Avnet, Inc. · NASDAQ:AVT
Avnet — Q1 2020 Earnings Presentation
27 slides from Avnet's earnings presentation, Oct 24, 2019
Slide 1: Avnet Fiscal First Quarter 2020 Financial Results
Avnet Fiscal First Quarter 2020 Financial Results October 24, 2019
Slide 2: Safe harbor statement
Safe harbor statement This document contains certain “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. These statements are based on management’s current expectations and are s
Slide 3: Executive Overview
Executive Overview Bill Amelio Chief Executive Officer
Slide 4: Q1 2020 highlights
Q1 2020 highlights • Delivered quarterly sales of $4.6B, in line with guidance • Market trends continued to decline over the quarter • Largely due to macroeconomic headwinds, tariff uncertainty • Buying patterns impacted across key geographies • Outlook for global market dynamics still uncertain • P
Slide 5: Fiscal year 2020 corporate strategy
Fiscal year 2020 corporate strategy Scale Leverage higher profit Ecosystem AMPLIFY businesses EXTEND for growth DRIVE LE Amplify SCALE Extend VERAGE Drive distribution digital Continuous opportunities capabilities improvement Successful execution will add value for our customers, 5 suppliers, invest
Slide 6: Accelerating electronic components business
1 Accelerating electronic components business • Quarterly sales of $4.3B • Operating margins 2.6% compared with 3.4% a year ago • Asia sales of $1.9B, up more than 9% sequentially • Bookings continue to show signs of stability in the region • Notable wins in the Americas, including: • Component busi
Slide 7: Farnell: scaling higher profit margin businesses
2 Farnell: scaling higher profit margin businesses • Pricing, sales and margin pressures continued • Lead times shortened and average selling prices declined across industry • Consistent with expectations from last quarter and previous cycles • Revenue of $336M, operating margins of 6.5% • Despite c
Slide 8: Farnell roadmap: Sales growth w/ best-in-class profitability
Farnell roadmap: Sales growth w/ best-in-class profitability Operational excellence Pricing & quoting Marketing Product SKU / NPI Web UX, speed & stability 8
Slide 9: Digital transformation driving growth
3 Digital transformation driving growth Robotic Process Automation: projects will continue throughout fiscal 2020 Artificial Intelligence Pricing: smooth launch with implementation targeted by June Marketing Automation: enables lead-sharing integration between Farnell and EC Salesforce Implementatio
Slide 10: Your ideas. Our Ecosystem.
Your ideas. PRODUCT Our Ecosystem. AVNET LIFECYCLE CAPABILITIES / Research @ A TFT AVNET / & Concept st Cs / SOLUTIONS Internet of Things Bring us your theories, your visions, your pipe dreams—we're ready to YOUR IDEA take on today’s toughest challenges. Design & Design Services Prototype J Wherever
Slide 11: Leveraging ecosystem to expand opportunities
4 Leveraging ecosystem to expand opportunities • Witekio acquisition strengthens overall solutions offering • Part of larger strategy of building vertical solutions and scalable platforms • Complements previous Softweb Solutions acquisition • Creating opportunities with non-traditional customers • C
Slide 12: Industrial asset & remote monitoring solution
Industrial asset & remote monitoring solution The Solution: Water purifier solution Business case & IoT use case definition • Web application for remote monitoring • Solar-power water purification tracking Softweb’s Role • IoT-based remote monitoring solution • Custom hardware kit connected via Aeri
Slide 13: Driving performance and operational excellence
5 Driving performance and operational excellence • Avnet remains aggressive in plans to improve execution • On track to pull forward $50M of operating expense reductions • Continued transformation activities include moving to lower cost geos • Growing Serbia office • Expanding Guadalajara facility •
Slide 14: Financial Overview
Financial Overview Tom Liguori Chief Financial Officer
Slide 15: Q1 2020 Financial highlights
Q1 2020 Financial highlights $4.6B Revenues slightly above midpoint of guidance, down 1% QoQ 11.8% Gross margin, down 76 bps YoY -$19M Reduction in SG&A expenses YoY 4 days Improved sequentially to 84 days from 88 days $196M Cash flow generated this quarter 104M Diluted shares at end of 1Q20, down f
Slide 16: Key metrics by business segment and region
Key metrics by business segment and region Electronic • Revenues of $4.3B, down 1% sequentially Components • Operating margins of 2.6% compared to 3.3% last quarter • Revenues of $1.2B, down 4% YoY and sequentially Americas • Slowness in region felt across the industry and expected to continue • Rev
Slide 17: Q1 2020 Balance sheet and cash flow performance
Q1 2020 Balance sheet and cash flow performance $133M Cash returned to shareholders through stock buybacks and dividends $1.2B Net debt at end of quarter 1.6 Net debt leverage ratio at end of quarter $196M Cash provided by operations, well above our $100M target 104M Diluted shares; on a path to get
Slide 18: Managing through the macro slowdown
Managing through the macro slowdown • Long-term focus: • Grow higher margin businesses including Farnell and IoT • Near-term focus: • Return Farnell to double digit operating margins • Adjust business for TI transition • Manage costs and generate cash for share buyback 18
Slide 19: Farnell operating margin recovery
Farnell operating margin recovery 210 bps 15.0% 390 bps 200 bps 10.0% -100 bps 150 bps 8.0% 6.5% Q1 SKU expansion, Summer 2020 Modest Summer 2020 TI Ops Return to Q4 FY20 Mktg spend, Op market w/modest loss improvement normal FY22 improvement recovery market (DC, SKUs, etc) market recovery condition
Slide 20: EC operating margin – TI transition
EC operating margin – TI transition 65 bps 4.0%-4.5% 25 bps 60 bps 2.6% -75 bps 30 bps 2.5% 35 bps 2.2% Q1 TI lower Cost Summer Market Summer Recapture Americas IoT Long term FY20 revenue reductions 2020 improvement 2020 lost sales / margin (net) - no market - market GP expansion improvement improve
Slide 21: Near- and long-term operating margin targets
Near- and long-term operating margin targets Operating income margin EC Farnell Total Summer No market recovery 2.2% 8.0% 2.1% 2020 Modest market recovery 2.5% 10.0% 2.6% Longer term 4.0% - 4.5% 15.0% 4.5% - 5.0% 21
Slide 22: Outlook for Q2 FY20
Outlook for Q2 FY20 (ending on December 28, 2019) Metric Guidance Range Midpoint Sales $4.2B - $4.6B $4.4B Non-GAAP Adjusted Diluted EPS(1) $0.35 – $0.45 $0.40 Estimated Annual Tax Rate 19% - 23% 21% • Macroeconomic slowdown impacting results across the board • Solid plan to recover Farnell • Contin
Slide 23: Q&A Session
Q&A Session
Slide 24: Thank you
Thank you AVNET
Slide 25: Appendix
Appendix
Slide 26: Financial scorecard: Q1 FY20 progress report
Financial scorecard: Q1 FY20 progress report ($M) Target Q1 ‘19 Q2 ‘19 Q3 ‘19 Q4 ‘19 Q1 ‘20 Progress Growing higher margin business % of AVT revenue from higher margin business 45% 38.8% 38.9% 41.2% 41.9% 38.7% ⚫ Optimizing cost and operating income Adjusted op expense as % of sales (1) 8.9% 8.9% 9.
Slide 27: Non-GAAP Definitions
Non-GAAP Definitions 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 ope