Avnet(US:AVT)2025-10-29 17:00Financial Data and Key Metrics Changes - The company achieved sales of $5.9 billion in the first quarter, exceeding guidance and reflecting a 5% increase year-over-year and sequentially [4][10] - Adjusted EPS was $0.84, near the high end of guidance [4] - Gross margin for the quarter was 10.4%, down 42 basis points year-over-year and 15 basis points sequentially [10][11] - Adjusted operating income was $151 million, with an adjusted operating margin of 2.6% [12] Business Line Data and Key Metrics Changes - Electronic components sales increased by 5% year-over-year and sequentially, driven by demand in Asia and the Americas [10][11] - Farnell sales grew by 50% year-over-year and 3% sequentially, with stable operating margins [10][11][12] - The IP&E segment showed steady sales with improving margins, particularly in Asia [7] Market Data and Key Metrics Changes - Sales in Asia grew by 10% year-over-year, representing over half of electronic components sales [10][11] - The Americas region saw a 3% year-over-year increase in sales, marking the first growth since fiscal 2023 [4][10] - EMEA sales were flat year-over-year and down 6% in constant currency [10] Company Strategy and Development Direction - The company is focused on balancing growth opportunities with inventory optimization [5][14] - There is an emphasis on enhancing digital capabilities and leveraging the core ecosystem for new opportunities, particularly in Farnell [7] - The company aims to reduce leverage to approximately 3.0 times over the next year while maintaining a strong balance sheet [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery in Asia and progress in the Americas, with stabilizing conditions in EMEA [8][9] - There are positive signs from supplier partners regarding lead times and potential price increases, indicating a strengthening market [9][33] - The company anticipates modest growth in the December quarter, particularly in Europe, as bookings have improved [29] Other Important Information - The company increased its quarterly dividend by approximately 6% to $0.35 per share [16] - The company repurchased approximately 2.6 million shares, totaling $138 million, representing 3% of outstanding shares in the first quarter [16] Q&A Session Summary Question: Exposure to AI applications in data centers - Management indicated that exposure to hyperscalers is relatively small, around 7% of Asia-Pac business, with opportunities in storage, connectivity, and power [19][20] Question: Inventory days and cash flow expectations - Management noted that inventory days decreased slightly, with expectations for further declines as sales grow [21][22][24] Question: Demand profile for EMEA in December quarter - Management expects modest growth in EMEA, indicating that the region is hitting the bottom after a tough period [29] Question: Incremental margins and operating leverage - Management indicated that the return to year-over-year growth in total business should provide operating leverage and expand margins [30][31] Question: Potential price increases from suppliers - Management noted that certain technologies are seeing potential price increases, particularly in memory and interconnect products [32][33] Question: Core segment margins and future expectations - Management expressed cautious optimism about achieving core margins above 4% in fiscal 2026, depending on mix shifts and market recovery [38][39] Question: Farnell margins and revenue impacts - Management indicated that Farnell margins could continue to grow, but product mix will play a significant role [41][43]