Avnet, Inc. (NYSE:AVT) today announced results for the second quarter ended December 30, 2017.
Second Quarter Results
- Sales of $4.5 billion were at the high end of our guidance
- Sales increased 5.8% year over year
- Organic sales increased 1.9% in constant currency from the year ago quarter
- Diluted earnings per share (EPS) from continuing operations of $0.47
- Adjusted diluted EPS from continuing operations of $0.78
- Cash generated from operating activities was $68.8 million in the December quarter
"Our team delivered a strong quarter with improvements across our business. We exceeded our financial commitments and importantly, the Americas region has stabilized after several quarters of challenges," said Avnet CEO Bill Amelio. "Our unique ecosystem and growth engines are really coming together nicely. Our communities, comprised of engineers, makers and start-ups doing design work, added nearly 10% new member growth sequentially, and our digital revenue continues to grow and exceeded an $800 million annual run rate. Premier Farnell delivered strong revenue growth with improving operating margins. Customers and suppliers are recognizing how Avnet can uniquely provide critical services at each stage of the product lifecycle as we help customers move from idea to product and from product to market. With our ecosystem performing well coupled with a strong book to bill we are pleased to be able to increase our fiscal 2018 revenue and EPS guidance in this important transition year at Avnet."
- Electronic Components sales exceeded expectations driven by the Americas and Asia regions
- Sales increased 4.0% year over year driven by the EMEA and Asia regions
- Organic sales increased 1.4% from the year ago quarter in constant currency
- Electronic Components Asia organic sales increased 9.5% year over year in constant currency
- Premier Farnell sales increased 33.0% year over year
- Organic sales increased 7.7% from the year ago quarter in constant currency
- Electronic Components operating income margin declined year over year due to supplier channel and program changes
- Premier Farnell operating income margin improved year over year due to the realization of cost synergies
Cash Flow and Returns to Shareholders
- Returned $89 million of cash to shareholders via share repurchases and dividends
- Cash and cash equivalents at the end of the quarter was $589.5 million; net debt (total debt less cash and cash equivalents) was $1.14 billion with stable leverage ratios
- Repurchased $67.4 million, or 1.7 million shares, in the quarter. Entering the third quarter, the Company had approximately $460 million remaining under the current share repurchase authorization
- Avnet paid a dividend of $0.18 per share, or $21.6 million, during the quarter
"In the December quarter, we generated $69 million of cash from continuing operations, which represents a sequential increase of $197 million," said Ken Jacobson, interim CFO of Avnet. "We utilized the proceeds from the sale of marketable securities to buy back $67 million, or 1.7 million shares. Our disciplined share repurchase program, along with our quarterly dividend, has returned $183 million to shareholders during the first 6 months of fiscal 2018, demonstrating our commitment to our capital allocation priorities. Our transformation and cost reduction initiatives continue to gain traction, as operating income and operating margin increased sequentially. With the expectation of seasonally strong growth in the March quarter, additional cost reductions, and a strong balance sheet, we are well positioned to improve upon our performance in the second half of fiscal 2018 as we progress towards our long term financial objectives."
Outlook for Third Quarter of Fiscal 2018 Ending on March 31, 2018
- Sales are expected to be in the range of $4.65 billion to $4.95 billion
- Adjusted diluted earnings per share1 is expected to be in the range of $0.90 to $1.00 per share
- The guidance assumes 121 million average diluted shares outstanding and an adjusted tax rate of 21% to 25%
The above guidance excludes any additional acquisitions, any results of discontinued operations, amortization of intangibles, accelerated depreciation, any potential restructuring, integration, and other expenses and certain income tax adjustments. In addition, the above guidance assumes that the average U.S. Dollar to Euro currency exchange rate for the third quarter of fiscal 2018 is $1.21 to €1.00. This compares with an average exchange rate of $1.06 to the Euro in the third quarter of fiscal 2017.
Outlook for Fiscal 2018 Ending on June 30, 2018
- Sales are expected to be in the range of $18.5 billion to $18.9 billion
- Adjusted diluted earnings per share1 is expected to be in the range of $3.35 to $3.55 per share
- The guidance assumes 122 million average diluted shares outstanding and an adjusted tax rate of 21% to 25%
The above guidance represents a 2% and 3% increase in sales and adjusted diluted earnings per share guidance, respectively, compared to the mid-point of prior fiscal 2018 guidance. The above guidance excludes any additional acquisitions, any results of discontinued operations, amortization of intangibles, accelerated depreciation, any potential restructuring, integration, and other expenses and certain income tax adjustments. In addition, the above guidance assumes that the average U.S. Dollar to Euro currency exchange rate for fiscal 2018 is $1.19 to €1.00. This compares with an average exchange rate of $1.09 to the Euro in fiscal 2017.