Thank you, operator. I'd like to welcome everyone to Avnet's fourth quarter fiscal year 2026 earnings conference call.

This morning, Avnet released financial results for the fourth quarter of fiscal year 2026, and the release is available on the Investor Relations section of Avnet's website, along with a slide presentation which you may access at your convenience. As a reminder, some of the information contained in the news release and on this 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-K 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. 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 CEO, and Ken Jacobson, Avnet 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 2026 earnings call. I'm very pleased to report an exceptional finish to fiscal 2026, with fourth quarter results that came in well above our expectations and capped a year of strong performance and meaningful progress for Avnet.

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 the areas we can control.

Looking back, fiscal 2026 was a year when 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.

Just as important, we stayed disciplined on working capital, operating expenses, and capital allocation while continuing to invest in the capabilities that differentiate Avnet in the market. Throughout the year, we continued to demonstrate the value we bring at the center of the technology supply chain.

We strengthened supplier 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, it was a record quarter for Avnet that exceeded our sales and EPS guidance. We achieved record sales of $8.3 billion and an adjusted operating margin of 3.8%, highlighted by an Electronic Components operating margin of 4% and a 9% operating margin at Farnell.

We also improved inventory days to 71, the lowest level in nearly 4 years, and believe we have the capacity to continue improving in fiscal 2027. The sales improvement we saw was broad-based.

We're 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.

The supply environment continued 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&E products. What initially appeared to be demand concentrated around AI and data center-related deployments has broadened considerably, with extended lead times now evident across a wide range of applications and end markets.

As the quarter progressed, pricing increases became more prevalent beyond memory. We expect additional price increases from a number of semiconductor and IP&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. While we benefited from sales into data center applications and technologies that support AI infrastructure, we're 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. These are areas where our supplier line card, 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 $3.9 billion, marking our eighth consecutive quarter of year-on-year sales growth in the region. 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're 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.

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.

We delivered meaningful margin expansion and earnings growth while managing our operating expenses. 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&E business is another example of how we benefit from complexity, and the fourth quarter was another record quarter for IP&E sales. For the full fiscal year, IP&E sales are approaching $5 billion.

As AI infrastructure, industrial automation, robotics, drones, and edge applications expand, customers need more complete technology solutions. Our ability to bring semiconductor and IP&E products together through demand creation, technical support, and supply chain expertise is an important part of our value proposition.

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. 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 2026, I am proud of what our team accomplished, but I am 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. 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 1.

Our backlog is healthy and extending, giving us better visibility well into fiscal year 2027. Our diversified go-to-market strategies, end markets, and supplier technologies ensure we are well positioned to benefit from 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. 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 2026 and are focused on continuing to execute with discipline as we move into fiscal year 2027. With that, I'll turn it over to Ken to dive deeper into our fourth quarter results.

Ken?

Thank you, Phil, and good morning, everyone. We appreciate your interest in Avnet.

Our sales for the fourth quarter a record $8.3 billion, 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. 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 dollars grew at approximately the same rate as sales growth, or 46% year-over-year.

Gross profit margin of 10.4% was up 5 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.

Farnell 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 components. SG&A expenses were $548 million in the quarter, up $96 million year-over-year and $29 million sequentially.

The sequential increase in SG&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&A expenses were 63% in the fourth quarter compared to 70% last quarter and 76% a year ago. SG&A expenses as a 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&A expenses as a percentage of gross profit will continue to improve to below 60% before the end of fiscal 2027. For the fourth quarter, we reported adjusted operating income of $318 million, 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. By operating group, Electronic Components operating income was $317 million, and EC operating margin was 4.1% in the fourth quarter.

The 54 basis points 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 2 years.

Farnell operating income was $45 million, 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 3 years and is their seventh consecutive quarter of operating margin expansion.

Farnell continues to be on track to reach double-digit operating margins before the end of fiscal 2027. Turning to expenses below operating income, fourth quarter interest expense was $66 million, 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 3 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 million sequentially, primarily due to an increase in accounts receivable driven by the $1.2 billion growth in sales.

Working capital days decreased 7 days quarter-over-quarter to 69 days. From an inventory perspective, inventory days improved to 71 days from 77 days last quarter.

Our EC inventory days improved to below 65 days, and Farnell inventory days improved to below 200 days. We expect inventory days to continue to improve for EC, but we expect Farnell inventory to remain around 200 days, reflecting the business's typical inventory turn profile of two turns per year.

Inventory dollars grew 11% or $600 million. 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 million 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 will remain a key priority for us coming into the new fiscal year. In the fourth quarter, we used $291 million of cash flow from operations to support $1.2 billion 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. 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 million during the quarter. We are making progress towards our leverage target of approximately 3 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 $1.2 billion of available committed borrowing capacity. For the fiscal year, we returned $138 million to shareholders from share repurchases, representing 3.2% of shares outstanding.

We also returned $114 million to shareholders in dividends, including $29 million for the quarter. Turning to the first quarter guidance, we are guiding sales in the range of $9 billion to $9.3 billion 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% at the midpoint. This guidance also assumes similar interest expense compared to the previous quarter, an effective tax rate of between 21% and 25%, and 85 million shares outstanding on a diluted basis.

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?

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? Then on the reported results, can you help us just understand what was the impact on the memory pricing from a bit perspective on the sequential year-over-year basis relative to, I think you said, it was about a third of the revenue growth?

Thanks, Joe. I'll start, and then turn it over to Ken for some of the percentages as well.

Thanks. It's general savings, even outside of memory, we're starting to see a broader expansion of price increases across, other commodities.

We mentioned that last quarter that lead times continue to extend or forecast to do extend, while start seeing some ASP inflation. It's, like I said, it's pretty pretty pretty broad, not not not across the board everywhere, but it's pretty broad.

Then, a lot of times the question comes, does it impact our margins or does it impact our GP dollars? A lot of times, well, we pass the pricing through to the customer, but we don't typically mark it up beyond that price increase.

We get some ASP upside and maybe some GP dollar upside, but not necessarily in the in percent, if you will. To date, most of it has really been in memory, but starting this quarter, end of last quarter this quarter will start to hit other areas.

Then there's other parts of the portfolio, Joe, you've got to remember that that, are still, price negotiations. You've got some deflation there, too.

It's not not all inflation. There is some deflation happening as well.

Ken, you want to— Joe,

I would say, just to reemphasize what 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. 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 did it impact EBIT or operating income, we would say about a third of that GP dollar growth also came from pricing, there wasn't any meaningful difference between the the sales impact and the GP dollar impact.

I think just in general, I think our our operating income dollars, our GP dollars dropped through about 2.6 times, the think about it as the operating leverage benefited not only from the volume growth, but also from the pricing in in, roughly the same mix as how we saw in the GP dollars.

Okay. Then maybe 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 the mix.

Can you talk about just the unit increase of inventory, and then how do we think about the unit increase of inventory as we start to look into fiscal 2027 or into the September quarter?

That's right. About half of the increase came from pricing, specifically memory.

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.

I think our commentary was you'd 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. I think the inventory is 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.

We're in really good shape, I think, from a quality of inventory. Continue to see things get tighter, right?

As things get tighter, we want to make sure we've got inventory on the shelves to take advantage of opportunities lead times extend.

Joe, just additionally, 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. 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 with many suppliers in weeks of inventory. Okay?

We're still investing in inventory, lead times as a matter of fact is very critical, and working that balance with the suppliers. I do know in Farnell, where we said inventory days improved as well, the SKU count actually year-on-year is up somewhere around 2% to 3%.

We continue to add inventory there, this might be a different mix and broader, which is what we want for the high-service business.

Thank you.

Thanks, Joe.

Great. Thanks for taking my questions.

Congrats on the very good results and the huge guidance you're providing.

Thanks, Phil.

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?

Thanks, Bill, for the comments, first off. That's a tough one to call.

We're going into fourth quarter. It's actually almost 50% year-on-year this quarter.

It was 34% last quarter growth. If I evaluate for Asia, it's eight quarters, Bill, which is extended already, right?

Still looking very bright. It's tough to call.

I'd say we're and depends on the supplier you talk to, but for the most part or the customers, it feels like maybe in the third or fourth inning, maybe, something on those lines. If I was going to put it in baseball terms, for sure not the eighth inning.

I would probably say it's in the front third of the baseball game, second to third or fourth inning.

That's— All right? Again,

it's an analogy, don't hold me to the exact wooden knee, but I think it gives you a little bit of what we're seeing from backlog, bookings, etc., just it seems like it's going to last for a little while.

Maybe the other thing I'd like to look at is the margin performance. I think you explained why gross margins were up sequentially, but maybe a little bit disappointing considering the magnitude of the upside.

Why that wouldn't have sort of flowed through to better results, I think what you've said is that price increases have a sort of deflationary effect on that. 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. You're still nowhere near that, really.

You've gotten close before. How should we think about expansion over the next few quarters?

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'd expect to continue to see some modest uptick in Farnell 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 Americas, has recovered, but Asia is still going really strong. That regional mix still has an impact on gross margin.

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. I think the guidance would imply that progress.

Obviously, the target is continuous improvement working towards 5. As we've been saying, that we need the West to get stronger, and that's starting to happen, which is great.

The Americas, we're seeing improvement in the top line and bottom line, as well as in Europe, which is really good news. That's our most profitable region.

Europe is definitely rebounding, good backlog and positive book-to-bills as well. Then, of course, as Ken mentioned, Farnell really accelerated to 9 percent operating margin.

They get that to 10, 11, 12, that should 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.

That's great. I want to see if I can ask one more, please.

In December, I think total company revenue growth is typically down a couple 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?

What's your current thinking as to what might drive a variance between typical and this December? Yeah.

Thanks, Will, and I would never correct you, Will. First the word typical is and that's what we talk about internally, too.

What's our typical seasonality? We go back and look at it, and it's kind of everything has been somewhat thrown out the door on typical anymore because even since COVID, if I'm looking at the numbers now, even last year December quarter was rather strong for us.

You are right. Historically, December quarter would be stronger in Asia, weaker in the West, and you have a mix issue.

That's first off. Just like Chinese New Year last year or the Lunar New Year in March quarter, we grew in Asia Pac for the first time significantly in the March quarter.

This whole historical, typical is really really tough to call. As we see it right now, 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 growth.

Yeah. Yeah.

Yep,

well, that helps, guys. Thanks so much.

Thanks, Will.

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 what were some of the factors that drove that regional divergence?

How much came from memory and data center? It just seems that that region had just outsized kind of growth this quarter.

Can you just comment on that?

Sure will, Ruplu. Thanks.

Really nice performance in the Americas, and really all the regions, actually. Yes, it did outgrow Asia, but you also got to remember Asia's had eight-plus quarters in a row of year-on-year accelerated growth, they're kind of going against their own, [chuckles] compares a little bit, right?

With Americas, I think it's four quarters now. If you look, it's really diverse, in the verticals, Ruplu, which is healthy, which is good.

No, it's not a ton of data center. Actually, that's relatively small for us here directly into the data center.

We've enjoyed 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. Directly into the data center.

All the verticals, as I'm looking at it as we're talking, were up. We saw increase in industrial, nicely, by the way.

Aerospace was up, almost 40 40 40% 40% to 50% year-on-year, aerospace and defense. The coms were up, compute, transportation was even up, which is predominantly automotive, and even as small, we saw increase in consumer.

It's just 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/aerospace, what's going on in the world, and we have a strong position there, with a dedicated business unit for that vertical.

Then industrial, partially getting some acceleration with the data center, right? Now we talk about that, the AI halo, kind of thing, and that ecosystem around the data center and the hyperscalers and the growth there is going to drive growth in the industrial, right, and EMS providers.

All the cooling, everything that they need to power data centers fall right into a lot of our industrial markets where we have a very strong position. It's no magic.

Ken, anything you want

to— I would just say there's nothing different, inherently given Americas benefited from memory pricing just like the rest of regions, but there was nothing inherently different in the Americas versus the other regions in terms of memory. 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 to $9.3 billion? How 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, but is there evidence that these orders reflect real consumption rather than any precautionary buying?

Then 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? Just if you can just kind of help us with what you're embedding into your outlook and risk management for the year, right?

Thank you.

Ruplu, 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 apart on it, but we feel good about the guidance we've provided.

We're shipping a lot more units. Again, the guidance doesn't assume any meaningful price aspects in that guide, 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, right? We have higher ASP products that are going through our volumes as well.

That's part of the equation. Again, you mention it, backlog strong, book-to-bills well above parity, and 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'll use memory as an example.

A lot of customers wish they had more, [chuckles] there's not more to be had. I don't think we feel that there's any excess builds or this is a lot of safety stock.

We believe this is getting much closer to true consumption. I guess time will tell there, but there's nothing we see in our indicators that suggest significant build-up of customer inventories.

That being said, memory is causing some constraints in terms of getting everything into build, but I think generally speaking, lead times are up and to 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?

No, just long and short, no, we're not seeing demand destruction at this point. On the book-to-bill, yeah, the book-to-bill's positive as you caught in our script.

Then the double booking questions comes up, and Joe asked that as well, I'm not sure we got to that, apologies. You're right, Ruplu, we kind of lean on the suppliers to try to track for the double bookings, right, because 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 ERP, MRPs coming in with whether API, EDIs, what have you, and we try to put some analytics around it and say, hey, what's the reality of that, how 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. The backlog is we sanitize as best we possibly can, work with the suppliers as best we possibly can.

The other thing we look at is cancellation rates, not seeing anything today, as we look at it, abnormal from a cancellation standpoint. Then we roll up, back to your point, we roll up the forecasts 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 saying we're going to do, and it's lining up to what we guided.

Thanks for all the details there. Appreciate it.

Thanks, Ruplu.

Hey, guys. Thanks very much.

Congratulations on another exceptional quarter. It's pretty clear all of our models were completely wrong [laughter] and not appreciating the growth rate.

That's a good problem to have, I bet.

Yeah. [laughter]

Phil, I know you have a pile of sheets with data in front of you, and if you could just make that available to us, that would be great. [laughter] No, I just wanted to kind of dig in on the Farnell improvement.

Obviously, we know that that's a highly cyclical business. At the same time, you have been making a lot of structural changes over there, and congratulations to the team for succeeding there.

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?

Don't know if I get into that detail on that, but the answer is yes. We know that the high-service guys can get some non-traditional demand, right, as we saw in the last cycle, come into for inventory and whatnot, and then we do get some accelerated ASPs and margin as a company because of that, and Farnell which Avnet benefits.

What we are doing is we're breaking out and where we're having a heavy ASP inflation with Farnell with Rebecca and team, and saying, okay, what's our performance without that? We're actually building in the model when there's a cycle adjustment, what is the margin model?

What do we predict the margin model based on what we saw? We are modeling that.

Don't have the exact numbers on that floor, but it's going to be much higher than what the cycle four was last time. That's how we're managing.

Doing that for all the businesses, frankly, but Farnell for sure, because they do get some accelerated growth there. We're proud of the team there as well as we are the rest of the team.

That was a nice jump for us, for sure.

Yeah. Great.

The other data point, Melissa, would just be from a memory side when we talk about that, that's mostly EC commentary,

that

Farnell is benefiting some from memory, but it's a much smaller percentage of their sales than what we see in the EC. 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 and pipelining and things like that. Farnell is probably seeing some benefit, but likely more as things get tight.

The other

diversification is interesting, too, Melissa. We are investing quite a bit in on-board components, which the definition is semiconductors, IP&E.

That helps their 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 is a little bit lower in that space, and higher on the board component.

We're intentionally driving that mix.

Perfect. 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, 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 the demand is still there and the supply is tight. I was wondering if you could comment on what you're seeing there.

I know exactly what you're talking about, and of course we talked about General Motors in the script with a nice win there. Looking at the transportation verticals across the world, and we actually saw an increase in all regions in transportation.

Although 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 US, 20% 20% to 25% year-on-year. There is a swing there, and there's also more products being designed in that are our technology, semiconductor and IP&E.

The content is going up, which we're benefiting from. Not aware of any intentional conversations with any of the transportation guys where they're just stockpiling inventory or anything along those lines.

There have been a few customers that have had those conversations outside the automotive, but if they're happening, I'm not directly involved in those dialogues. Ken Ken, comment as well.

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. Again, we're not privy to Tier 1 versus the automakers, but clearly, there was 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.

I think Phil's comment was, we don't want a $2 part holding up a $100,000 vehicle.

I and our suppliers want to watch that, too, right? They don't want to over-ship either into that and cause another issue like we saw in the last cycle.

I think bad outcomes is an understatement.

[laughter] Right. A couple of the suppliers that have announced this week talked more about the mass market, which is great for us,

so. Great.

Thanks very much, guys. Appreciate all the color.

Thanks again, Melissa.

Thank you, and I want to thank everybody for attending today's earnings call. I look forward to speaking to you again on our first quarter fiscal year 2027 earnings report in November.

Okay? Have a good rest of the summer.

Thank you.