Avnet(US:AVT)2020-10-29 02:56Financial Data and Key Metrics Changes - Revenues for Q1 2021 were $4.7 billion, representing a sequential growth of 13.5% and an increase year-over-year [10][18] - Adjusted diluted earnings per share (EPS) was $0.36, significantly above prior guidance [10][19] - Operating expenses as a percentage of revenues decreased from 10.4% to 9.6% [18][19] - Cash flow from operations totaled $122 million, marking the eighth consecutive quarter of positive cash flow [19] Business Line Data and Key Metrics Changes - Electronic components revenue was $4.4 billion, up 13.3% sequentially, with strong growth in Asia [20][21] - Farnell revenues totaled $341 million, up 16.7% sequentially, with an operating margin of 3.5% [21][22] - The company added 28,000 SKUs to Farnell's inventory, aiming to reach a total of 250,000 SKUs by fiscal year 2022 [14][61] Market Data and Key Metrics Changes - The Asia region saw a 22% sequential revenue increase on a constant currency basis, driven by demand in various verticals, particularly automotive [11][20] - The Americas and EMEA regions showed positive trends, with EMEA slightly below parity but improving [12][20] Company Strategy and Development Direction - The company is focusing on its primary components distribution operations while strategically investing in Farnell to enhance digital capabilities [14][17] - A flatter organizational structure is being implemented to improve responsiveness to customer and supplier needs [15][17] - The company aims to improve revenue growth and increase market share in key target markets [15][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about operational improvements and financial results, despite ongoing uncertainty related to the pandemic [10][11] - The company is committed to enhancing profitability and return on capital metrics while maintaining a healthy balance sheet [23][27] - Future guidance for Q2 2021 includes revenues in the range of $4.0 to $4.4 billion and adjusted EPS between $0.33 and $0.43 [26] Other Important Information - The company is focused on cash liquidity and intends to support dividends, with share buybacks on pause due to COVID-19 uncertainties [44] - The company has a strong liquidity position, ending the quarter with $483 million in cash and equivalents [22] Q&A Session Summary Question: Will the company see year-over-year revenue growth in fiscal '21? - Management confirmed that excluding TI, they expect to see year-over-year revenue growth [30] Question: Why isn't incremental revenue leading to better margins in Farnell? - Management indicated that operational improvements and the ramp-up of the Farnell lead distribution center are expected to enhance margins over time [31][32] Question: What are the capital allocation priorities? - The company is prioritizing cash liquidity and intends to support dividends, with no active M&A plans currently [43][44] Question: How are customer inventory levels being managed? - Management noted that they do not see significant inventory buildup among customers and are closely monitoring demand forecasts [66] Question: What is the status of the TI transition? - The company is in the final quarter of the TI transition and is tracking progress closely [53][54] Question: How is the company addressing working capital targets? - The company aims to reduce working capital to the mid-70-day range by the end of calendar year 2021, focusing on receivables, payables, and inventory [75]