Avnet Reports First Quarter 2024 Financial Results

Avnet, Inc. (Nasdaq: AVT) today announced results for its first quarter ended September 30, 2023.

Commenting on the Company’s financial results, Avnet Chief Executive Officer Phil Gallagher stated, “We delivered better-than-expected results in the first quarter thanks to the strong performance of our Electronic Components business. Our team’s continued execution and flexibility are resonating with both our customer and supplier partners, especially in today’s market conditions. We remain focused on the things we can control, and are confident that our resiliency and adaptability will keep us on our path to driving profitable growth and value for all of our stakeholders in the long term.”

Fiscal First Quarter Key Financial Highlights:

• Sales of $6.3 billion decreased 6.1% year over year from $6.8 billion.
  • On a constant currency basis, sales decreased 7.8% year over year and decreased 2.9% sequentially.
• Diluted earnings per share of $2.25, compared with $1.93 in the prior year quarter.
  • Adjusted diluted earnings per share of $1.61, compared with $2.00 in the prior year quarter.
  • A gain on legal settlement benefitted GAAP diluted earnings per share by $0.71 for the quarter.
• Operating income margin of 4.0%, decreased 29 basis points year over year.
  • Adjusted operating income margin of 4.1%, decreased 22 basis points year over year.
  • Electronic Components operating income margin of 4.6%, increased 38 basis points year over year.
  • Farnell operating income margin of 4.2% decreased 389 basis points sequentially.
• Returned $28.3 million to shareholders in dividends during the quarter.
• Returned $27.0 million to shareholders in the quarter from share repurchases.

Key Financial Metrics

($ in millions, except per share data)

First Quarter Results (GAAP)
		Sep – 23				Sep – 22				Change Y/Y			Jun – 23				Change Q/Q
Sales		$	6,335.6			$	6,750.1			(6.1	)%		$	6,554.6			(3.3	)%
Operating Income		$	253.8			$	290.5			(12.7	)%		$	283.7			(10.5	)%
Operating Income Margin			4.0	%			4.3	%		(29	)bps			4.3	%		(32	)bps
Diluted Earnings Per Share (EPS)		$	2.25			$	1.93			16.6	%		$	1.68			33.9	%
First Quarter Results (Non-GAAP)(1)
		Sep – 23				Sep – 22				Change Y/Y			Jun – 23				Change Q/Q
Adjusted Operating Income		$	261.7			$	293.3			(10.8	)%		$	312.6			(16.3	)%
Adjusted Operating Income Margin			4.1	%			4.4	%		(22	)bps			4.8	%		(64	)bps
Adjusted Diluted Earnings Per Share (EPS)		$	1.61			$	2.00			(19.5	)%		$	2.06			(21.8	)%
Segment and Geographical Mix
		Sep – 23				Sep – 22				Change Y/Y			Jun – 23				Change Q/Q
Electronic Components (EC) Sales		$	5,914.4			$	6,324.2			(6.5	)%		$	6,109.2			(3.2	)%
EC Operating Income Margin			4.6	%			4.2	%		38	bps			5.1	%		(47	)bps
Farnell Sales		$	421.2			$	425.9			(1.1	)%		$	445.4			(5.4	)%
Farnell Operating Income Margin			4.2	%			12.1	%		(792	)bps			8.1	%		(389	)bps
Americas Sales		$	1,573.5			$	1,678.9			(6.3	)%		$	1,732.7			(9.2	)%
EMEA Sales		$	2,308.0			$	2,129.5			8.4	%		$	2,450.6			(5.8	)%
Asia Sales		$	2,454.1			$	2,941.7			(16.6	)%		$	2,371.3			3.5	%

_______________
(1)		A reconciliation of non-GAAP financial measures to GAAP financial measures is presented in the “Non-GAAP Financial Information” section of this press release.

Outlook for the Second Quarter of Fiscal 2024 Ending on December 30, 2023

		Guidance Range		Midpoint
Sales		$6.00B – $6.30B		$6.15B
Adjusted Diluted EPS		$1.35 – $1.45		$1.40

The above guidance is based upon current market conditions and implies a sequential sales decline of 1% to 5% and assumes a seasonal decline in sales from the western regions primarily due to holidays.

The above guidance also excludes restructuring, integration and other expenses, amortization of intangibles, and certain income tax adjustments. The above guidance assumes similar interest expense to the fourth quarter and an effective tax rate of between 22% and 26%. The above guidance assumes 92 million average diluted shares outstanding and average currency exchange rates as shown in the table below:

		Q2 Fiscal
		2024		Q1 Fiscal		Q2 Fiscal
		Guidance		2024		2023
Euro to U.S. Dollar		$1.06		$1.09		$1.02
GBP to U.S. Dollar		$1.22		$1.27		$1.17

Today’s Conference Call and Webcast Details

Avnet will host a conference call and webcast today at 1:30 p.m. PT / 4:30 p.m. ET to discuss its financial results, provide a business update and answer questions.

• Live conference call: 877-407-8112 (domestic) or 201-689-8840 (international)
• Conference call replay available through November 8, 2023: 877-660-6853 or 201-612-7415 and using Conference ID: 13741421
• Live and archived webcast can be accessed via Avnet’s Investor Relations web page at: https://ir.avnet.com

Forward-Looking Statements

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the financial condition, results of operations, and business of the Company. You can find many of these statements by looking for words like “believes,” “projected,” “plans,” “expects,” “anticipates,” “should,” “will,” “may,” “estimates,” or similar expressions. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties. The following important factors, in addition to those discussed elsewhere in the Company’s Annual Report on Form 10-K for the fiscal year ended July 1, 2023 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, could affect the Company’s future results of operations, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements: geopolitical events and military conflicts; pandemics and other health-related crises; competitive pressures among distributors of electronic components; an industry down-cycle in semiconductors, including supply shortages; relationships with key suppliers and allocations of products by suppliers, including increased non-cancellable/non-returnable orders; accounts receivable defaults; risks relating to the Company’s international sales and operations, including risks relating to repatriating cash, foreign currency fluctuations, inflation, duties and taxes, sanctions and trade restrictions, and compliance with international and U.S. laws; risks relating to acquisitions, divestitures, and investments; adverse effects on the Company’s supply chain, operations of its distribution centers, shipping costs, third-party service providers, customers, and suppliers, including as a result of issues caused by military conflicts, terrorist attacks, natural and weather-related disasters, pandemics and health-related crises, warehouse modernization, and relocation efforts; risks related to cyber security attacks, other privacy and security incidents, and information systems failures, including related to current or future implementations, integrations, and upgrades; general economic and business conditions (domestic, foreign, and global) affecting the Company’s operations and financial performance and, indirectly, the Company’s credit ratings, debt covenant compliance, liquidity, and access to financing; constraints on employee retention and hiring; and legislative or regulatory changes.

Any forward-looking statement speaks only as of the date on which that statement is made. Except as required by law, the Company assumes no obligation to update any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made.

About Avnet

As a leading global technology distributor and solutions provider, Avnet has served customers’ evolving needs for more than a century. Decade after decade, Avnet helps its customers and suppliers around the world realize the transformative possibilities of technology. Learn more about Avnet at www.avnet.com. (AVT_IR)

AVNET, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
		First Quarters Ended
		September 30,				October 1,
		2023				2022
		(Thousands, except per share data)
Sales		$	6,335,648			$	6,750,133
Cost of sales			5,587,542				5,981,960
Gross profit			748,106				768,173
Selling, general and administrative expenses			487,286				477,636
Restructuring, integration and other expenses			7,051				—
Operating income			253,769				290,537
Other income, net			5,960				323
Interest and other financing expenses, net			(70,796	)			(45,098	)
Gain on legal settlements and other			86,499				—
Income before taxes			275,432				245,762
Income tax expense			66,164				61,501
Net income		$	209,268			$	184,261
Earnings per share:
Basic		$	2.29			$	1.96
Diluted		$	2.25			$	1.93
Shares used to compute earnings per share:
Basic			91,495				94,051
Diluted			93,178				95,636
Cash dividends paid per common share		$	0.31			$	0.29

AVNET, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
		September 30,				July 1,
		2023				2023
		(Thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	278,679			$	288,230
Receivables			4,679,691				4,763,788
Inventories			5,755,051				5,465,031
Prepaid and other current assets			197,720				233,804
Total current assets			10,911,141				10,750,853
Property, plant and equipment, net			470,971				441,557
Goodwill			759,848				780,629
Operating lease assets			220,657				221,698
Other assets			283,845				282,422
Total assets		$	12,646,462			$	12,477,159
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt		$	68,601			$	70,636
Accounts payable			3,445,711				3,373,820
Accrued expenses and other			722,409				753,130
Short-term operating lease liabilities			53,657				51,792
Total current liabilities			4,290,378				4,249,378
Long-term debt			3,101,903				2,988,029
Long-term operating lease liabilities			186,745				190,621
Other liabilities			244,853				297,462
Total liabilities			7,823,879				7,725,490
Shareholders’ equity			4,822,583				4,751,669
Total liabilities and shareholders’ equity		$	12,646,462			$	12,477,159

AVNET, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
		First Quarters Ended
		September 30, 2023				October 1, 2022
		(Thousands)
Cash flows from operating activities:
Net income		$	209,268			$	184,261
Non-cash and other reconciling items:
Depreciation			20,639				19,640
Amortization			878				2,755
Amortization of operating lease assets			13,271				13,141
Deferred income taxes			5,575				(7,296	)
Stock-based compensation			9,355				8,924
Other, net			(20,171	)			8,224
Changes in (net of effects from businesses acquired and divested):
Receivables			30,190				(419,852	)
Inventories			(371,604	)			(559,044	)
Accounts payable			111,489				120,938
Accrued expenses and other, net			(50,184	)			(16,840	)
Net cash flows used for operating activities			(41,294	)			(645,149	)
Cash flows from financing activities:
Borrowings (repayments) under accounts receivable securitization, net			(92,100	)			152,200
Borrowings under senior unsecured credit facility, net			243,613				701,987
Repayments under bank credit facilities and other debt, net			(133	)			(85,432	)
Repurchases of common stock			(24,324	)			(152,408	)
Dividends paid on common stock			(28,320	)			(26,998	)
Other, net			1,414				(964	)
Net cash flows provided by financing activities			100,150				588,385
Cash flows from investing activities:
Purchases of property, plant and equipment			(76,089	)			(28,208	)
Other, net			300				7,303
Net cash flows used for investing activities			(75,789	)			(20,905	)
Effect of currency exchange rate changes on cash and cash equivalents			7,382				4,857
Cash and cash equivalents:
— decrease			(9,551	)			(72,812	)
— at beginning of period			288,230				153,693
— at end of period		$	278,679			$	80,881

Non-GAAP Financial Information

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company also discloses certain non-GAAP financial information including (i) adjusted operating income, (ii) adjusted operating expenses, (iii) adjusted other income (expense), (iv) adjusted income before income taxes, (v) adjusted income tax expense (benefit), and (vi) adjusted diluted earnings per share.

There are also references to the impact of foreign currency in the discussion of the Company’s results of operations. When the U.S. Dollar strengthens and the stronger exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results. Conversely, when the U.S. Dollar weakens and the weaker exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is an increase in U.S. Dollars of reported results. In the discussion of the Company’s results of operations, results excluding this impact are referred to as “constant currency.” Management believes sales in constant currency is a useful measure for evaluating current period performance as compared with prior periods and for understanding underlying trends. In order to determine the translation impact of changes in foreign currency exchange rates on sales, income or expense items for subsidiaries reporting in currencies other than the U.S. Dollar, the Company adjusts the average exchange rates used in current periods to be consistent with the average exchange rates in effect during the comparative period.

Management believes that operating income and operating expenses adjusted for restructuring, integration and other expenses, and amortization of acquired intangible assets and other, are useful measures to help investors better assess and understand the Company’s operating performance. This is especially the case when comparing results with previous periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of Avnet’s normal operating results or non-cash in nature. Management analyzes operating income and operating expenses without the impact of these items as an indicator of ongoing margin performance and underlying trends in the business. Management also uses these non-GAAP measures to establish operational goals and, in most cases, for measuring performance for compensation purposes. Management measures operating income for its reportable segments excluding restructuring, integration and other expenses, and amortization of acquired intangible assets and other.

Additional non-GAAP metrics management uses is adjusted operating income margin, which is defined as adjusted operating income (as defined above) divided by sales.

Management also believes income tax expense (benefit), net income and diluted earnings per share adjusted for the impact of the items described above, gain on legal settlements and other, and certain items impacting other income (expense) and income tax expense (benefit) are useful to investors because they provide a measure of the Company’s net profitability on a more comparable basis to historical periods and provide a more meaningful basis for forecasting future performance. Adjustments to income tax expense (benefit) and the effective income tax rate include the effect of changes in tax laws, certain changes in valuation allowances and unrecognized tax benefits, income tax audit settlements and adjustments to effective tax rate based upon the expected long-term adjusted effective tax rate. Additionally, because of management’s focus on generating shareholder value, of which net profitability is a primary driver, management believes net income and diluted earnings per share excluding the impact of these items provides an important measure of the Company’s net profitability for the investing public.

Any analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, results presented in accordance with GAAP.

		Fiscal 2024
		First Quarter
		September 30, 2023
		($ in thousands, except per share amounts)
GAAP selling, general and administrative expenses		$	487,286
Amortization of intangible assets and other			(878	)
Adjusted operating expenses			486,408
GAAP operating income		$	253,769
Restructuring, integration and other expenses			7,051
Amortization of intangible assets and other			878
Adjusted operating income			261,698
GAAP income before income taxes		$	275,432
Restructuring, integration and other expenses			7,051
Amortization of intangible assets and other			878
Gain on legal settlements and other			(86,499	)
Adjusted income before income taxes			196,862
GAAP income tax expense		$	66,164
Restructuring, integration and other expenses			1,703
Amortization of intangible assets and other			203
Gain on legal settlements and other			(20,434	)
Income tax expense items, net			(390	)
Adjusted income tax expense			47,246
GAAP net income		$	209,268
Restructuring, integration and other expenses (net of tax)			5,348
Amortization of intangible assets and other (net of tax)			675
Gain on legal settlements and other (net of tax)			(66,065	)
Income tax expense items, net			390
Adjusted net income			149,616
GAAP diluted earnings per share		$	2.25
Restructuring, integration and other expenses (net of tax)			0.06
Amortization of intangible assets and other (net of tax)			0.01
Gain on legal settlements and other (net of tax)			(0.71	)
Income tax expense items, net			0.00
Adjusted diluted EPS			1.61

						Quarters Ended
		Fiscal Year				July 1,				April 1,				December 31,				October 1,
		2023*				2023*				2023				2022				2022
		($ in thousands, except per share amounts)
GAAP selling, general and administrative expenses		$	1,967,305			$	506,322			$	498,219			$	485,127			$	477,636
Amortization of intangible assets and other			(6,053	)			(878	)			(876	)			(1,541	)			(2,759	)
Adjusted operating expenses			1,961,252				505,444				497,343				483,586				474,877
GAAP operating income		$	1,186,800			$	283,662			$	313,629			$	298,973			$	290,537
Restructuring, integration and other expenses			28,038				28,038				—				—				—
Amortization of intangible assets and other			6,053				878				876				1,541				2,759
Adjusted operating income			1,220,891				312,578				314,505				300,514				293,296
GAAP income before income taxes		$	982,876			$	190,393			$	243,587			$	303,134			$	245,762
Restructuring, integration and other expenses			28,038				28,038				—				—				—
Amortization of intangible assets and other			6,053				878				876				1,541				2,759
Gain on legal settlements and other			(37,037	)			24,669				—				(61,705	)			—
Adjusted income before income taxes			979,931				243,978				244,463				242,970				248,521
GAAP income tax expense		$	212,048			$	35,138			$	56,161			$	59,248			$	61,501
Restructuring, integration and other expenses			6,007				6,007				—				—				—
Amortization of intangible assets and other			1,360				207				203				345				605
Gain on legal settlements and other			(8,711	)			5,828				—				(14,539	)			—
Income tax expense items, net			16,453				5,583				3,529				12,287				(4,946	)
Adjusted income tax expense			227,157				52,763				59,893				57,341				57,160
GAAP net income		$	770,828			$	155,255			$	187,426			$	243,886			$	184,261
Restructuring, integration and other expenses (net of tax)			22,031				22,031				—				—				—
Amortization of intangible assets and other (net of tax)			4,693				671				673				1,196				2,154
Gain on legal settlements and other (net of tax)			(28,326	)			18,841				—				(47,166	)			—
Income tax expense items, net			(16,453	)			(5,583	)			(3,529	)			(12,287	)			4,946
Adjusted net income			752,774				191,215				184,570				185,629				191,361
GAAP diluted earnings per share		$	8.26			$	1.68			$	2.03			$	2.63			$	1.93
Restructuring, integration and other expenses (net of tax)			0.24				0.24				—				—				—
Amortization of intangible assets and other (net of tax)			0.05				0.01				0.01				0.01				0.02
Gain on legal settlements and other (net of tax)			(0.31	)			0.20				—				(0.51	)			—
Income tax expense items, net			(0.18	)			(0.06	)			(0.04	)			(0.13	)			0.05
Adjusted diluted EPS			8.06				2.06				2.00				2.00				2.00
_______________
* May not foot/cross foot due to rounding.

Sales in Constant Currency

The following table presents reported sales growth rates and sales growth rates in constant currency for the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023.

		Quarter Ended
		September 30, 2023
					Sales						Sales
					Year-Year %						Sequential %
		Sales			Change in			Sales			Change in
		Year-Year			Constant			Sequential			Constant
		% Change			Currency			% Change			Currency
Avnet		(6.1	)%		(7.8	)%		(3.3	)%		(2.9	)%
Avnet by region
Americas		(6.3	)%		(6.3	)%		(9.2	)%		(9.2	)%
EMEA		8.4			1.9			(5.8	)		(5.5	)
Asia		(16.6	)		(15.8	)		3.5			4.4
Avnet by segment
EC		(6.5	)%		(8.1	)%		(3.2	)%		(2.7	)%
Farnell		(1.1	)		(3.8	)		(5.4	)		(5.4	)

Historical Segment Financial Information

		Fiscal 2024
		First Quarter
		September 30,
		2023*
		(in millions)
Sales:
Electronic Components		$	5,914.4
Farnell			421.2
Avnet sales		$	6,335.6
Operating income:
Electronic Components		$	272.8
Farnell			17.7
			290.5
Corporate expenses			(28.7	)
Restructuring, integration and other expenses			(7.1	)
Amortization of acquired intangible assets and other			(0.9	)
Avnet operating income		$	253.8
Sales by geographic area:
Americas		$	1,573.5
EMEA			2,308.0
Asia			2,454.1
Avnet sales		$	6,335.6
_______________
* May not foot due to rounding.

						Quarters Ended
		Fiscal				Fourth Quarter				Third Quarter				Second Quarter				First Quarter
		Year				July 1,				April 1,				December 31,				October 1,
		2023*				2023*				2023				2022				2022
		(in millions)
Sales:
Electronic Components		$	24,802.6			$	6,109.2			$	6,059.6			$	6,309.5			$	6,324.2
Farnell			1,734.3				445.4				455.0				408.0				425.9
Avnet sales		$	26,536.9			$	6,554.6			$	6,514.6			$	6,717.5			$	6,750.1
Operating income:
Electronic Components		$	1,179.6			$	310.4			$	305.2			$	296.7			$	267.3
Farnell			165.5				36.1				40.9				36.9				51.6
			1,345.1				346.5				346.1				333.6				318.9
Corporate expenses			(124.2	)			(33.9	)			(31.6	)			(33.1	)			(25.6	)
Restructuring, integration and other expenses			(28.0	)			(28.0	)			—				—				—
Amortization of acquired intangible assets and other			(6.1	)			(0.9	)			(0.9	)			(1.5	)			(2.8	)
Avnet operating income		$	1,186.8			$	283.7			$	313.6			$	299.0			$	290.5
Sales by geographic area:
Americas		$	6,807.7			$	1,732.7			$	1,714.9			$	1,681.2			$	1,678.9
EMEA			9,229.4				2,450.6				2,393.4				2,255.9				2,129.5
Asia			10,499.8				2,371.3				2,406.3				2,780.4				2,941.7
Avnet sales		$	26,536.9			$	6,554.6			$	6,514.6			$	6,717.5			$	6,750.1
_______________
* May not foot/cross foot due to rounding.

 

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The Avnet Stock at the time of publication of the news with a fall of -0,43 % to 46,13EUR on Nasdaq stock exchange (01. November 2023, 20:56 Uhr).