Avnet(AVT)2023-05-04 01:35Financial Data and Key Metrics Changes - Sales for the quarter were 2, marking the fifth consecutive quarter of adjusted EPS of 2 billion in annual sales at double-digit operating margins [15] - The company is managing through an inventory correction phase, expecting it to take a few quarters to normalize [16] Management's Comments on Operating Environment and Future Outlook - Management noted that the pricing environment remained stable, with some suppliers raising prices due to higher input costs [9][33] - The company anticipates a mixed demand environment moving forward, with some verticals showing strength while others remain weak [34][50] - Management expressed confidence in the quality of inventory and plans to improve turnover to align with near-term sales outlook [10][25] Other Important Information - Interest expense increased to 0.37 year-over-year [23] - The company ended the quarter with a gross leverage of 2.3x, improving from the previous quarter [26] - The company paid a quarterly dividend of 27 million, with 319 million remaining on the current share repurchase authorization [27] Q&A Session Summary Question: What drove better-than-expected revenue growth in Europe and the Americas? - Management indicated that automotive and industrial markets performed better than anticipated, along with positive contributions from defense and aerospace sectors [32] Question: How is inventory impacting working capital and free cash flow? - Management acknowledged that inventory levels were higher than desired, with a goal to reduce working capital into the low 80s days [35] Question: What is the outlook for core components margins? - Management stated that a mid-6 billion revenue level is needed to sustain a 5% margin, with favorable mix and demand creation contributing to current performance [38] Question: How is pricing inflation affecting new inventory? - Management noted that pricing is impacting inventory levels but is more muted than in previous quarters, with about 25% of inventory increase attributed to pricing [42] Question: What is the expectation for inventory correction? - Management expects the inventory correction to take 2 to 3 quarters, with mixed signals across different verticals complicating the outlook [50] Question: How are accounts receivable collections performing? - Management reported improved quality of receivables, with no near-term headwinds from customer bankruptcies, and emphasized strategic management of accounts receivable [61]