Avnet reports second quarter fiscal 2023 financial results
Phoenix--(business wire)--avnet, inc. (nasdaq: avt) today announced results for its second quarter ended december 31, 2022. commenting on the company’s financial results, avnet chief executive officer phil gallagher stated, “we delivered another strong quarter of sales and earnings to close out 2022. this past year we were able to accelerate our sales growth, expand operating margins and gain market share thanks in large part to our customers’ partnership and our employees’ dedication and commitment. as we head into 2023, we are closely monitoring near-term market dynamics and remain encouraged about the medium-term growth opportunities across our diverse end markets.” fiscal second quarter key financial highlights: sales of $6.7 billion up 14.5% year over year from $5.9 billion. on a constant currency basis, sales increased 21.1% year over year. on a constant currency basis, sales increased 21.1% year over year. diluted earnings per share increased to $2.63, compared with $1.50 in the prior year quarter. adjusted diluted earnings per share of $2.00, compared with $1.51 in the prior year quarter. higher interest expense negatively impacted second quarter adjusted diluted earnings per share by $0.31 year over year. adjusted diluted earnings per share of $2.00, compared with $1.51 in the prior year quarter. higher interest expense negatively impacted second quarter adjusted diluted earnings per share by $0.31 year over year. operating income margin of 4.5%, increased 84 basis points year over year. adjusted operating income margin of 4.5%, increased 80 basis points year over year. adjusted operating income margin of 4.5%, increased 80 basis points year over year. electronic components operating income margin of 4.7%, increased 122 basis points year over year. farnell operating income margin of 9.0% decreased 461 basis points year over year. returned $64 million to shareholders in the quarter from share repurchases, representing 1.8% of outstanding shares. returned $26 million to shareholders in dividends during the quarter. key financial metrics ($ in millions, except per share data) second quarter results (gaap) dec – 22 dec – 21 change y/y sep – 22 change q/q sales $ 6,717.5 $ 5,865.2 14.5 % $ 6,750.1 (0.5 )% operating income 299.0 211.7 41.2 % 290.5 2.9 % operating income margin 4.5 % 3.6 % 84 bps 4.3 % 15 bps diluted earnings per share (eps) $ 2.63 $ 1.50 75.3 % $ 1.93 36.3 % second quarter results (non-gaap)(1) dec – 22 dec – 21 change y/y sep – 22 change q/q adjusted operating income 300.5 215.5 39.5 % 293.3 2.5 % adjusted operating income margin 4.5 % 3.7 % 80 bps 4.4 % 12 bps adjusted diluted earnings per share (eps) $ 2.00 $ 1.51 32.5 % $ 2.00 - % segment and geographical mix dec – 22 dec – 21 change y/y sep – 22 change q/q electronic components (ec) sales $ 6,309.5 $ 5,424.3 16.3 % $ 6,324.2 (0.2 )% ec operating income margin 4.7 % 3.5 % 122 bps 4.2 % 47 bps farnell sales $ 408.0 $ 440.9 (7.5) % $ 425.9 (4.2 )% farnell operating income margin 9.0 % 13.7 % (461 ) bps 12.1 % (308 ) bps americas sales $ 1,681.2 $ 1,391.5 20.8 % $ 1,678.9 0.1 % emea sales 2,255.9 1,840.8 22.6 % 2,129.5 5.9 % asia sales 2,780.4 2,632.9 5.6 % 2,941.7 (5.5 )% (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 third quarter of fiscal 2023 ending on april 1, 2023 guidance range midpoint sales $6.15b – $6.45b $6.30b adjusted diluted eps(1) $1.75 – $1.85 $1.80 (1) a reconciliation of non-gaap guidance to gaap guidance is presented in the “non-gaap financial information” section of this press release. the above guidance is based upon current market conditions and implies a sequential growth rate range of down 4% to down 8%. this guidance assumes a seasonal decline in sales from asia primarily due to the lunar new year and below seasonal growth for the western regions. the above guidance also excludes amortization of intangibles and certain income tax adjustments. the above guidance assumes similar interest expense to the second quarter and an effective tax rate of between 22% and 26%. the above guidance assumes 92.5 million average diluted shares outstanding and average currency exchange rates as shown in the table below: q3 fiscal 2023 q2 fiscal q3 fiscal guidance 2023 2022 euro to u.s. dollar $1.09 $1.02 $1.12 gbp to u.s. dollar $1.24 $1.17 $1.34 today’s conference call and webcast details avnet will host a quarterly webcast and teleconference today at 1:30 p.m. pt and 4:30 p.m. et to discuss its financial results and provide a corporate update. the webcast can be accessed via avnet’s investor relations web page at: https://ir.avnet.com. those who would still like to participate in the live call can dial 877-407-8112 or 201-689-8840. a replay of the conference call will be available for 90 days, through may 2, 2023, at 5:00 p.m. et, and can be accessed by dialing: 877-660-6853 or 201-612-7415 and using conference id: 13734794. 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, including covid-19; 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 the ability to repatriate 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 or 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 affecting the company’s businesses. 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 an entire century. we support customers at each stage of a product’s lifecycle, from idea to design and from prototype to production. our unique position at the center of the technology value chain enables us to accelerate the design and supply stages of product development so customers can realize revenue faster. 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) second quarters ended six months ended december 31, january 1, december 31, january 1, 2022 2022 2022 2022 (thousands, except per share data) sales $ 6,717,521 $ 5,865,217 $ 13,467,654 $ 11,449,912 cost of sales 5,933,421 5,152,182 11,915,381 10,077,185 gross profit 784,100 713,035 1,552,273 1,372,727 selling, general and administrative expenses 485,127 501,363 962,764 987,540 restructuring, integration and other expenses — — — 5,272 operating income 298,973 211,672 589,509 379,915 other income, net 1,476 1,737 1,800 1,327 interest and other financing expenses, net (59,020 ) (21,630 ) (104,118 ) (44,474 ) gain on legal settlement 61,705 — 61,705 — income before taxes 303,134 191,779 548,896 336,768 income tax expense 59,248 40,958 120,749 74,629 net income $ 243,886 $ 150,821 $ 428,147 $ 262,139 earnings per share: basic $ 2.67 $ 1.52 $ 4.62 $ 2.64 diluted $ 2.63 $ 1.50 $ 4.55 $ 2.60 shares used to compute earnings per share: basic 91,192 99,032 92,621 99,340 diluted 92,755 100,286 94,195 100,701 cash dividends paid per common share $ 0.29 $ 0.24 $ 0.58 $ 0.48 avnet, inc. condensed consolidated balance sheets (unaudited) december 31, july 2, 2022 2022 (thousands) assets current assets: cash and cash equivalents $ 324,778 $ 153,693 receivables 4,789,402 4,301,002 inventories 4,972,898 4,244,148 prepaid and other current assets 216,487 177,783 total current assets 10,303,565 8,876,626 property, plant and equipment, net 378,269 315,204 goodwill 755,030 758,833 operating lease assets 229,537 227,138 other assets 263,473 210,731 total assets $ 11,929,874 $ 10,388,532 liabilities and shareholders’ equity current liabilities: short-term debt $ 209,401 $ 174,422 accounts payable 3,106,667 3,431,683 accrued expenses and other 688,643 591,020 short-term operating lease liabilities 52,944 54,529 total current liabilities 4,057,655 4,251,654 long-term debt 2,979,823 1,437,400 long-term operating lease liabilities 198,986 199,418 other liabilities 263,747 307,300 total liabilities 7,500,211 6,195,772 shareholders’ equity 4,429,663 4,192,760 total liabilities and shareholders’ equity $ 11,929,874 $ 10,388,532 avnet, inc. consolidated statements of cash flows (unaudited) six months ended december 31, 2022 january 1, 2022 (thousands) cash flows from operating activities: net income $ 428,147 $ 262,139 non-cash and other reconciling items: depreciation 39,411 43,876 amortization 4,294 8,964 amortization of operating lease assets 26,414 27,426 deferred income taxes (15,581 ) (4,451 ) stock-based compensation 21,338 19,556 other, net 7,199 10,281 changes in (net of effects from businesses acquired and divested): receivables (469,650 ) (558,702 ) inventories (686,884 ) (359,755 ) accounts payable (341,210 ) 328,574 accrued expenses and other, net 20,021 (41,117 ) net cash flows used for operating activities (966,501 ) (263,209 ) cash flows from financing activities: borrowings under accounts receivable securitization, net 352,200 190,400 borrowings under senior unsecured credit facility, net 1,132,245 109,669 borrowings (repayments) under bank credit facilities and other debt, net 47,712 (1,550 ) repurchases of common stock (221,282 ) (45,570 ) dividends paid on common stock (53,304 ) (47,642 ) other, net (1,048 ) (6,069 ) net cash flows provided by financing activities 1,256,523 199,238 cash flows from investing activities: purchases of property, plant and equipment (111,436 ) (22,116 ) other, net (16,279 ) 68,270 net cash flows (used) provided by investing activities (127,715 ) 46,154 effect of currency exchange rate changes on cash and cash equivalents 8,778 (14,056 ) cash and cash equivalents: — increase (decrease) 171,085 (31,873 ) — at beginning of period 153,693 199,691 — at end of period $ 324,778 $ 167,818 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, gains on legal settlements, 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. fiscal quarters ended year to date december 31, october 1, 2023* 2022 2022 ($ in thousands, except per share amounts) gaap selling, general and administrative expenses $ 962,764 $ 485,127 $ 477,636 amortization of intangible assets and other (4,300 ) (1,541 ) (2,759 ) adjusted operating expenses 958,464 483,586 474,877 gaap operating income $ 589,509 $ 298,973 $ 290,537 amortization of intangible assets and other 4,300 1,541 2,759 adjusted operating income 593,809 300,514 293,296 gaap income before income taxes $ 548,896 $ 303,134 $ 245,762 amortization of intangible assets and other 4,300 1,541 2,759 gain on legal settlement (61,705 ) (61,705 ) - adjusted income before income taxes 491,491 242,970 248,521 gaap income tax expense $ 120,749 $ 59,248 $ 61,501 amortization of intangible assets and other 950 345 605 gain on legal settlement (14,539 ) (14,539 ) - income tax expense items, net 7,341 12,287 (4,946 ) adjusted income tax expense 114,501 57,341 57,160 gaap net income $ 428,147 $ 243,886 $ 184,261 amortization of intangible assets and other (net of tax) 3,350 1,196 2,154 gain on legal settlement (net of tax) (47,166 ) (47,166 ) - income tax expense items, net (7,341 ) (12,287 ) 4,946 adjusted net income 376,990 185,629 191,361 gaap diluted earnings per share $ 4.55 $ 2.63 $ 1.93 amortization of intangible assets and other (net of tax) 0.03 0.01 0.02 gain on legal settlement (net of tax) (0.50 ) (0.51 ) - income tax expense items, net (0.08 ) (0.13 ) 0.05 adjusted diluted eps 4.00 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. sales in constant currency the following table presents sales growth rates and sales growth rates in constant currency for the second quarter and first six months of fiscal 2023 compared to the second quarter and first six months of fiscal 2022. quarter ended six months ended sales sales sales year-year % sequential % year-year % sales change in sales change in sales change in year-year constant sequential constant year-year constant % change currency % change currency % change currency avnet 14.5 % 21.1 % (0.5 )% (0.6 )% 17.6 % 24.9 % avnet by region americas 20.8 % 20.8 % 0.1 % 0.1 % 26.8 % 26.8 % emea 22.6 37.6 5.9 4.8 22.2 39.9 asia 5.6 9.3 (5.5 ) (5.0 ) 9.8 13.4 avnet by segment ec 16.3 % 22.8 % (0.2 )% (0.3 )% 19.7 % 27.0 % farnell (7.5 ) (0.1 ) (4.2 ) (3.7 ) (6.9 ) 0.8 historical segment financial information quarters ended fiscal second quarter first quarter year to date december 31, october 1, 2023* 2022 2022 (in millions) sales: electronic components $ 12,633.7 $ 6,309.5 $ 6,324.2 farnell 833.9 408.0 425.9 avnet sales $ 13,467.7 $ 6,717.5 $ 6,750.1 operating income: electronic components $ 564.0 $ 296.7 $ 267.3 farnell 88.5 36.9 51.6 652.5 333.6 318.9 corporate expenses (58.7 ) (33.1 ) (25.6 ) amortization of acquired intangible assets and other (4.3 ) (1.5 ) (2.8 ) avnet operating income $ 589.5 $ 299.0 $ 290.5 sales by geographic area: americas $ 3,360.1 $ 1,681.2 $ 1,678.9 emea 4,385.4 2,255.9 2,129.5 asia 5,722.2 2,780.4 2,941.7 avnet sales $ 13,467.7 $ 6,717.5 $ 6,750.1 * may not foot/cross foot due to rounding. fiscal year 2022 quarters ended fourth quarter third quarter second quarter first quarter fiscal year july 2, april 2, january 1, october 2, 2022* 2022* 2022 2022 2021 (in millions) sales: electronic components $ 22,503.3 $ 5,930.4 $ 6,019.1 $ 5,424.3 $ 5,129.5 farnell 1,807.4 442.3 469.0 440.9 455.2 avnet sales $ 24,310.7 $ 6,372.7 $ 6,488.1 $ 5,865.2 $ 5,584.7 operating income: electronic components $ 872.0 $ 255.6 $ 265.0 $ 188.9 $ 162.4 farnell 242.5 62.9 69.8 60.2 49.6 1,114.5 318.5 334.8 249.1 212.0 corporate expenses (128.9 ) (30.9 ) (31.1 ) (33.6 ) (33.3 ) restructuring, integration and other expenses (5.3 ) - - - (5.3 ) russian-ukraine conflict related expenses (26.3 ) - (26.3 ) - - amortization of acquired intangible assets and other (15.0 ) (2.9 ) (3.1 ) (3.8 ) (5.2 ) avnet operating income $ 939.0 $ 284.7 $ 274.4 $ 211.7 $ 168.2 sales by geographic area: americas $ 5,896.0 $ 1,618.4 $ 1,627.2 $ 1,391.5 $ 1,258.8 emea 7,838.1 2,064.0 2,185.7 1,840.8 1,747.6 asia 10,576.6 2,690.3 2,675.2 2,632.9 2,578.3 avnet sales $ 24,310.7 $ 6,372.7 $ 6,488.1 $ 5,865.2 $ 5,584.7 * may not foot/cross foot due to rounding. guidance reconciliation there are no significant differences expected between the above adjusted diluted earnings per share guidance and gaap diluted earnings per share guidance for the third quarter of fiscal 2023.
