Press Release

Quarterly revenues of $4.2 billion

Operating cash flow of $730 million for fiscal year 2020 and $288 million for the quarter

PHOENIX--(BUSINESS WIRE)--Aug. 6, 2020-- Avnet, Inc. (Nasdaq: AVT) today announced results for its fourth quarter and fiscal year ended June 27, 2020.

Fiscal Fourth Quarter Key Financial Highlights:

• Sales of $4.2 billion, compared with $4.3 billion in the previous quarter and $4.7 billion in the prior year quarter.
• GAAP diluted earnings per share from continuing operations of $0.53, compared with loss per share of $0.33 a year ago.
  • Non-GAAP adjusted diluted EPS of $0.64 compared with $0.95 a year ago.
  • GAAP and Non-GAAP diluted EPS was positively impacted by $0.42 from lower tax expense and $0.08 from lower interest expense and favorable foreign currency gains as compared to the prior quarter.
• GAAP operating income totaled $1.9 million, compared with GAAP operating loss of $30 million a year ago.
  • Adjusted operating income of $42.9 million, compared with $156.3 million a year ago.
• GAAP operating margin of 0.1%, compared with GAAP operating loss margin of (0.6)% a year ago.
  • Adjusted operating income margin was 1.0%, compared with 3.3% a year ago.
• Cash flow from operations totaled $288 million in the quarter, up sequentially from $98 million in the previous quarter.
• Adjusted operating expenses improved by $16 million compared to the previous quarter and by $7 million compared to the prior year quarter.
• For fiscal year 2020, cash flow from continuing operations totaled $730 million, up $139 million from fiscal year 2019.
• For fiscal year 2020, reduced debt by $296 million with net debt of $948 million at the end of the current fiscal year.

CEO Commentary

“In the fourth quarter, we delivered quarterly revenues above consensus and generated strong operating cash flow,” said Avnet Interim CEO Phil Gallagher. “Despite the challenges of the COVID-19 operating environment, we are committed to improving our bottom-line results. In fiscal year 2021, we will enhance our core distribution business capabilities, while helping our current and future supplier partners deploy their technologies to over two million customers.”

Gallagher continued, “I want to thank all of our employees for their continued dedication and commitment to Avnet, especially during the uncertainties of the pandemic. Our people’s health and safety remains our top priority. As we enter fiscal year 2021, we will work to manage our costs while still making investments in the business that will ensure we are well-positioned to benefit as the market recovers.”

Key Financial Metrics

($ in millions, except per share data)

CFO Commentary

“During the fourth quarter, we delivered sales of $4.2 billion and adjusted diluted EPS of $0.64 despite the uncertain environment,” said Avnet CFO Tom Liguori. “Our business operations and finance teams worked diligently throughout the quarter to optimize our working capital and deliver value to our customers. Our quarterly cash flow from operations totaled $288 million, which marks the 7th consecutive quarter of positive cash flow. For fiscal year 2020, our operating cash flow totaled $730 million.”

Liguori continued, “While taking steps to conserve cash in the quarter, we also reduced adjusted operating expenses by $16 million sequentially and by $7 million year over year. Looking ahead, as we evaluate the economic impact of COVID-19 and the current demand environment, we are establishing a plan to reduce our net operating expenses by $75 million annually. This plan will be in place by the December quarter, and we will implement it while continuing to optimize our working capital levels.”

Additional Fourth Quarter Fiscal 2020 Updates

• Awarded the Cypress Semiconductor product line by Infineon, further expanding the breadth of our line card.
• Redeemed $300 million of outstanding 5.875% notes in April 2020.
• Returned $21 million to shareholders with dividends paid during the quarter.
• Recorded an income tax refund receivable of over $100 million related to the reduction in value in certain assets and from the impact of the CARES Act, most of which is expected to be realized in fiscal 2021.

Outlook for the First Quarter of Fiscal 2021 Ending on October 3, 2020

The above guidance is based upon market conditions existing as of today, and excludes amortization of intangibles, any potential restructuring, integration, and other expenses and certain income tax adjustments. The above guidance assumes 100 million average diluted shares outstanding and average U.S. Dollar to Euro and GBP currency exchange rates are as shown below:

Today’s Conference Call and Webcast Details

Avnet will host a quarterly webcast and teleconference today at 1:30 p.m. PDT and 4:30 p.m. EDT to discuss its financial results and provide a corporate update. The webcast can be accessed via Avnet’s Investor Relations web page at: www.ir.avnet.com, or from the following link Avnet Earnings Call Webcast and Slides.

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 30 days, through September 5 at 5:00 p.m. EDT, and can be accessed by dialing: 877-660-6853 or 201-612-7415 and using Conference ID: 13705277. The webcast will be available for 90 days.

Forward-Looking Statements

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 subject to uncertainty and changes in facts and circumstances. The forward-looking statements herein include statements addressing future financial and operating results of Avnet and may include words such as “will,” “anticipate,” “intend,” “estimate,” “forecast,” “expect,” “feel,” “believe,” “should,” and other words and terms of similar meaning in connection with any discussions of future operating or financial performance, business prospects or market conditions. Actual results may differ materially from the expectations contained in the forward-looking statements.

The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: the scope and duration of the COVID-19 outbreak and its impact on global economic systems, financial markets and Avnet’s operations, employees, customers and supply chain; Avnet’s ability to retain and grow market share and to generate additional cash flow; risks associated with any acquisition activities and the successful integration of acquired companies; implementing and maintaining IT systems; supplier losses and changes to supplier programs; an industry down-cycle in electronic components including semiconductors; declines in sales; changes in business conditions and the economy in general; disruptions to the business resulting from pandemics, epidemics or other health related crisis (such as COVID-19 outbreak); changes in market demand and pricing pressures; any material changes in the allocation of product or price discounts by suppliers; and other competitive and/or regulatory factors affecting the businesses of Avnet generally. More detailed information about these and other factors is set forth in Avnet’s filings with the Securities and Exchange Commission, including Avnet’s reports on Form 10-K, Form 10-Q and Form 8-K. Except as required by law, Avnet is under no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

About Avnet

Avnet is a global electronic components distributor with extensive design, product, marketing and supply chain expertise for customers and suppliers at every stage of the product lifecycle. For nearly a century, Avnet has helped its customers and suppliers around the world realize the transformative possibilities of technology. Learn more about Avnet at www.avnet.com. (AVT_IR)

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 tax expense, (v) adjusted income from continuing operations, (vi) adjusted diluted earnings per share from continuing operations, and (vii) sales adjusted for the impact of significant acquisitions and other items (as defined in the Organic Sales section of this document).

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 organic sales and sales in constant currency are useful measures 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, goodwill and intangible asset impairment 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, goodwill and intangible asset impairment 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), income from continuing operations and diluted earnings (loss) per share from continuing operations adjusted for the impact of the items described above 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. Adjustment to income tax expense (benefit) and the effective income tax rate include the effect of changes in tax laws including recent tax law changes in the U.S., 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 income from continuing operations and diluted earnings (loss) per share from continuing operations 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. All amounts below relate to Avnet’s continuing operations.

Organic Sales

Organic sales is defined as sales adjusted for the impact of significant acquisitions, divestitures and other items by adjusting Avnet’s prior and current (if necessary) periods to include the sales of acquired businesses and exclude the sales of divested businesses as if the acquisitions and divestitures had occurred at the beginning of the earliest period presented. Organic sales in constant currency is defined as organic sales (as defined above) excluding the impact of changes in foreign currency exchange rates.

The following table presents reported and organic sales growth rates for the fourth quarter and full year of fiscal 2020 compared to fiscal 2019.

Historical Segment Financial Information