Avnet(US:AVT)2019-04-26 19:23Financial Data and Key Metrics Changes - Revenue for Q3 2019 was $4.7 billion, down slightly year-over-year, but increased by 1.2% in constant currency [23][10] - Adjusted operating income margin increased to 3.8% from 3.6% in the prior-year quarter [23][27] - Adjusted earnings per share rose to $1.09, a 6.9% year-over-year increase [23][10] - Strong cash flow from operations of $269 million was generated [24][10] Business Line Data and Key Metrics Changes - Electronic components segment reported sales of $4.3 billion, with a decline primarily due to the slowdown in Asia [24][25] - Farnell revenues were flat sequentially and down 1.5% year-over-year in constant currency, but operating margins improved to 12.4% [25][15] - Passive and interconnect revenues grew in high single digits year-over-year, contributing positively to margins [11][25] Market Data and Key Metrics Changes - Americas revenue was up high single digits year-over-year, with strong design win performance [12][10] - EMEA revenues grew 4.7% sequentially and 3.8% year-over-year in constant currency [25][26] - Asia revenues declined by $419 million sequentially, but signs of stabilization are emerging [14][25] Company Strategy and Development Direction - The company is focusing on an ecosystem strategy to capitalize on trends in data-driven economy, AI, and 5G connectivity [8][9] - Strategic investments are being made in Farnell to improve inventory and customer experience, with expectations for growth to return [15][16] - Digital transformation initiatives are underway, including the rollout of new pricing and CRM tools to enhance sales productivity [18][17] Management's Comments on Operating Environment and Future Outlook - Management noted mixed market conditions, with strength in the Americas and EMEA but continued weakness in Asia [10][12] - The company expects revenues in Q4 to be similar to Q3, with guidance of $4.5 billion to $4.9 billion [29][10] - Management remains focused on controlling costs and improving operational efficiency despite macroeconomic challenges [22][29] Other Important Information - Avnet was recognized as one of the world's most ethical companies for the sixth consecutive year [12] - The company is on track to achieve $245 million in operational expense savings over the next three years [22][27] Q&A Session Summary Question: Gross margins and guidance implications - Management acknowledged that the change in mix, particularly with higher Asia revenue, is impacting gross margins [31][32] Question: Timing for cost savings realization - Management indicated that cost savings will materialize linearly over the next three years [35][36] Question: Farnell growth rate and inventory improvements - Management is ramping up new warehousing and adding SKUs to accelerate growth in Farnell [39][40] Question: Impact of Brexit on Farnell sales - Management noted that uncertainties from Brexit have led to a pause in purchasing decisions in the U.K. [81][82] Question: Book-to-bill ratios by region - Management reported that the Americas are above 1:1, Europe is slightly below, and Asia is improving [54][55] Question: Inventory levels in Asia - Management confirmed that inventory days in Asia are higher than normal and will start to normalize in Q4 [51][52]