TechDogs-"Avnet Reports Fourth Quarter And Fiscal 2023 Financial Results"

Consumer Electronics Technology

Avnet Reports Fourth Quarter And Fiscal 2023 Financial Results

By Business Wire

Business Wire
Overall Rating

Fiscal year 2023 sales of $26.5 billion and record diluted EPS of $8.26

Fourth quarter sales of $6.6 billion exceeded guidance

Electronic components fourth quarter operating income margin of 5.1%

PHOENIX--(BUSINESS WIRE)--#Avnet--Avnet, Inc. (Nasdaq: AVT) today announced results for its fourth quarter and fiscal year ended July 1, 2023.

Commenting on the Company’s financial results, Avnet Chief Executive Officer Phil Gallagher stated, “Our strong financial results in fiscal 2023 demonstrate the dedication and commitment of our employees in driving profitable growth. With the breadth of our supplier line card, our diversified customer base and the strength of the end markets they serve, we are well-positioned to capitalize on the industry growth expected over the next several years. Although we can’t control near-term market conditions, our team will continue to focus on executing well in the market.”

Fiscal Fourth Quarter Key Financial Highlights:

  • Sales of $6.6 billion up 2.9% year over year from $6.4 billion.
    • On a constant currency basis, sales increased 2.9% year over year.
  • Diluted earnings per share of $1.68, compared with $2.51 in the prior year quarter.
    • Adjusted diluted earnings per share of $2.06, compared with $2.07 in the prior year quarter.
    • Higher interest expense negatively impacted year-over-year adjusted diluted earnings per share by $0.39.
  • Operating income margin of 4.3%, decreased 14 basis points year over year.
    • Adjusted operating income margin of 4.8%, increased 26 basis points year over year.
    • Year-over-year adjusted operating income grew three times greater than sales.
  • Electronic Components operating income margin of 5.1%, increased 77 basis points year over year.
  • Farnell operating income margin of 8.1% decreased 90 basis points sequentially.
  • Generated $234.5 million of cash flow from operations during the quarter.
  • Returned $26.5 million to shareholders in dividends during the quarter.

Fiscal 2023 Key Financial Highlights:

  • Sales of $26.5 billion up 9.2% year over year from $24.3 billion.
    • On a constant currency basis, sales increased 13.4% year over year.
  • Diluted earnings per share of $8.26, compared with $6.94 in the prior year.
    • Adjusted diluted earnings per share of $8.06, compared with $6.93 in the prior year.
    • Higher interest expense negatively impacted year over year adjusted diluted earnings per share by $1.24.
  • Operating income margin of 4.5%, increased 61 basis points year over year.
    • Adjusted operating income margin of 4.6%, increased 55 basis points year over year.
    • Year-over-year adjusted operating income grew more than 2.5 times greater than sales.
  • Electronic Components operating income margin of 4.8%, increased 89 basis points year over year.
  • Farnell operating income margin of 9.5% decreased 388 basis points year over year.
  • Returned $106 million to shareholders in dividends during the fiscal year.
  • Returned $213 million to shareholders in the fiscal year from share repurchases, representing 5.3% of outstanding shares.

Key Financial Metrics

($ in millions, except per share data)

Fourth Quarter Results (GAAP)

Jun – 23

Jun – 22

Change Y/Y

Mar – 23

Change Q/Q

Sales

$

6,554.6

$

6,372.7

2.9

%

$

6,514.6

0.6

%

Operating Income

$

283.7

$

284.7

(0.4

)%

$

313.6

(9.6

)%

Operating Income Margin

4.3

%

4.5

%

(14

)bps

4.8

%

(48

)bps

Diluted Earnings Per Share (EPS)

$

1.68

$

2.51

(33.1

)%

$

2.03

(17.2

)%

Fourth Quarter Results (Non-GAAP)(1)

Jun – 23

Jun – 22

Change Y/Y

Mar – 23

Change Q/Q

Adjusted Operating Income

$

312.6

$

287.6

8.7

%

$

314.5

(0.6

)%

Adjusted Operating Income Margin

4.8

%

4.5

%

26

bps

4.8

%

(6

)bps

Adjusted Diluted Earnings Per Share (EPS)

$

2.06

$

2.07

(0.5

)%

$

2.00

3.0

%

Segment and Geographical Mix

Jun – 23

Jun – 22

Change Y/Y

Mar – 23

Change Q/Q

Electronic Components (EC) Sales

$

6,109.2

$

5,930.4

3.0

%

$

6,059.6

0.8

%

EC Operating Income Margin

5.1

%

4.3

%

77

bps

5.0

%

4

bps

Farnell Sales

$

445.4

$

442.3

0.7

%

$

455.0

(2.1

)%

Farnell Operating Income Margin

8.1

%

14.2

%

(614

)bps

9.0

%

(90

)bps

Americas Sales

$

1,732.7

$

1,618.4

7.1

%

$

1,714.9

1.0

%

EMEA Sales

$

2,450.6

$

2,064.0

18.7

%

$

2,393.4

2.4

%

Asia Sales

$

2,371.3

$

2,690.3

(11.9

)%

$

2,406.3

(1.5

)%

_______________

(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 First Quarter of Fiscal 2024 Ending on September 30, 2023

Guidance Range

Midpoint

Sales

$6.15B – $6.45B

$6.30B

Adjusted Diluted EPS

$1.45 – $1.55

$1.50

The above guidance is based upon current market conditions and implies a sequential growth rate range of down 2% to down 6% and assumes a mix shift in sales to Asia from the Western regions.

The above guidance also excludes restructuring, integration and other expenses, amortization of intangibles, gains on legal settlements 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 93 million average diluted shares outstanding and average currency exchange rates as shown in the table below:

Q1 Fiscal

2024

Q4 Fiscal

Q1 Fiscal

Guidance

2023

2023

Euro to U.S. Dollar

$1.10

$1.09

$1.01

GBP to U.S. Dollar

$1.28

$1.25

$1.18

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 August 23, 2023: 877-660-6853 or 201-612-7415 and using Conference ID: 13740210
  • 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 2, 2022 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)

Fourth Quarters Ended

Years Ended

July 1,

July 2,

July 1,

July 2,

2023

2022

2023

2022

(Thousands, except per share data)

Sales

$

6,554,608

$

6,372,653

$

26,536,881

$

24,310,708

Cost of sales

5,736,586

5,593,022

23,354,738

21,345,317

Gross profit

818,022

779,631

3,182,143

2,965,391

Selling, general and administrative expenses

506,322

494,943

1,967,305

1,994,847

Russian-Ukraine conflict related expenses

26,261

Restructuring, integration and other expenses

28,038

28,038

5,272

Operating income

283,662

284,688

1,186,800

939,011

Other income (expense), net

6,456

(6,160

)

9,908

(5,302

)

Interest and other financing expenses, net

(75,056

)

(29,987

)

(250,869

)

(100,375

)

Gain on legal settlements and other

(24,669

)

37,037

Income before taxes

190,393

248,541

982,876

833,334

Income tax expense

35,138

1,718

212,048

140,955

Net income

$

155,255

$

246,823

$

770,828

$

692,379

Earnings per share:

Basic

$

1.70

$

2.54

$

8.37

$

7.02

Diluted

$

1.68

$

2.51

$

8.26

$

6.94

Shares used to compute earnings per share:

Basic

91,493

97,309

92,043

98,662

Diluted

92,626

98,387

93,368

99,819

Cash dividends paid per common share

$

0.29

$

0.26

$

1.16

$

1.00

AVNET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

July 1,

July 2,

2023

2022

(Thousands)

ASSETS

Current assets:

Cash and cash equivalents

$

288,230

$

153,693

Receivables

4,763,788

4,301,002

Inventories

5,465,031

4,244,148

Prepaid and other current assets

233,804

177,783

Total current assets

10,750,853

8,876,626

Property, plant and equipment, net

441,557

315,204

Goodwill

780,629

758,833

Operating lease assets

221,698

227,138

Other assets

282,422

210,731

Total assets

$

12,477,159

$

10,388,532

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Short-term debt

$

70,636

$

174,422

Accounts payable

3,373,820

3,431,683

Accrued expenses and other

753,130

591,020

Short-term operating lease liabilities

51,792

54,529

Total current liabilities

4,249,378

4,251,654

Long-term debt

2,988,029

1,437,400

Long-term operating lease liabilities

190,621

199,418

Other liabilities

297,462

307,300

Total liabilities

7,725,490

6,195,772

Shareholders’ equity

4,751,669

4,192,760

Total liabilities and shareholders’ equity

$

12,477,159

$

10,388,532

AVNET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Years Ended

July 1, 2023

July 2, 2022

(Thousands)

Cash flows from operating activities:

Net income

$

770,828

$

692,379

Non-cash and other reconciling items:

Depreciation

82,565

87,367

Amortization

6,048

14,959

Amortization of operating lease assets

54,392

52,881

Deferred income taxes

(37,060

)

(52,513

)

Stock-based compensation

38,781

36,738

Other, net

52,142

34,116

Changes in (net of effects from businesses acquired and divested):

Receivables

(461,117

)

(1,132,039

)

Inventories

(1,173,124

)

(1,218,871

)

Accounts payable

(75,943

)

1,131,225

Accrued expenses and other, net

28,785

134,448

Net cash flows used for operating activities

(713,703

)

(219,310

)

Cash flows from financing activities:

Issuance of notes, net of discounts

498,615

299,973

Repayments of public notes

(354,336

)

Borrowings under accounts receivable securitization, net

258,000

274,900

Borrowings under senior unsecured credit facility, net

728,182

Borrowings (repayments) under bank credit facilities and other debt, net

(96,209

)

235,047

Repurchases of common stock

(221,730

)

(184,382

)

Dividends paid on common stock

(106,325

)

(98,490

)

Other, net

(5,777

)

(16,653

)

Net cash flows provided by financing activities

1,054,756

156,059

Cash flows from investing activities:

Purchases of property, plant and equipment

(194,674

)

(48,900

)

Proceeds from liquidation of Company owned life insurance policies

90,384

Other, net

(16,877

)

9,815

Net cash flows (used for) provided by investing activities

(211,551

)

51,299

Effect of currency exchange rate changes on cash and cash equivalents

5,035

(34,046

)

Cash and cash equivalents:

— increase (decrease)

134,537

(45,998

)

— at beginning of period

153,693

199,691

— at end of period

$

288,230

$

153,693

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, Russian-Ukraine conflict related 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, Russian-Ukraine conflict related 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 the adjusted interim effective tax rate based upon the expected annual 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.

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.

Quarters Ended

Fiscal Year

July 2,

April 2,

January 1,

October 2,

2022*

2022*

2022*

2022*

2021*

($ in thousands, except per share amounts)

GAAP selling, general and administrative expenses

$

1,994,847

$

494,943

$

512,364

$

501,363

$

486,178

Amortization of intangible assets and other

(15,038

)

(2,929

)

(3,074

)

(3,796

)

(5,239

)

Adjusted operating expenses

1,979,809

492,014

509,290

497,567

480,939

GAAP operating income

$

939,011

$

284,688

$

274,408

$

211,672

$

168,243

Restructuring, integration and other expenses

5,272

5,272

Russian-Ukraine conflict related expenses

26,261

26,261

Amortization of intangible assets and other

15,038

2,929

3,074

3,796

5,239

Adjusted operating income

985,582

287,617

303,743

215,468

178,754

GAAP income before income taxes

$

833,334

$

248,541

$

248,025

$

191,779

$

144,990

Restructuring, integration and other expenses

5,272

5,272

Russian-Ukraine conflict related expenses

26,261

26,261

Amortization of intangible assets and other

15,038

2,929

3,074

3,796

5,239

Other expenses

4,935

4,494

441

Adjusted income before income taxes

884,840

255,964

277,360

195,575

155,942

GAAP income tax expense

$

140,955

$

1,718

$

64,608

$

40,958

$

33,672

Restructuring, integration and other expenses

1,012

1,012

Russian-Ukraine conflict related expenses

6,836

6,836

Amortization of intangible assets and other

3,080

711

667

704

998

Other expenses

1,092

956

136

Income tax benefit (expense) items, net

40,376

49,142

(8,613

)

2,917

(3,070

)

Adjusted income tax expense

193,351

52,527

63,498

44,579

32,748

GAAP net income

$

692,379

$

246,823

$

183,417

$

150,821

$

111,318

Restructuring, integration and other expenses (net of tax)

4,260

4,260

Russian-Ukraine conflict related expenses (net of tax)

19,425

19,425

Amortization of intangible assets and other (net of tax)

11,958

2,218

2,407

3,092

4,241

Other expenses (net of tax)

3,843

3,538

305

Income tax (benefit) expense items, net

(40,376

)

(49,142

)

8,613

(2,917

)

3,070

Adjusted net income

691,489

203,437

213,862

150,996

123,194

GAAP diluted earnings per share

$

6.94

$

2.51

$

1.84

$

1.50

$

1.10

Restructuring, integration and other expenses (net of tax)

0.04

0.04

Russian-Ukraine conflict related expenses (net of tax)

0.19

0.20

Amortization of intangible assets and other (net of tax)

0.12

0.02

0.02

0.03

0.04

Other expenses (net of tax)

0.04

0.04

0.00

Income tax (benefit) expense items, net

(0.40

)

(0.50

)

0.09

(0.03

)

0.03

Adjusted diluted EPS

6.93

2.07

2.15

1.51

1.22

_______________

* May not foot/cross foot due to rounding and differences in average diluted shares between quarterly periods compared to the fiscal year.


Contacts

Investor Relations Contact
InvestorRelations@Avnet.com

Media Relations Contact
Jeanne Forbis, 480-643-7499
Jeanne.Forbis@Avnet.com

Read full story here

First published on Thu, Aug 17, 2023

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