Arrow Electronics(ARW) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter sales were $7.02 billion, a decrease of 3% year-over-year when adjusted for the wind-down of the PC and mobility asset disposition business [15] - Net income was $155 million, down 17% year-over-year as adjusted, with earnings per share of $1.86, down 12% year-over-year on an adjusted basis [21] - Total company operating expenses decreased 9% year-over-year [20] Business Line Data and Key Metrics Changes - Global components sales were $4.99 billion, representing a 4% year-over-year decrease adjusted for the wind-down and changes in foreign currencies [16] - Enterprise computing solutions sales were $2.03 billion, a decrease of 2% year-over-year as adjusted, with operating income increasing by 12% year-over-year [19] Market Data and Key Metrics Changes - Demand environment for components deteriorated during the third quarter, with a book-to-bill ratio of 0.91, below parity in all regions [9] - In the Americas, sales decreased 15% year-over-year as adjusted, while Europe saw a 2% year-over-year decrease [17] Company Strategy and Development Direction - The company is focused on being the leading enabler of next-generation technology solutions, with a strong emphasis on engineering and supply chain services [12] - The strategy includes adapting to market conditions and optimizing costs while maintaining a focus on long-term growth [14] Management's Comments on Operating Environment and Future Outlook - Management indicated that the markets are "bouncing along the bottom" and does not expect significant changes in demand conditions in the near term [70] - There are signs of improvement in the book-to-bill ratio, suggesting potential stabilization in the market [70] Other Important Information - The effective tax rate for the quarter was 22.3%, below the prior target range, and is expected to remain at the low end of the target range in the fourth quarter [20] - The company repurchased approximately 1.4 million shares or $100 million during the quarter, with a total of $440 million repurchased over the last 12 months [22][23] Q&A Session Summary Question: Will gross margin remain at depressed levels? - Management expects gross margin to remain depressed in the fourth quarter, with potential slight improvements depending on market conditions [27] Question: What is the outlook for ECS? - Management believes ECS has turned a corner, with operating income expected to grow in the fourth quarter due to strength in software and storage [42][43] Question: How is inventory at customers trending, particularly in Asia? - The company noted that customers in China hold less inventory, leading to less cyclical swings in demand [60] Question: What are the priorities for cash use? - The company stated that its priorities are share repurchases and debt reduction [76]