.69 | $177.17 | | 7/1/2023 | $209.03 | $144.64 | $218.32 | | 6/29/2024 | $218.81 | $187.46 | $253.53 | | 6/28/2025 | $229.61 | $215.81 | $256.14 | - The Board of Directors approved a share repurchase plan of up to $600 million, with $364.1 million remaining under authorization as of June 28, 2025129130182 Issuer Purchases of Equity Securities (Q4 Fiscal 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining | | :------------------ | :--------------------- | :--------------------------- | :------------------------------- | | March 30 – April 26 | 1,059,729 | $45.98 | $365,394,000 | | April 27 – May 24 | — | — | $365,394,000 | | May 25 – June 28 | 25,686 | $49.59 | $364,120,000 | Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Avnet's fiscal year 2025 saw declining sales and profitability due to market downturns, offset by restructuring and liquidity management - The global electronic components market experienced a downturn in the second half of calendar year 2023, leading to decreased sales for Avnet due to elevated customer inventory levels and lower underlying demand138 Key Financial Results (Fiscal 2025 vs. 2024) | Metric | FY2025 | FY2024 | Variance ($) | Variance (%) | | :-------------------------- | :------------ | :------------ | :----------- | :----------- | | Sales | $22,201M | $23,757M | $(1,556)M | (6.6)% | | Gross profit | $2,385M | $2,766M | $(381)M | (13.8)% | | Operating income | $514M | $844M | $(330)M | (39.1)% | | Adjusted operating income | $624M | $900M | $(276)M | (30.7)% | | Net income | $240M | $499M | $(258)M | (51.8)% | | Diluted earnings per share | $2.75 | $5.43 | $(2.68) | (49.4)% | | Gross profit margin | 10.7% | 11.6% | (90) bps | (0.9)% | | Operating income margin | 2.3% | 3.6% | (123) bps | (1.2)% | | Adjusted operating income margin | 2.8% | 3.8% | (98) bps | (1.0)% | | Effective tax rate | 4.1% | 21.1% | (1,699) bps | (17.0)% | Sales Change Rates by Operating Group and Geographic Region (FY2025 vs. FY2024) | Category | FY2025 Sales ($M) | FY2024 Sales ($M) | Year-Year % Change | Year-Year % Change (Constant Currency) | | :------------------- | :---------------- | :---------------- | :----------------- | :------------------------------------- | | Operating Group: | | | | | | EC | $20,755.0 | $22,160.0 | (6.3)% | (6.4)% | | Farnell | $1,445.8 | $1,597.1 | (9.5)% | (9.9)% | | Total Avnet | $22,200.8 | $23,757.1 | (6.6)% | (6.7)% | | Geographic Region: | | | | | | Americas | $5,300.0 | $5,919.2 | (10.5)% | (10.5)% | | EMEA | $6,409.6 | $8,395.0 | (23.7)% | (24.1)% | | Asia | $10,491.2 | $9,442.9 | 11.1% | 11.1% | | Total Avnet | $22,200.8 | $23,757.1 | | | - Net cash provided by operating activities increased by $34.5 million to $724.5 million in fiscal 2025, primarily due to improvements in working capital management and inventory reduction, despite lower net income164 - The company repaid $274.9 million in net debt during fiscal 2025, paid $113.3 million in dividends ($1.32 per share), and repurchased $303.5 million of common stock165 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Avnet manages interest rate and foreign currency risks using financial arrangements and derivative instruments to mitigate volatility - Avnet uses financial arrangements and economic hedges, including derivative financial instruments, to reduce earnings and cash flow volatility from interest rate and foreign currency exchange rate changes198201 Scheduled Maturities of Debt Outstanding (June 28, 2025, in Millions USD) | Fiscal Year | Fixed Rate Debt | Floating Rate Debt | | :---------- | :-------------- | :----------------- | | 2026 | $552.9 | $84.3 | | 2027 | $— | $500.0 | | 2028 | $500.0 | $— | | 2029 | $— | $— | | 2030 | $— | $411.6 | | Thereafter | $622.0 | $— | | Total | $1,674.9 | $995.9 | - A hypothetical 10% change in foreign currency exchange rates would result in an approximate $25.0 million increase or decrease to the fair value of forward foreign currency exchange contracts, generally offset by the underlying hedged exposure203 Item 8. Financial Statements and Supplementary Data This section presents Avnet's audited consolidated financial statements for fiscal years 2025, 2024, and 2023, with an unqualified auditor opinion - KPMG LLP provided an unqualified opinion on Avnet's consolidated financial statements and the effectiveness of its internal control over financial reporting as of June 28, 2025207208 - A critical audit matter identified was the evaluation of accounting for income taxes, requiring complex auditor judgment due to the application of current tax regulations in various foreign jurisdictions217218 Consolidated Balance Sheet Highlights (Thousands USD) | Item | June 28, 2025 | June 29, 2024 | | :------------------------ | :------------ | :------------ | | Total current assets | $10,018,737 | $10,370,552 | | Total assets | $12,118,553 | $12,209,147 | | Total current liabilities | $4,128,104 | $4,465,269 | | Total liabilities | $7,107,058 | $7,283,643 | | Total shareholders' equity | $5,011,495 | $4,925,504 | Consolidated Statements of Cash Flows Highlights (Thousands USD) | Cash Flow Activity | FY2025 | FY2024 | FY2023 | | :------------------------ | :------------ | :------------ | :------------ | | Operating activities | $724,504 | $689,984 | $(713,703) | | Financing activities | $(693,526) | $(433,799) | $1,054,756 | | Investing activities | $(137,127) | $(225,484) | $(211,551) | | Cash & cash equivalents at end of period | $192,428 | $310,941 | $288,230 | - Avnet recorded a net loss contingency of $43.4 million in fiscal 2025 related to an ongoing consumption tax audit in Mexico, representing the company's best estimate of potential losses331 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure Item 9A. Controls and Procedures Avnet's management concluded that disclosure controls and internal control over financial reporting were effective as of June 28, 2025 - Avnet's disclosure controls and procedures were deemed effective as of June 28, 2025346 - Management concluded that the company maintained effective internal control over financial reporting as of June 28, 2025, based on the 2013 COSO framework, with KPMG LLP concurring347348 - No material changes to internal control over financial reporting occurred during the fourth quarter of fiscal 2025349 Item 9B. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the fourth quarter of fiscal 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fourth quarter of fiscal 2025350 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections There are no disclosures regarding foreign jurisdictions that prevent inspections PART III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive proxy statement for the Annual Meeting of Shareholders on November 21, 2025353354 Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the definitive proxy statement - Information on executive compensation is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders on November 21, 2025355 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and related stockholder matters is incorporated by reference from the definitive proxy statement - Information on security ownership and related stockholder matters is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders on November 21, 2025356 Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the definitive proxy statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the definitive proxy statement for the Annual Meeting of Shareholders on November 21, 2025357 Item 14. Principal Accounting Fees and Services Information on principal accounting fees and services is incorporated by reference from the definitive proxy statement - Information on principal accounting fees and services is incorporated by reference from the definitive proxy statement for the Annual Meeting of Stockholders on November 21, 2025358 PART IV Item 15. Exhibits and Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the 10-K report - The section lists exhibits including the Restated Certificate of Incorporation, By-laws, descriptions of securities, indentures for notes, executive compensation plans, and bank agreements363364367368369370371372373374375376377378379380381 - Key bank agreements include the Securitization Program, which was amended and extended in December 2024, and the $1.50 billion revolving Credit Facility, amended and extended in January 2025291293381 - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included381382 Item 16. Form 10-K Summary This item is not applicable to the company Signature Page The report is signed by the Chief Executive Officer and members of the Board of Directors, authorizing the filing of the Annual Report on Form 10-K - The report is signed by Philip R. Gallagher, Chief Executive Officer, and other directors, authorizing the filing of the Annual Report on Form 10-K391393