Avnet (NASDAQ:AVT) Q4 2026 Earnings Call

0:03 Welcome to the Avnet Fourth Quarter Fiscal Year twenty twenty six Earnings Call. I would now like to turn the floor over to Lisa Mueller, Director of Investor Relations for Avnet. Please go ahead. Thank you, operator. I'd like to welcome everyone to Avnet's fourth quarter fiscal year twenty twenty six earnings conference call. This morning, Avnet released financial results for the fourth quarter of fiscal year twenty twenty six, and the release is available on the Investor Relations section of Avnet's website, along with a slide presentation, which you may

0:33 access at your convenience. As a reminder, some of the information contained in the news release and on conference call contain forward looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Such forward looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent Form 10 Q and 10 ks and subsequent filings with the SEC. These forward looking statements speak only as of the date of this presentation, and the company undertakes no obligation to publicly update any forward looking statements or supply new information regarding the circumstances after the date of this presentation.

1:24 Please note, unless otherwise stated, all results provided will be non GAAP measures. The full non GAAP to GAAP reconciliation can be found in the press release issued today as well as in the appendix slides of today's presentation and posted on the Investor Relations website. Today's call will be led by Phil Gallagher, Avnet's CEO and Ken Jacobson, Avnet's CFO. With that, let me turn the call over to Phil Gallagher. Phil? Thank you, Lisa, and thank you everyone for joining us on our fourth quarter and fiscal year twenty twenty six earnings call. I'm very pleased to report an exceptional finish to fiscal twenty twenty six. The fourth quarter results came in well above our expectations and capped a year of strong performance and meaningful progress for Avnet.

2:11 We delivered a record quarter across all key metrics in both our Electronic Components and Farnell businesses, supported by improving demand across all of our core markets, strong execution by our teams and expanded margins from the operating leverage inherent in our business model. For the full fiscal year, Avnet delivered substantial revenue, margin and earnings growth as market conditions improved and our team remained focused on execution in areas we can control. Looking back, fiscal twenty twenty six was a year where many of the indicators we have been discussing for several quarters began to translate into stronger results. Book to bills improved, backlog grew, customer demand visibility and ordering patterns strengthened, lead times extended in most product categories and demand creation activity remained healthy.

2:59 Just as important, we stayed disciplined in working capital, operating expenses and capital allocation, while continuing to invest in the capabilities that differentiate Avnet in the market. Throughout the year, we continue to demonstrate the value we bring at the center of the technology supply chain. We strengthened supply relationships, supported customers through a more complex demand environment and expanded our technical and digital capabilities. We also ensured that we are well positioned to participate in several end markets that are demonstrating high growth potential or already showing high growth in electronic components demand. I want to thank our employees around the world for their hard work and commitment. These results reflect the experience, resilience and dedication of our team. Now turning to the recently completed fourth quarter.

3:48 It was a record quarter for Avnet that exceeded our sales and EPS guidance. We achieved record sales of $8,300,000,000 and an adjusted operating margin of 3.8%, highlighted by an Electronic Components operating margin of 4% and a nine percent operating margin at FRNL. We also improved inventory days to 71, the lowest level in nearly four years and believe we have the capacity to continue improving in fiscal twenty twenty seven. The sales improvement we saw was broad based. We are excited not only by the magnitude of the growth, but the breadth of the recovery across all regions and end markets. This gives us confidence that the improvement in demand is not tied to a single end market or trend, but reflects a broader demand recovery across the diverse applications that require electronic components.

4:38 The supply environment continues to tighten during the quarter, with lead times moving higher across most of the component categories we track for both semiconductor, interconnect, passive and electromechanical or IP and E products. What initially appeared to be demand concentrated around AI and data center related appointments has broadened considerably with extended lead times now evident across a wider range of applications and end markets. As the quarter progressed, increases became more prevalent beyond memory. We expect additional price increases from a number of semiconductor and IP and E suppliers in the months ahead. Artificial intelligence continues to be an important catalyst for the industry and for Avnet, but we believe the improving demand environment is broader than AI alone.

5:24 While we benefit from sales into data center applications and technologies that support AI infrastructure, we are also seeing positive effects across our diversified end markets. Investments being made to support AI are accelerating demand for power management, connectivity, automation and other enabling technologies across a wide range of applications. That impact is increasing semiconductor and component content across the broader markets we serve. We also see new demand from customers that are deploying AI at the edge. These customers are in our industrial sweet spot, which we are well positioned to serve. Robotics, drones and autonomous systems are still in the early stages of adoption, but each application requires a combination of sensing, connectivity, embedded computing, power and thermal management.

6:15 These are areas where our supplier line acquired engineering resources, global scale and supply chain expertise create meaningful value. Now with that, let me turn to the highlights for our businesses. Our Electronic Components business delivered another record sales quarter. All three regions grew double digits year over year and sequentially. Sales growth was the highest in The Americas, marking its fourth consecutive quarter of year on year growth. All end markets showed sequential growth. Year on year, aerospace and defense, networking and data center were the strongest end markets. In Asia, sales reached another record high of $3,900,000,000 marking our eighth consecutive quarter of year on year sales growth in the region.

7:05 Similar to last quarter, demand increased across all the geographies and end markets we serve, led by data center, transportation, networking and industrial. In EMEA, sales grew both sequentially and year on year for the third consecutive quarter. We are seeing improvement with a mix of higher performing end markets such as data center and industrial alongside markets with a somewhat slower growth like Transportation. We continue to see positive signs including improved book to bills and our expectations that the region will see continued growth in the second half of calendar year 2026. Within Europe, we also continue to see steady improvement in our Embedded business, which creates tighter customer relationships and better margins.

7:51 Customers continue to see the value Embedded Boards and Displays bring as a part of our total solutions offering, helping them solve for their product design requirements. Now turning to Farnell. We were pleased with the continued progress in the business. Farnell benefited from improving demand, continued execution against its strategy and the benefits of leveraging Farnell's digital platform and high service distribution model within Avnet's global relationships and scale. Our Power of One initiatives continue to create opportunities for both organizations and we are excited by Farnell's trajectory as market conditions improve, particularly in Europe. This quarter demonstrated that our model is designed to generate significant profit expansion as we grow the top line.

8:38 We delivered meaningful margin expansion and earnings growth, while managing our operating expense. We still have ample capacity in our sales, engineering, digital and distribution infrastructure and that capacity becomes more valuable as demand improves and market conditions tighten. Our higher margin IP and E business is another example of how we benefit from complexity and the fourth quarter was another record quarter for IP and E sales. For the full fiscal year, IP and E sales are approaching $5,000,000,000 As AI infrastructure, industrial automation, robotics, drones and edge applications expand, customers need more complete technology solutions. Our ability to bring semiconductor and IP and E products together through demand creation, technical support and supply chain expertise is an important part of our value proposition.

9:29 Our Supply Chain Solutions business continues to build momentum as large OEM customers increasingly turn to us to help navigate complex and evolving supply chains. We are expanding our engagements with a growing number of leading OEMs, particularly in markets such as data center infrastructure, networking and transportation, where demand trends remain favorable. The strength of our capabilities was recently recognized by General Motors, which named Avnet a 2025 Creative Supplier of the Year, recognizing our relationship, innovation and supply chain support. This award reinforces the value we bring to customers through our global reach, deep industry expertise and ability to deliver creative supply chain solutions. Another good example of the differentiated capabilities within our company is Avnet Integrated Solutions, which helps customers bring complete technology solutions to market by providing system assembly, rack integration, configuration, testing and deployment services globally.

10:30 One of its larger customers sells directly into the data center market and we support that growth through a combination of technology solutions, physical integration, supply chain coordination and fulfillment capabilities. While this is only one example, it highlights how Avnet creates value beyond traditional component distribution and participates in high growth areas where complexity is increasing. As I reflect on fiscal twenty twenty six, I am proud of what our team accomplished, but I'm also mindful that success in our industry is earned every day. It is earned through reliability, execution, technical expertise and trusted relationships. That responsibility is something we take very seriously. It is also why I believe our culture matters so much.

11:15 We have experienced teams who understand the market, stay close to customers and suppliers and move quickly when conditions change. That consistency is a real advantage for Avnet. Looking ahead, we remain optimistic, but grounded. Market conditions and demand trends continue to improve. Our book to bills in all regions are solidly above one. Our backlog is healthy and extending, giving us better visibility well into fiscal year twenty twenty seven. And our diversified go to market strategies, end markets and supplier technologies ensure we are well positioned to benefit from the many of the long term growth trends shaping the electronics industry. At the center of the technology supply chain, Avnet has never been more relevant.

12:02 Our capabilities, relationships and global reach position us to support customers and suppliers as demand strengthens across the markets we serve. We are proud of the progress we made in fiscal twenty twenty six and are focused on continuing to execute with discipline as we move into fiscal year twenty twenty seven. With that, I'll turn it over to Ken to dive deeper into our fourth quarter results. Ken? Thank you, Phil, good morning, everyone. We appreciate your interest in Avnet. Our sales for the fourth quarter were record $8,300,000,000 above the high end of our guidance range and up 48% year over year. On a sequential basis, sales were higher by 17%. Foreign currency did not have a meaningful impact on our sales growth this quarter.

12:47 Regionally, on a year over year basis, sales increased 55% in The Americas, 46% in Asia and 44% in EMEA. During the fourth quarter, sales from Asia were 47% of total sales compared to approximately 48% of sales in the year ago quarter. From an operating group perspective, Electronic Components had record sales during the quarter as sales increased 49% year over year and increased 17% sequentially. Farnell also had record sales during the quarter as sales increased 29% year over year and 10% sequentially. Similar to last quarter, Memory prices increased during the quarter. As a result, approximately one third of both the sequential and year over year sales growth was attributable to pricing increases in the Memory product category. For the fourth quarter, gross profit dollar grew at approximately the same rate as sales growth or 46% year over year.

13:39 Gross profit margin of 10.4% was up five basis points sequentially and was down 14 basis points year over year. Electronic Components gross profit margin was flat sequentially and down 25 basis points year over year. Cornell gross profit margin was up nearly 400 basis points year over year and was up over 200 basis points sequentially, primarily due to a better mix of higher margin on the board component. SG and A expenses were $548,000,000 in the quarter, up $96,000,000 year over year and $29,000,000 sequentially. The sequential increase in SG and A is primarily from higher incentive compensation, freight and logistics costs due to higher sales volumes. Our expense discipline continues to drive our operating leverage. As a percentage of gross profit dollars, SG and A expenses were 63% in the fourth quarter compared to 70% last quarter and 76% a year ago.

14:32 SG and A expenses as percentage of gross profit dollars was even lower for our EC business at 56% compared to 62% last quarter and 68% a year ago. We expect that our SG and A expenses as a percentage of gross profit will continue to improve to below 60% before the end of fiscal twenty twenty seven. For the fourth quarter, we reported adjusted operating income of $318,000,000 and the Avnet adjusted operating margin was 3.8%, an increase of over 70 basis points from last quarter. This represents the fourth consecutive quarter of adjusted operating income margin expansion. Adjusted operating income also grew approximately 2.6 times greater than sales compared to last quarter and last year. We expect to continue to drive operating income growth at approximately twice the rate of sales growth supported by our disciplined expense management.

15:22 By operating group, Electronic Components operating income was $317,000,000 and EC operating margin was 4.1% in the fourth quarter. The 54 basis point sequential increase in EC operating margin was led by The Americas with all regions improving their operating margins sequentially and year over year. This is EC's third consecutive quarter of operating margin expansion and is the highest EC operating margin in more than two years. Farnell operating income was $45,000,000 and their operating income margin was 9%, which was up nearly 400 basis points from last quarter. This is the highest Farnell operating margin in over three years and is our seventh consecutive quarter of operating margin expansion. Farnell continues to be on track to reach double digit operating margins before the end of fiscal twenty twenty seven.

16:08 Turning to expenses below operating income, fourth quarter interest expense was $66,000,000 and our adjusted effective income tax rate was 23%, both consistent with expectations. Adjusted diluted earnings per share of $2.28 was a quarterly record for our company and was well above the high end of our guidance. Adjusted diluted earnings per share grew 3.8 times greater than sales compared to last year and grew 3.3 times greater than sales compared to last quarter. Near term, we expect EPS to continue growing at approximately three times as fast as sales, driven by sales growth and expanded operating margins. Turning to the balance sheet and liquidity. During the quarter, working capital increased $559,000,000 sequentially, primarily due to an increase in accounts receivable driven by the $1,200,000,000 growth in sales.

16:55 Working capital days decreased seven days quarter over quarter to sixty nine days.

17:00 From an inventory perspective, inventory days improved to seventy one days from seventy seven days last quarter. Our EC inventory days improved to below sixty five days and Farnell inventory days improved to below two hundred days. We expect inventory days to continue to improve for EC, but we expect Farnell inventory to remain around two hundred days, reflecting the business's typical inventory churn profile of two turns per year.

17:24 Inventory dollars grew 11% or $600,000,000 similar to the impact pricing had on sales more than 50% of the inventory increase was driven by pricing and substantially all of that was memory related. Inventory net of accounts payable decreased by $821,000,000 compared to last quarter. Inventory remains a fundamental driver of our business. We will continue to focus on making necessary inventory investments to position us to capture the growth opportunities we see in the markets we serve. We ended the quarter with a return on working capital of 19% exceeding our near term target of 16%. Continually improving our return on working capital remain a key priority for us coming to the new fiscal year. In the fourth quarter, we used $291,000,000 of cash flow from operations to support $1,200,000,000 of sequential sales growth. We anticipate using cash in the first quarter to continue supporting the sales growth primarily in the form of accounts receivable.

18:20 With regards to our capital allocation, in the near term, we expect to prioritize funding our accelerating growth and supporting our dividend. Cash used for capital expenditures was $17,000,000 during the quarter. We are making progress towards our leverage target of approximately three times, which we expect to achieve by the end of the calendar year. We ended the fourth quarter with a gross leverage of 3.2 times, down from 3.6 times in the third quarter and with approximately $1,200,000,000 of available committed borrowing capacity. For the fiscal year, we returned $138,000,000 to shareholders from share repurchases, representing 3.2% of shares outstanding. We also returned $114,000,000 to shareholders in dividends, including $29,000,000 for the quarter.

19:04 Turning to the first quarter guidance, we're guiding sales in the range of $9,000,000,000 to $9,300,000,000 and adjusted diluted earnings per share in the range of $2.80 to $2.90 Our first quarter guidance assumes current market conditions persist and implies a sequential sales increase of approximately 10% of the midpoint. This guidance also assumes similar interest expense compared to the previous quarter and effective tax rate of between twenty one percent and twenty five percent and 85,000,000 shares outstanding on a diluted basis.

19:33 I want to thank our team for driving a solid quarter and fiscal year of improved financial results. We have great momentum coming into the new fiscal year and we continue to position ourselves to be able to capitalize on the growth opportunities ahead and to continue to achieve new records for both sales as well as earnings in the coming quarters. With that, I will turn it over to the operator to open it up for questions. Operator?

19:57 We'll now be conducting a question and answer session. Thank you. Our first question is from Joe Quatrochi with Wells Fargo. Yes. Thanks for taking the questions. I was wondering if you could just talk a little bit more about the pricing dynamics that you're seeing. What's kind of embedded in the guide from a memory pricing change perspective? And then on the reported results, can you help us just understand what was the impact on the memory pricing from an EBIT perspective on a sequential year over year basis relative to, think you said, it was about a third of the revenue growth?

20:55 Yes. Thanks, Joe. I'll start and then turn it over to Ken for some of the percentage as well. So thanks. Well, as a general statement, even outside of memory, we're starting to see a broader expansion of price increases across other commodities. So we mentioned that last quarter is that lead times continue to extend or forecast to extend, we'll start seeing some ASP inflation. And it's pretty broad, not across the board everywhere, but it's pretty broad.

21:31 And then lot times the question does it impact our margins or does it impact our GP dollars? A lot of times we'll we pass the pricing through to the customer. We don't typically mark it up beyond that price increase. So we get some ASP

21:49 upside and maybe some GP dollar upside, but not necessarily in the percent, if you will. But to date, most of it has really been in memory, but starting this quarter and the last quarter, this quarter will start to hit other areas. And then there's other parts of the portfolio, Joe, you got to remember that are still pressing negotiations, they've got some deflation there too. So it's not all inflation, there is some deflation happening as well. Ken, you want to Yes. Joe, would say, just to ramp up, as Phil said, I think we would see that there's other price increases happening or being announced, but they're much more modest than what we saw in memory.

22:29 I would say then the guide assumed modest or minor price increases going into next quarter. We'll continue to monitor the situation and give clarity there. From a how much they impact EBIT or operating income, we would say about a third of that GP dollar growth also came from pricing. So, there wasn't any meaningful difference between the sales impact and the GP dollar impact. And I think just in general, I think our operating income dollars, our GP dollars dropped through about 2.6 times. So, think about it as the operating leverage benefited not only from the volume growth, but also from the pricing in roughly the same mix as how we saw in the GP dollars.

23:17 Okay. And then maybe I think you I think I heard you say greater than 50% of the increase in inventory was more or less related to kind of pricing of the inventory or pricing of mix. You talk about just like the unit increase of inventory and then how do we think about the unit increase of inventory as we start to look into fiscal twenty twenty seven or into the September quarter?

23:43 Yes, that's right. About half of the increase came from pricing specifically memory and again some of that's just timing differences, right, in terms of when we got product and things of that nature. I think in general, you're going to need more units to support the higher volumes, but we're turning it faster. So, I think our commentary was you expect to continue to see some improvement at least in the EC business on inventory days as we continue to increase our working capital velocity. But I think the inventories as healthy as it's been, no real problems in terms of even some of the stuff that was kind of excess is kind of freed up. So, we're in really good shape, I think from a quality of inventory and continue to see things get tighter, right. So, as things get tighter, we want make sure we've got inventory on the shelves to take advantage of that opportunity as lead times extend.

24:29 Joe, this is call. We work with all of our customers in the forecasting, as well as obviously balancing that with our suppliers' needs and bounce that back and forth.

24:40 So from a unit standpoint, we're in good shape. From an inventory standpoint, to Ken's point, the inventory is healthy. But we're constantly though meeting with our suppliers to be sure we got the right positioning of their inventory of the top runners as well. And we track it in with many suppliers in the weeks of inventory, okay. So we're still investing in inventory. Big time, as a matter of fact, is very critical and working that balance with the suppliers. And I do know in Farnell, where we said the inventory stays improved as well, the SKU count actually year on year is up somewhere around 2% to 3%. So we'll continue to add inventory there. So this might be a different mix and broader, which is what we want for the high service business. Thank you.

25:27 Thanks, Joe. Our next question is from William Stein with Tru Securities. Great. Thanks for taking my questions. Congrats on the very good results and the huge guidance you're providing.

25:45 Phil, I'm hoping you can talk to us a little bit about sort of the positioning in the cycle, right? You just posted revenue up, I don't know, about 34% year over year. It's the fourth quarter of year over year growth. What inning would you say we're in?

26:09 Thanks, Will, for the comments, first off. It's a tough one to call. It's a yes, we're going to fourth quarter, actually almost 50% year on year this quarter. It was 34% last quarter growth. And I evaluate for Asia, it's eight quarters, Will, which is extended already, right, and still looking very bright. So it's tough to call. I'd say we're and it depends on the supplier you talk to, but for most part or the customers, it feels like maybe in the third or fourth inning, maybe something along those lines, if I were going to put it in baseball terms, for sure not the eighth inning.

26:49 So I would probably say it's in the front third of the baseball game, the third fourth inning.

26:56 Sort of an analogy. All do is exactly what anybody, I think gives you a little bit of what we're seeing from a backlog bookings, etcetera. Just it seems like it's going to last for a little while. Okay. Maybe the other thing I'd like to look at is the margin performance. I think you explained why gross margins may I mean, they were up sequentially, but maybe a little bit disappointing considering the magnitude of the upside, why that wouldn't have sort of flowed through the better results. I think what you've said is that price increases have sort of deflationary effect on that. But as we progress through the cycle, where should we anticipate gross and operating margins traveling to and maybe settling out? I think historically, you've talked about a 5% or greater than 5% operating margin target.

27:53 You're still nowhere near that really. You've gotten close before.

28:00 Should we think about expansion over the next few quarters?

28:05 Well, I guess the short answer to your question would be continued steady progress. I think if you look at the past four quarters, 30 basis points this quarter was about 60 basis points expansion, specifically on EC. In general, I think we can expect to continue to see some modest uptick in Parnell's gross margins as they get a higher mix of on the board components. For EC, that answer partially depends on where the growth is coming from. We've seen good progress on operating margin because the West, Europe and The Americas has recovered, but Asia is still going really strong. So, that regional mix still has an impact on gross margin. So, I would temper any expectations for expansion of gross margin on EC, but continued steady progress in that historical range we've seen over the past year.

28:52 And I think the guidance would imply that progress. But obviously, that's

28:59 the target is continuous improvement working towards 5%. And as we've been saying that we need the West to get stronger and that's starting to happen, which is great. So, The Americas, we're seeing improvement in top line and bottom line as well as in Europe, which is really good news. That's our most profitable region. So Europe is definitely rebounding with good backlog and positive book to bills as well. And then, course, as Ken mentioned, Farnell really accelerated to 9% operating margin. They get that to 10%, 11%, 12% that should

29:32 happen and we'll see where it plays out. By the way, I want to correct myself. I think you corrected me though, Phil. I was looking at my old model to look at year over year growth. You're right, 47% you just posted and maybe the fifth quarter of expansion and you're guiding to even better. So, that's great. But I want see if I can ask one more, please. In December, I think total company revenue growth is typically down a couple of percentage points. I know you're not guiding more than a quarter out. But as we think about where we are in the cycle and as we think about price increases, is it reasonable for us to think December comes in at seasonal, above? Or is there any concern that maybe there's double ordering or customers trying to get ahead and that there could be a pause in December?

30:27 What's your current thinking as to what might drive a variance between typical and this December? Yes. Thanks, Will. And I would never correct you, Will. But first, word typical is that's what we talk about internally too. It's our typical seasonality and go back and look at it. Kind of everything has been somewhat thrown out the door on typical anymore because of the even since COVID. But looking at the numbers now, even last year, quarter was rather strong for us. But you are right, historically, December quarter will be stronger in Asia, weaker in the West and you have a mix issue. But so that's first obviously, yes, and just like Chinese New Year last year, or Lunar New Year in March quarter, we grew in Asia Pac for the first time significantly in the March quarter. So this whole historical typical is really, really tough to call. But as you see it right now, as you look at the without guiding, but if we look at the backlog and the book to bills and what we're talking to the teams about, December is actually looking pretty healthy, but without giving an exact guide, it's actually looking pretty good. I'd say better than seasonal, but probably not double digit sequential Yes.

31:50 Well, helps guys. Thanks so much. Thanks, Will. Our next question is from Ruplu Bhattacharya with Bank of America. Hi, thanks for taking my questions. Phil, Americas revenue increased 28% sequentially and looks like it was materially faster than EMEA and Asia. Can you talk about like what were some of the factors that drove that regional divergence and how much came from memory and data center? I mean, it just seems that that region had just outsized kind of growth this quarter. So can you just comment on that? Yes, sure. Ruplu, thanks. Yes, so really nice performance in The Americas, and it was in all the regions actually. And yes, it did outgrew Asia, but you also got to remember Asia has had eight plus quarters in a row of year on year accelerated growth. So they're kind of going against their own compares a little bit, right. So, with Americas, I think it's four quarters now.

32:50 If you look at it, it's really diverse in the verticals, Ruplu, which is healthy, which is good. So, it's actually no, it's not a ton of data center, actually it's relatively small for us here directly into the data center. We enjoy more of that business in Asia Pac. But even there, it's maybe 10% to 15% of the total business for us at the corporate level, so directly into the data center. But all verticals, I'm looking at, as we're talking, we're up. We saw increase in industrial nicely, by the way. Aerospace was up almost 40%, 40%, 50% year on year to Aerospace and Defense.

33:38 The comms were up, Compute Transportation was even up, which is predominantly automotive. And even although it's small, we saw increase in consumer. So just had a diversification of the market and really the industrial and defense leading the way from a revenue standpoint and a growth standpoint, which makes sense. Unfortunately, Defense, Aero, look what's going on in the world, and we have a strong position there with a dedicated business unit for that vertical. And then industrial, partially getting some acceleration with the data center, right now we talk about that, the AI hail kind of thing. And that ecosystem around the data center and the hyperscale and the growth there is going to drive growth in the industrial, right, and EMS providers.

34:35 So the cooling, that they need to power data centers fall right into a lot of our industrial markets where we have a very strong position. So, it's no magic. Ken, anything I would just say there's nothing different inherently different. Americas benefited from memory pricing just like the rest of the regions, but there was nothing inherently different in The Americas versus the other regions in terms of memory. So again, that's helping in the growth rates, but it helped all the other regions as well. Okay. All right. Thanks for all the details there. For my follow-up, Ken, can I ask you to unpack a little bit on the revenue guide for 9,000,000,000 to $9,300,000,000 I mean, much is memory pricing and how much are you factoring in unit volumes? How sensitive is the outlook to each? Book to bill is well above parity you said and lead times are increasing.

35:27 But I mean is there evidence that these orders reflect real consumption rather than any precautionary buying? And then we talked about you said double ordering is something probably the suppliers look at, but just with all the component costs going up, any danger of any demand destruction? So if you can just kind of help us with what you're embedding into your outlook and risk management for the year kind of, right? Thank you. Yes. So, there's a few questions in there. I'll probably let Phil jump in on a couple of those as well. I guess, maybe just to answer your question, our approach for giving guidance hasn't really changed from past quarters. We're taking the roll up from the teams and putting some intelligence on it, but it's we feel, good about the guidance we've provided.

36:16 And we're shipping a lot more units. Again, the guidance doesn't assume any meaningful price aspects in that guide. So, there's some modest price increases, but it's rounding relative to the overall scheme. This is really units and by the way increased ASP mix, So, we have higher ASP products that are going through our volumes as well. So, that's part of the equation. But, again, you mentioned that backlog strong, book to bills well above parity, when we're seeing volumes move. I would say, we are seeing more and more customers, especially large OEMs trying to build up, let's say, safety stock, buffer stocks, things like that. But I think in this environment, it's hard to get a hold of it. We use memory as an example. A lot of customers wish they had more, there's not more to be had. So, don't think we feel that there's any excess builds or this is a lot of safety stock. Believe this is getting much closer to true consumption.

37:12 I guess, time will tell there, but there's nothing we see in our indicators that suggest significant buildup of customer inventories. That being said, memory is causing some constraints in terms of getting everything you need to build. But think generally speaking, lead times are up into the right and inventory is being consumed as it comes in and that's why we're turning things faster. Phil, any other commentary there? Yes. No, just on the so long and short, no, we're not seeing demand disruption at this point. And on the book to bill, yes, the book to bill is positive as you caught in our script. And then the double booking questions comes up, I think Joe asked that as well. I'm not sure we got to that, so I apologize. You're right, we kind of lean on the suppliers to try to track for the double bookings, right, but we wouldn't see that. We look at the forecast management inflated demand, right, which is part of your question. We try to, as we manage these MRPs coming in the API, EDIs, have you, we're trying to put some analytics around and say, hey, what's the reality of that?

38:19 Real is that forecast? And we look for spikes. If something all of a sudden spikes up, we go back and challenge the customer, do they really need that additional product or not. So the backlog is we sanitize as best we possibly can, work with the suppliers as best we possibly can. And the other thing we look at is, we're anything today as we look at it abnormal from a cancellation standpoint. And then we roll up back to your point, we roll up the forecast from the field as Ken points out, we have a lot of dialogue as you can imagine. And then we got analytics that says, okay, what's the analytics we're going to do? And it's lining up to what we guided.

39:06 Okay. Thanks for all the details. Appreciate it. Thanks, Ruplu. Our next question is from Melissa Fairbank with Raymond James. Hey, guys. Thanks very much. Congratulations on another exceptional quarter. It's pretty clear all of our models were completely wrong and and and not appreciating the growth rate. So that's a good problem to have. Yeah. Yeah. Phil, I know you have a pile of sheets with the data in front of you. And you know, if you could just make that available to us, that would be great. No. I just I I wanted to kinda dig in on the Farnell improvement.

39:54 Obviously, we know that that's a highly cyclical business, but at the same time, you have been making a lot of structural changes over there and congratulations to the team for succeeding there. I would is there a way to quantify what sustainable margin profile is going to look like versus we've got structural improvement plus end market demand? Is there a way to kind of parse that out? Yes. Don't know if I get into the max detail on that, but the answer is yes. We're looking at know that high service guys can get some non traditional demand, right, as we saw the last cycle come into their inventory and whatnot. And then we do get some accelerated ASPs and margin as a company because of that at Farnell, which had many benefits.

40:49 What we are doing is we're breaking out and where we're having heavy ASP inflation with Farnell, with Rebecca and team and say, okay, what's our performance without that? So we're actually building in the model as there's when there's a cycle adjustment, what is the margin model, what do we predict the margin model is what we saw. So we are modeling that. We don't have the exact numbers on that floor, but it's going to be much higher than what the cycle floor was last time. And that's how we're managing. We don't have all the businesses frankly, but Farnell for sure, because they do get some accelerated growth here. But we're proud of that, the team there as well as we are the rest of the team. Was a nice jump for us for sure.

41:36 The other data point I gave you Melissa would just appreciate the from a memory side when we talk about that, that's mostly EC commentary that's benefiting some from memory, but it's a much smaller percentage of their sales than what we see in the EC. And I would still say, we're still probably earlier innings in terms of seeing some of that additional demand coming from shortages and things like that. I still think EC business is kind of fulfilling customers as they need it in pipelining and things like that. So Farnell is probably seeing some benefit, likely more as things get tight. Yes. The diversification is interesting too, Melissa. We are investing quite a bit in onboard components, which by definition is semiconductors, IP and E, and that helps our overall margin model as well. That tends to run a little bit higher than the test and measurement, although that's great business for us. It's just the margin a little bit lower in that space and higher onboard components. So potentially driving that mix.

42:36 Perfect. I appreciate all that detail. I was kind of curious if you can comment on what you're seeing. I know that you've seen some growth driven by transport improved demand there. In automotive, we've heard from some of your suppliers recently, including one this morning, that was saying the automotive guys, the OEMs are pressuring the Tier 1s to finally start securing more, inventory. You know? And I think that this is a little bit of a swing factor from we saw this overcorrection back to just in time or extremely lean inventory levels after the supply chain crisis, maybe now we're starting to realize like the demand is still there and the supply is tight.

43:27 I was wondering if you could comment on what you're seeing there? Yes. So, I know exactly what you're talking about. Of course, talked about General Motors in the script and nice win there. Look, I'm looking at the it's pretty I looked at the transportation verticals across the world, we actually saw an increase in all regions in transportation. It's coming from a lower year on year compare. Even in Europe, we saw it up double digit, low double digit, Asia roughly 15%, 20% and here in The U. S. With 2025% year on year. So there is a swing there. And part of that is just more there's also more products being designed in our technology semiconductor and airfact passive.

44:19 So the content is going up, which we're benefiting from. Not aware of any intentional conversations with any of the transportation guys who are just stockpiling inventory or anything along those lines. There has been a few customers that have had those conversations outside of the automotive, but I'm not if they're happy, I'm not directly involved in those dialogues, but Ken can comment. I would just say, Melissa, from our supply chain services business perspective though, we're having lots of conversations in the transportation space about how we can help keep supply chains going. So, again, we're not privy to Tier one versus the automakers, but clearly, there were some bad outcomes last time around when things got short in the transportation space and definitely they're not looking to have that happen again. Think Phil's comment was, I want a $2 part holding up $100,000 vehicle.

45:17 Yes. So and our suppliers are to watch that too, right? I mean, they don't want to over ship either into that and cause another issue like we saw last cycle. Yes. I think bad outcomes is an understatement. Yes, right. And a couple of the suppliers that have announced this week talk more about the mass market, which is great for us. Great. Thanks very much, guys. Appreciate all the color. Thanks again, Boise. Thank you. There are no further questions at this time. I would like to hand the floor back over to Phil Gallagher for any closing remarks. Okay. Thank you. And I want to thank everybody for attending today's earnings call.

46:03 I look forward to speaking to you again at our first quarter fiscal year twenty twenty seven earnings report in November. Okay. Have a good rest of the summer. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.