Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Avnet Inc (AVT, Financial) delivered $23.8 billion in revenues and $5.43 of diluted earnings per share for fiscal year 2024, exceeding top line and EPS guidance.
- The electronic components business achieved a 4.1% operating margin, marking 10 consecutive quarters of greater than 4% operating margin.
- Avnet Inc (AVT) generated strong cash flow, with $274 million from operations in the fourth quarter and $690 million for the full fiscal year.
- The company has made structural improvements, particularly in the electronic components business, which has shown resilience despite market challenges.
- Avnet Inc (AVT) is strategically positioned in the technology supply chain, with opportunities in AI growth trends and data center build-outs.
Negative Points
- Avnet Inc (AVT) faced a softening demand environment, with sales down 15% year-over-year in the fourth quarter.
- Gross margin decreased by 92 basis points year-over-year, reflecting weaker market demand and lower sales mix from Western regions.
- Farnell, a part of Avnet Inc (AVT), experienced sequential and year-over-year sales declines, with market softness impacting its performance.
- The company is dealing with elevated inventory levels in certain areas, which it aims to reduce while making strategic investments elsewhere.
- Avnet Inc (AVT) anticipates continued market correction, with guidance for the first quarter of fiscal 2025 indicating potential sales declines.
Q & A Highlights
Q: Can you provide an update on the inventory situation and whether it has improved in terms of distribution by supplier and region?
A: Philip Gallagher, CEO: Inventory levels are still higher than desired, particularly in certain commodities and product lines. We are working to balance this, and while some regions have made better progress than others, the situation remains somewhat uneven.
Q: Have you observed a recovery in demand in China similar to what some semiconductor companies have reported?
A: Philip Gallagher, CEO: We have seen a modest recovery in China, but it is not as robust as some suppliers might suggest. Our exposure may differ based on the specific end markets and product lines we serve.
Q: Regarding demand in North America and Europe, are these regions expected to be below seasonal levels, and how does this affect your overall business outlook?
A: Kenneth Jacobson, CFO: We anticipate lower-than-seasonal demand in EMEA, particularly due to the August vacation period. While we don't see worsening conditions, we are not ready to call a bottom yet. The Americas remain stable, but visibility into December is still unclear.
Q: What are the plans for Farnell, and how do you expect its margins to improve over the next fiscal year?
A: Philip Gallagher, CEO: Rebeca Obregon has been appointed to lead Farnell, and we are focusing on strategy and structure improvements. While sales are softer than expected, we are seeing stable gross margins and expect operating expense reductions to positively impact margins as the market recovers.
Q: How are you prioritizing capital allocation, and what is the outlook for inventory correction and investments?
A: Kenneth Jacobson, CFO: We are prioritizing share buybacks, especially with our stock trading below book value. M&A is not a primary focus, but we remain open to opportunities. Inventory correction will take a few more quarters, and we continue to invest in areas that support growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
