ARW 10-Q
Arrow Electronics, Inc. (ARW)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission file number
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification Number) |
| ||
(Zip Code) | ||
(Address of principal executive offices) |
(
(Registrant’s telephone number, including area code)
No Changes
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of the exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
There were
ARROW ELECTRONICS, INC.
Table of Contents
|
| ||
4 | |||
5 | |||
6 | |||
7 | |||
8 | |||
9 | |||
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29 | ||
42 | |||
42 | |||
43 | |||
43 | |||
43 | |||
43 | |||
44 | |||
45 | |||
2
ARROW ELECTRONICS, INC.
Glossary of Selected Abbreviated Terms*
Abbreviated Term | Defined Term |
AFC | Arrow Electronics Funding Corporation |
ASU | Accounting Standard Update |
CODM | Chief Operating Decision Maker |
ECS | Enterprise Computing Solutions |
EMEA | Europe, the Middle East, and Africa |
EMS | Electronics Manufacturing Services |
FASB | Financial Accounting Standards Board |
GAAP | Generally Accepted Accounting Principles |
MSPs | Managed Service Providers |
OEMs | Original Equipment Manufacturers |
SOFR | Secured Overnight Financing Rate |
U.S. or United States | United States of America |
VARs | Value-Added Resellers |
* Terms used, but not defined, within the body of the Form 10-Q, including in the Consolidated Financial Statements and accompanying notes, are defined in this Glossary.
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
Quarter Ended | |||||||
March 29, | March 30, | ||||||
| 2025 |
| 2024 |
| |||
Sales | $ | | $ | | |||
Cost of sales |
| |
| | |||
Gross profit |
| |
| | |||
Operating expenses: |
|
|
|
| |||
Selling, general, and administrative |
| |
| | |||
Depreciation and amortization |
| |
| | |||
Restructuring, integration, and other |
| |
| | |||
| |
| | ||||
Operating income |
| |
| | |||
Equity in earnings (losses) of affiliated companies |
| |
| ( | |||
Gain on investments, net |
| |
| | |||
Employee benefit plan expense, net |
| ( |
| ( | |||
Interest and other financing expense, net |
| ( |
| ( | |||
Income before income taxes |
| |
| | |||
Provision for income taxes |
| |
| | |||
Consolidated net income |
| |
| | |||
Noncontrolling interests |
| |
| ( | |||
Net income attributable to shareholders | $ | | $ | | |||
Net income per share: |
|
|
|
| |||
Basic | $ | | $ | | |||
Diluted | $ | | $ | | |||
Weighted-average shares outstanding: |
|
|
|
| |||
Basic |
| |
| | |||
Diluted |
| |
| | |||
See accompanying notes.
4
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
Quarter Ended | |||||||
March 29, | March 30, | ||||||
| 2025 |
| 2024 |
| |||
Consolidated net income | $ | | $ | | |||
Other comprehensive income (loss): |
|
|
|
| |||
Foreign currency translation adjustment and other, net of taxes |
| |
| ( | |||
(Loss) gain on foreign exchange contracts designated as net investment hedges, net of taxes |
| ( |
| | |||
(Loss) gain on interest rate swaps designated as cash flow hedges, net of taxes |
| ( |
| | |||
Employee benefit plan items, net of taxes |
| ( |
| ( | |||
Other comprehensive income (loss) |
| |
| ( | |||
Comprehensive income (loss) |
| |
| ( | |||
Less: Comprehensive income (loss) attributable to noncontrolling interests |
| |
| ( | |||
Comprehensive income (loss) attributable to shareholders | $ | | $ | ( | |||
See accompanying notes.
5
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
(Unaudited)
March 29, | December 31, | ||||||
| 2025 |
| 2024 |
| |||
ASSETS |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents | $ | | $ | | |||
Accounts receivable, net |
| |
| | |||
Inventories |
| |
| | |||
Other current assets |
| |
| | |||
Total current assets |
| |
| | |||
Property, plant, and equipment, at cost: |
|
|
|
| |||
Land |
| |
| | |||
Buildings and improvements |
| |
| | |||
Machinery and equipment |
| |
| | |||
| |
| | ||||
Less: Accumulated depreciation and amortization |
| ( |
| ( | |||
Property, plant, and equipment, net |
| |
| | |||
Investments in affiliated companies |
| |
| | |||
Intangible assets, net |
| |
| | |||
Goodwill |
| |
| | |||
Other assets |
| |
| | |||
Total assets | $ | | $ | | |||
LIABILITIES AND EQUITY |
|
|
|
| |||
Current liabilities: |
|
|
|
| |||
Accounts payable | $ | | $ | | |||
Accrued expenses |
| |
| | |||
Short-term borrowings, including current portion of long-term debt |
| |
| | |||
Total current liabilities |
| |
| | |||
Long-term debt |
| |
| | |||
Other liabilities |
| |
| | |||
Contingencies (Note L) | |||||||
Equity: |
|
|
|
| |||
Shareholders’ equity: |
|
|
|
| |||
Common stock, par value $ |
|
|
|
| |||
Authorized - |
|
|
|
| |||
Issued - |
| |
| | |||
Capital in excess of par value |
| |
| | |||
Treasury stock ( |
| ( |
| ( | |||
Retained earnings |
| |
| | |||
Accumulated other comprehensive loss |
| ( |
| ( | |||
Total shareholders’ equity |
| |
| | |||
Noncontrolling interests |
| |
| | |||
Total equity |
| |
| | |||
Total liabilities and equity | $ | | $ | | |||
See accompanying notes.
6
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Quarter Ended | |||||||
March 29, | March 30, | ||||||
| 2025 |
| 2024 |
| |||
Cash flows from operating activities: |
|
|
|
|
| ||
Consolidated net income | $ | | $ | | |||
Adjustments to reconcile consolidated net income to net cash provided by operations: |
|
|
|
| |||
Depreciation and amortization |
| |
| | |||
Amortization of stock-based compensation |
| |
| | |||
Equity in (earnings) losses of affiliated companies |
| ( |
| | |||
Deferred income taxes |
| ( |
| ( | |||
(Gain) loss on investments, net |
| ( |
| | |||
Other |
| ( |
| | |||
Change in assets and liabilities, net of effects of acquired businesses: |
|
|
| ||||
Accounts receivable, net |
| |
| | |||
Inventories |
| ( |
| | |||
Accounts payable |
| ( |
| ( | |||
Accrued expenses |
| ( |
| | |||
Other assets and liabilities |
| ( |
| ( | |||
Net cash provided by operating activities |
| |
| | |||
Cash flows from investing activities: |
|
|
|
| |||
Acquisition of property, plant, and equipment |
| ( |
| ( | |||
Other |
| |
| | |||
Net cash used for investing activities |
| ( |
| ( | |||
Cash flows from financing activities: |
|
|
|
| |||
Change in short-term and other borrowings |
| |
| ( | |||
(Repayments of) proceeds from long-term bank borrowings, net |
| ( |
| | |||
Proceeds from exercise of stock options |
| |
| | |||
Repurchases of common stock |
| ( |
| ( | |||
Net cash used for financing activities |
| ( |
| ( | |||
Effect of exchange rate changes on cash |
| |
| ( | |||
Net increase in cash and cash equivalents |
| | | ||||
Cash and cash equivalents at beginning of period | | | |||||
Cash and cash equivalents at end of period | $ | | $ | | |||
See accompanying notes.
7
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
(Unaudited)
|
|
|
|
| Accumulated |
|
| ||||||||||||||
Common | Capital in | Other | |||||||||||||||||||
Stock at Par | Excess of Par | Treasury | Retained | Comprehensive | Noncontrolling | ||||||||||||||||
| Value |
| Value | Stock | Earnings |
| Loss | Interests | Total | ||||||||||||
Balance at December 31, 2024 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Consolidated net income |
| |
| |
| |
| |
| |
| |
| | |||||||
Other comprehensive income |
| |
| |
| |
| |
| |
| |
| | |||||||
Amortization of stock-based compensation |
| |
| |
| |
| |
| |
| |
| | |||||||
Shares issued for stock-based compensation awards |
| |
| ( |
| |
| |
| |
| |
| | |||||||
Repurchases of common stock |
| |
| |
| ( |
| |
| |
| |
| ( | |||||||
Balance at March 29, 2025 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
|
|
|
|
| Accumulated |
|
| ||||||||||||||
Common | Capital in | Other | |||||||||||||||||||
Stock at Par | Excess of Par | Treasury | Retained | Comprehensive | Noncontrolling | ||||||||||||||||
Value | Value | Stock | Earnings |
| Loss | Interests | Total | ||||||||||||||
Balance at December 31, 2023 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
Consolidated net income (loss) |
| |
| |
| |
| |
| |
| ( |
| | |||||||
Other comprehensive loss |
| |
| |
| |
| |
| ( |
| ( |
| ( | |||||||
Amortization of stock-based compensation |
| |
| |
| |
| |
| |
| |
| | |||||||
Shares issued for stock-based compensation awards |
| |
| ( |
| |
| |
| |
| |
| | |||||||
Repurchases of common stock |
| |
| |
| ( |
| |
| |
| |
| ( | |||||||
Balance at March 30, 2024 | $ | | $ | | $ | ( | $ | | $ | ( | $ | | $ | | |||||||
See accompanying notes.
8
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A – Basis of Presentation
The accompanying consolidated financial statements of Arrow Electronics, Inc. (the “company”) were prepared in accordance with GAAP and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position and results of operations at, and for the periods presented. The consolidated results of operations for the interim periods are not necessarily indicative of results for the full year.
These consolidated financial statements do not include all of the information or notes necessary for a complete presentation and, accordingly, should be read in conjunction with the company’s audited consolidated financial statements and accompanying notes for the year ended December 31, 2024, as filed in the company’s Annual Report on Form 10-K.
Quarter End
Note B – Impact of Recently Issued Accounting Standards
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires entities to disaggregate expense items in the notes to the financial statements and requires disclosure of specified information related to purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in this ASU are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Companies have the option to apply the guidance either on a retrospective or prospective basis, and early adoption is permitted. The company is currently evaluating the impact of the ASU on its condensed consolidated financial statements and related disclosures. In January 2025, the FASB issued ASU No. 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. This ASU amends the effective date of ASU No. 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU No. 2024-03 is permitted. The company does not currently anticipate adopting these amendments early.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Upon adoption of this ASU, the company will disclose specific new categories in its income tax rate reconciliation and provide additional information for reconciling items above a quantitative threshold. The company will also disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes, and also disaggregated by individual jurisdictions in which income taxes paid were above a threshold. The company expects these amendments will first be applied in the company’s annual report on Form 10-K for the fiscal year ending December 31, 2025, on a prospective basis.
Note C – Goodwill and Intangible Assets
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. The company tests goodwill and other indefinite-lived intangible assets for impairment annually as of the first day of the fourth quarter, or more frequently if indicators of potential impairment exist.
10
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Goodwill of companies acquired, allocated to the company’s reportable segments, is as follows:
| Global |
|
| ||||||
(thousands) | Components | Global ECS | Total | ||||||
Balance as of December 31, 2024 (a) | $ | | $ | | $ | | |||
Foreign currency translation adjustment |
| |
| |
| | |||
Balance as of March 29, 2025 (a) | $ | | $ | | $ | | |||
| (a) | The total carrying value of goodwill as of March 29, 2025 and December 31, 2024, in the table above is reflected net of $ |
Intangible assets, net, are comprised of the following as of March 29, 2025:
| Gross |
|
| ||||||
Carrying | Accumulated | ||||||||
(thousands) | Amount | Amortization | Net | ||||||
Customer relationships | $ | | $ | ( | $ | | |||
Amortizable trade name |
| |
| ( |
| | |||
$ | | $ | ( | $ | | ||||
Intangible assets, net, are comprised of the following as of December 31, 2024:
| Gross |
|
| ||||||
Carrying | Accumulated | ||||||||
(thousands) | Amount | Amortization | Net | ||||||
Customer relationships | $ | | $ | ( | $ | | |||
Amortizable trade name |
| |
| ( |
| | |||
$ | | $ | ( | $ | | ||||
During the first quarter of 2025 and 2024, the company recorded amortization expense related to identifiable intangible assets of $
Note D – Investments in Affiliated Companies
The company owns a
The following table presents the company’s investment in affiliated companies:
March 29, |
| December 31, | |||
(thousands) | 2025 | 2024 | |||
Marubun/Arrow | $ | | $ | | |
Other |
| |
| | |
$ | | $ | | ||
11
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The equity in earnings (losses) of affiliated companies consists of the following:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Marubun/Arrow | $ | | $ | ( | ||
Other |
| |
| | ||
$ | | $ | ( | |||
Under the terms of various joint venture agreements, the company is required to pay its pro-rata share of the third-party debt of the joint ventures in the event that the joint ventures are unable to meet their obligations. There were
Subsequent to the balance sheet date, the company sold investments in certain equity securities for $
Note E – Accounts Receivable
Accounts receivable, net, consists of the following:
March 29, | December 31, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Accounts receivable | $ | | $ | | ||
Allowance for credit losses |
| ( |
| ( | ||
Accounts receivable, net | $ | | $ | | ||
The following table is a rollforward for the company’s allowance for credit losses:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Balance at beginning of period | $ | | $ | | ||
Charged to income |
| |
| | ||
Translation adjustments |
| |
| ( | ||
Write-offs |
| ( |
| ( | ||
Balance at end of period | $ | | $ | | ||
The company monitors the current credit condition of its customers in estimating the expected credit losses and has not experienced significant changes in customers’ payment trends or significant deterioration in customers’ credit risk as of March 29, 2025.
EMEA Asset Securitization
The company has an EMEA asset securitization program under which it continuously sells its interest in designated pools of trade accounts receivable of certain of its subsidiaries in the EMEA region at a discount to a special purpose entity, which in turn sells certain of the receivables to unaffiliated financial institutions and conduits administered by such unaffiliated financial institutions (“unaffiliated financial institutions”) on a monthly basis. The company may sell up to €
12
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
accordance with its terms. The program is conducted through Arrow EMEA Funding Corp B.V., an entity structured to be bankruptcy remote. The company is deemed the primary beneficiary of Arrow EMEA Funding Corp B.V. as the company has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivable into the special purpose entity. Accordingly, Arrow EMEA Funding Corp B.V. is included in the company’s consolidated financial statements.
Sales of accounts receivable to unaffiliated financial institutions under the EMEA asset securitization program:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(thousands) |
| 2025 |
| 2024 | ||
EMEA asset securitization, sales of accounts receivable | $ | | $ | | ||
Receivables sold to unaffiliated financial institutions under the program are excluded from “Accounts receivable, net” on the company’s consolidated balance sheets, and cash receipts are reflected in the “Cash provided by operating activities” section of the consolidated statements of cash flows. The purchase price is paid in cash when the receivables are sold. Certain unsold receivables held by Arrow EMEA Funding Corp B.V. are pledged as collateral to unaffiliated financial institutions. These unsold receivables are included in “Accounts receivable, net” on the company’s consolidated balance sheets.
The company continues servicing the receivables which were sold and in exchange receives a servicing fee under the program. The company does not record a servicing asset or liability on the company’s consolidated balance sheets as the company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities.
Other amounts related to the EMEA asset securitization program are set forth below:
March 29, | December 31, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Receivables sold to unaffiliated financial institutions that were uncollected | $ | | $ | | ||
Collateralized accounts receivable held by Arrow EMEA funding Corp B.V. |
| |
| | ||
Any accounts receivable held by Arrow EMEA Funding Corp B.V. would likely not be available to other creditors of the company in the event of bankruptcy or insolvency proceedings if there are outstanding balances under the EMEA asset securitization program. The assets of the special purpose entity cannot be used by the company for general corporate purposes. Additionally, the financial obligations of Arrow EMEA Funding Corp B.V. to the unaffiliated financial institutions under the program are limited to the assets it owns and there is no recourse to Arrow Electronics, Inc. for receivables that are uncollectible as a result of an account debtor’s insolvency or inability to pay.
The EMEA asset securitization program includes terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels. As of March 29, 2025, the company was in compliance with all such financial covenants.
Factoring
In the normal course of business, certain of the company’s subsidiaries have factoring agreements to sell, with limited or no recourse, selected trade accounts receivable to financial institutions and accounts for these transactions as sales of the related receivables. The receivables are excluded from “Accounts receivable, net” on the company’s consolidated balance
13
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
sheets and cash receipts are reflected as “Cash provided by operating activities” on the consolidated statements of cash flows. The company typically does not retain financial or legal interests in these receivables. Factoring fees for the sales of accounts receivables are included in “Interest and other financing expense, net” in the consolidated statements of operations. The company continues servicing the receivables which were sold.
Sales of trade accounts receivable under the company’s factoring programs:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Sales of accounts receivable under the factoring programs | $ | | $ | | ||
Other amounts under the company’s factoring programs:
March 29, | December 31, | |||||
(thousands) | 2025 | 2024 | ||||
Receivables sold under the factoring programs that were uncollected | $ | | $ | | ||
Note F – Supplier Finance Programs
At the request of certain of the company’s suppliers, the company has entered into agreements (“supplier finance programs”) with third-party finance providers, which facilitate the participating suppliers’ ability to sell their receivables from the company to the third-party financial institutions, at the sole discretion of the suppliers. For agreeing to participate in these programs, the company seeks to secure improved standard payment terms with its suppliers. The company is not involved in negotiating terms of the arrangements between its suppliers and the financial institutions and has no economic interest in a supplier’s decision to enter into these agreements, or sell receivables from the company. The company’s rights and obligations to its suppliers, including amounts due, are not impacted by suppliers’ decisions to sell amounts under the arrangements. However, the company agrees to make all payments to the third-party financial institutions, and the company’s right to offset balances due from suppliers against payment obligations is restricted by the agreements for those payment obligations that have been sold by suppliers. As of March 29, 2025, and December 31, 2024, the company had $
Note G – Debt
Short-term borrowings, including current portion of long-term debt, consist of the following:
March 29, | December 31, | |||||
(thousands) |
| 2025 |
| 2024 | ||
$ | | $ | | |||
Commercial paper |
| |
| | ||
Other short-term borrowings |
| |
| | ||
| $ | | $ | | ||
The company has $
14
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
term and is agreed upon with lenders at the time of each borrowing. The uncommitted lines of credit had a weighted-average effective interest rate of
The company has a commercial paper program, and the maximum aggregate balance of commercial paper outstanding may not exceed the borrowing capacity of $
Long-term debt consists of the following:
March 29, | December 31, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Revolving credit facility | $ | | $ | | ||
North American asset securitization program |
| |
| | ||
| |
| | |||
| |
| | |||
| |
| | |||
| |
| | |||
| |
| | |||
Other obligations with various interest rates and due dates |
| |
| | ||
$ | | $ | | |||
The
The estimated fair market value of long-term debt, using quoted market prices, is as follows:
March 29, | December 31, | |||||
(thousands) |
| 2025 |
| 2024 | ||
$ | | $ | | |||
| | |||||
| |
| | |||
| |
| | |||
| |
| | |||
The carrying amount of the company’s other short-term borrowings,
The company has a $
15
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The company has a North American asset securitization program collateralized by accounts receivable of certain of its subsidiaries. The company may borrow up to $
The company had $
Both the revolving credit facility and North American asset securitization program include terms and conditions that limit the incurrence of additional borrowings and require that certain financial ratios be maintained at designated levels. As of March 29, 2025, the company was in compliance with all such financial covenants.
Subsequent to the balance sheet date, the company repaid $
Interest and dividend income of $
16
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note H – Financial Instruments Measured at Fair Value
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The fair value hierarchy has three levels of inputs that may be used to measure fair value:
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
Level 2 | Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability |
Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. |
The following table presents assets measured at fair value on a recurring basis at March 29, 2025:
(thousands) |
| Balance Sheet Location |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash equivalents (a) |
| Cash and cash equivalents | $ | | $ | | $ | | $ | | ||||
Equity investments (b) |
| Other assets |
| |
| |
| |
| | ||||
Foreign exchange contracts designated as net investment hedges |
| Other assets / other current assets |
| |
| |
| |
| | ||||
$ | | $ | | $ | | $ | | |||||||
The following table presents assets measured at fair value on a recurring basis at December 31, 2024:
(thousands) |
| Balance Sheet Location |
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Cash equivalents (a) |
| Cash and cash equivalents | $ | | $ | | $ | | $ | | ||||
Equity investments (b) |
| Other assets |
| |
| |
| |
| | ||||
Foreign exchange contracts designated as net investment hedges |
| Other assets / other current assets |
| |
| |
| |
| | ||||
$ | | $ | | $ | | $ | | |||||||
| (a) | Cash equivalents include highly liquid investments with an original maturity of less than three months. |
| (b) | The company has an approximately |
Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to goodwill, and identifiable intangible assets (see Note C). The company tests these assets for impairment if indicators of potential impairment exist or at least annually if indefinite-lived.
Derivative Instruments
The company uses various financial instruments, including derivative instruments, for purposes other than trading. Certain derivative instruments are designated at inception as hedges and assessed for effectiveness both at inception and on an ongoing basis. Derivative instruments not designated as hedges are carried at fair value on the consolidated balance sheets with changes in fair value recognized in earnings.
17
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Interest Rate Swaps
The company manages the risk of variability in interest rates of future expected debt issuances by entering into various forward-starting interest rate swaps, designated as cash flow hedges. Changes in fair value of interest rate swaps designated as cash flow hedges are recorded in the shareholders’ equity section in the company’s consolidated balance sheets in “Accumulated other comprehensive loss” and will be reclassified into income over the life of the anticipated debt issuance or in the period the hedged forecasted cash flows are deemed no longer probable to occur. Reclassified gains and losses are recorded within the line item “Interest and other financing expense, net” in the consolidated statements of operations.
The fair value of interest rate swaps are estimated using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest rate curves and credit spreads.
The company occasionally enters into interest rate swap transactions, designated as fair value hedges, that convert certain fixed-rate debt to variable-rate debt in order to manage its targeted mix of fixed- and floating-rate debt. For qualifying interest rate fair value hedges, gains or losses on derivatives are included in “Interest and other financing expense, net” in the consolidated statements of operations. The change in fair value of the hedged item attributable to the risk being hedged is reported as an adjustment to its carrying value and is also included in “Interest and other financing expense, net.”
Foreign Exchange Contracts
The company’s foreign currency exposure relates primarily to international transactions where the currency collected from customers can be different from the currency used to purchase the product. The company’s primary exposures to such transactions are denominated primarily in Euros and Indian Rupees. The company enters into foreign exchange forward, option, or swap contracts (collectively, the “foreign exchange contracts”) to facilitate the hedging of foreign currency exposures resulting from inventory purchases and sales and mitigate the impact of changes in foreign currency exchange rates related to these transactions. Foreign exchange contracts generally have terms of no more than six months. The company does not enter into foreign exchange contracts for trading purposes. The risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to major financial institutions. The fair value of the foreign exchange contracts is estimated using foreign currency spot rates and forward rates quotes by third-party financial institutions. The notional amount of the foreign exchange contracts inclusive of foreign exchange contracts designated as a net investment hedge at March 29, 2025 and December 31, 2024 was $
Gains and losses related to non-designated foreign currency exchange contracts are recorded in “Cost of sales” on the company’s consolidated statements of operations. Gains and losses related to foreign currency exchange contracts designated as cash flow hedges are recorded in “Cost of sales,” “Selling, general, and administrative,” and “Interest and other financing expense, net” based upon the nature of the underlying hedged transaction, on the company’s consolidated statements of operations. Gains or losses on these contracts are deferred and recognized when the underlying future purchase or sale is recognized or when the corresponding asset or liability is revalued, and were not material to the financial statements for the periods presented.
18
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following foreign exchange contracts were designated as net investment hedges, hedging a portion of the company’s net investments in subsidiaries with Euro-denominated net assets:
Notional Amount (thousands) | ||||||
Maturity Date | March 29, 2025 | December 31, 2024 | ||||
April 2025 |
| EUR | |
| EUR | |
January 2028 |
| EUR | |
| EUR | |
Total |
| EUR | |
| EUR | |
The change in the fair value of derivatives designated as net investment hedges are recorded in foreign currency translation adjustments within “Accumulated other comprehensive loss” on the company’s consolidated balance sheets. Amounts excluded from the assessment of hedge effectiveness are included in “Interest and other financing expense, net” on the company’s consolidated statements of operations.
Subsequent to the balance sheet date, during April 2025, a foreign exchange contract designated as a net investment hedge matured and the company received $
The effects of derivative instruments on the company’s consolidated statements of operations and other comprehensive income are as follows:
Quarter Ended | ||||||||
March 29, | March 30, | |||||||
(thousands) |
| Income Statement Line |
| 2025 |
| 2024 | ||
Gain (Loss) Recognized in Income |
|
|
|
|
|
| ||
Foreign exchange contracts, net investment hedge (a) |
| Interest Expense | $ | | $ | | ||
Interest rate swaps, cash flow hedge |
| Interest Expense |
| |
| ( | ||
Interest rate swap, fair value hedge (b) |
| Interest Expense |
| |
| | ||
Total |
|
| $ | | $ | | ||
Gain (Loss) Recognized in Other Comprehensive Income (Loss) before reclassifications, net of tax |
|
|
|
|
|
| ||
Foreign exchange contracts, net investment hedge (c) |
|
| $ | ( | $ | | ||
Total |
|
| $ | ( | $ | | ||
| (a) | Represents derivative amounts excluded from the assessment of effectiveness for the net investment hedges reclassified from foreign currency translation adjustments to “Interest and other financing expense, net”. |
| (b) | The cumulative amount of fair value hedging adjustments to the carrying value of hedged debt instruments totaled a loss of $ |
| (c) | Includes derivative gains of $ |
Other
The carrying amount of “Cash and cash equivalents”, “Accounts receivable, net”, and “Accounts payable” approximate their fair value due to the short maturities of these financial instruments.
19
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note I – Restructuring, Integration, and Other
The following table presents the components of the restructuring, integration, and other charges:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Restructuring, integration and related costs | ||||||
Operating Expense Efficiency Plan costs (a) | $ | | $ | | ||
Other plans | | ( | ||||
Other expenses | ||||||
Operating expense reduction costs not related to restructuring initiatives (b) | | | ||||
Early lease termination costs | | | ||||
Other charges | | | ||||
$ | | $ | | |||
| (a) | See details related to the Operating Expense Efficiency Plan discussed below. |
| (b) | These costs are primarily related to employee severance and benefit costs. As of March 29, 2025, the accrued liabilities related to these costs totaled $ |
Operating Expense Efficiency Plan
On October 31, 2024, in response to evolving business needs and as part of an initiative to optimize operating expenses, the company announced a multi-year restructuring plan (the “Operating Expense Efficiency Plan” or “the Plan”). The Plan is designed to improve operational efficiency through the following measures: (i) reorganizing and consolidating certain areas of the company’s operations to centralize functions and streamline resources, with a focus on more cost-efficient regions; (ii) enhancing warehouse and logistics operations; (iii) investing in information technology to support automation and process improvements; (iv) consolidating the company’s global real estate footprint; (v) reducing third-party spending; and (vi) winding down certain non-core businesses that are not aligned with the company’s strategic objectives. The company expects to substantially complete the Plan by the end of fiscal year 2026, subject to, among other things, local legal and consultation requirements.
Under the Plan, the company anticipates to incur pre-tax restructuring charges of no more than $
20
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table presents the costs related to the Operating Expense Efficiency Plan:
(thousands) |
| Income Statement Line |
| Quarter Ended March 29, |
| Total Cost Incurred to Date | |||
Employee severance and benefit costs | Restructuring, integration, and other | $ | | $ | | ||||
Inventory (recoveries) write-downs | Cost of sales | ( | | ||||||
Asset impairments | Restructuring, integration, and other | | | ||||||
Other costs (a) | Restructuring, integration, and other | | | ||||||
$ | | $ | | ||||||
| (a) | Other costs consist primarily of consulting and other professional fees and lease terminations. |
The following table presents the activity in the restructuring and integration accruals related to the Operating Expense Efficiency Plan:
(thousands) |
| Employee Severance and Benefit Costs |
| Inventory Recoveries |
| Other Costs |
| Total | ||||
Balance at December 31, 2024 | $ | | $ | | $ | | $ | | ||||
Restructuring related charges | | ( | | | ||||||||
Cash (payments) receipts | ( | | ( | ( | ||||||||
Foreign currency translations | | | | | ||||||||
Balance at March 29, 2025 | $ | | $ | | $ | | $ | | ||||
Substantially all amounts accrued at March 29, 2025 related to the Operating Expense Efficiency Plan are expected to be paid in cash within
21
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note J – Net Income per Share
Basic net income per share is computed by dividing net income attributable to shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. The dilutive effect of equity awards is calculated using the treasury stock method.
The following table presents the computation of net income per share on a basic and diluted basis:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(thousands except per share data) |
| 2025 |
| 2024 | ||
Net income attributable to shareholders | $ | | $ | | ||
Weighted-average shares outstanding - basic |
| |
| | ||
Net effect of various dilutive stock-based compensation awards |
| |
| | ||
Weighted-average shares outstanding - diluted |
| |
| | ||
Net income per share: |
|
|
|
| ||
Basic | $ | | $ | | ||
Diluted (a) | $ | | $ | | ||
(a) Equity awards excluded from diluted net income per share as their effect would have been anti-dilutive | | | ||||
22
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note K – Shareholders’ Equity
Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in Accumulated other comprehensive income (loss), excluding noncontrolling interests:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Foreign Currency Translation Adjustment and Other: |
|
| ||||
Other comprehensive income (loss) before reclassifications (a) | $ | | $ | ( | ||
Amounts reclassified into income |
| |
| | ||
(Loss) gain on Foreign Exchange Contracts Designated as Net Investment Hedges, Net: |
|
|
| |||
Other comprehensive (loss) income before reclassifications (b) |
| ( |
| | ||
Amounts reclassified into income |
| ( |
| ( | ||
(Loss) gain on Interest Rate Swaps Designated as Cash Flow Hedges, Net: |
|
|
|
| ||
Amounts reclassified into income |
| ( |
| | ||
Employee Benefit Plan Items, Net: |
|
|
|
| ||
Amounts reclassified into income |
| ( |
| ( | ||
Net change in Accumulated other comprehensive income (loss) | $ | | $ | ( | ||
| (a) | Foreign currency translation adjustment includes intra-entity foreign currency transactions that are of a long-term investment nature of $ |
| (b) | For additional information related to net investment hedges and interest rate swaps refer to Note H. |
Common Stock Outstanding Activity
The following tables set forth the activity in the number of shares outstanding:
| Common |
|
| Common | ||
Stock | Treasury | Stock | ||||
(thousands) | Issued | Stock | Outstanding | |||
Common stock outstanding at December 31, 2024 |
| |
| |
| |
Shares issued for stock-based compensation awards |
| |
| ( |
| |
Repurchases of common stock |
| |
| |
| ( |
Common stock outstanding at March 29, 2025 |
| |
| |
| |
| Common |
|
| Common | ||
Stock | Treasury | Stock | ||||
(thousands) | Issued | Stock | Outstanding | |||
Common stock outstanding at December 31, 2023 |
| |
| |
| |
Shares issued for stock-based compensation awards |
| |
| ( |
| |
Repurchases of common stock |
| |
| |
| ( |
Common stock outstanding at March 30, 2024 |
| |
| |
| |
23
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Share Repurchase Program
The following table shows the company’s share repurchase program as of March 29, 2025:
|
|
| Approximate | ||||||
Dollar Value of | |||||||||
Dollar Value | Dollar Value of | Shares that May | |||||||
Approved for | Shares | Yet be Purchased | |||||||
Share Repurchase Details by Month of Board Approval (thousands) | Repurchase | Repurchased | Under the Program | ||||||
January 2023 | $ | | $ | | $ | | |||
The company repurchased
Note L – Contingencies
Environmental Matters
The Company has accrued liabilities of $
Costs are recorded for environmental matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Environmental liabilities are included in “Accrued expenses” and “” on the company’s consolidated balance sheets. The company has determined that there is no amount within the environmental liability ranges discussed below, that is a better estimate than any other amount, and therefore has recorded the accruals at the minimum amount of the ranges. The liabilities were estimated based on current costs and are not discounted. Environmental costs related to these matters include remediation, project management, regulatory oversight, and investigative and feasibility study activities.
To date, the company has spent approximately $
The company expects the liabilities associated with such ongoing remediation to be resolved over an extended period of time with current estimates extending beyond 2040. The accruals for environmental liabilities are adjusted periodically as facts and circumstances change, assessment and remediation efforts progress, or as additional technical or legal information becomes available. Environmental liabilities are difficult to assess and estimate due to various unknown factors such as the timing and extent of remediation, the efficacy and long-term costs of remediation, improvements in remediation technologies, orders by administrative agencies, and the extent to which environmental laws and regulations
24
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
may change in the future. Accordingly, the company cannot presently estimate the ultimate potential costs related to either of the two sites.
To date, the company has recovered approximately $
It is reasonably possible that the company will need to adjust the liabilities noted above to reflect the effects of new or additional information, to the extent that such information impacts the costs, timing or duration of the required actions. Future changes in estimates of the costs, timing or duration of the required actions could have a material adverse effect on the company’s consolidated financial position, results of operations or cash flows.
Other
From time to time, in the normal course of business, the company may become liable with respect to other pending and threatened litigation, environmental, regulatory, labor, product, and tax matters. While such matters are subject to inherent uncertainties, it is not currently anticipated that any such matters will materially impact the company’s consolidated financial position, liquidity, or results of operations.
Note M – Segment and Geographic Information
The company is a global provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The company organizes its operations by geographic region and global business lines. The company’s operating segments reflect the way the chief executive officer (CODM as defined in ASC 280, Segment Reporting) reviews financial information, makes operating decisions and assesses business performance. In identifying operating segments, the company also considers its annual budgeting and forecasting process, management reporting structure, the basis on which management compensation is determined, information presented to the Board of Directors and similarities such as the nature of products, the level of shared products, technology and other resources, and customer base. The company concluded that identifying operating segments by major geographic region within each of the company’s major businesses was consistent with the objectives of ASC 280 and it has aggregated geographic operating segments within the global components reportable segment and the global ECS reportable segment based on similar characteristics including long-term financial performance, the nature of services provided, internal process for delivering those services, and types of customers.
The company’s global components reportable segment is enabled by a comprehensive range of value-added capabilities and services, markets, and distributes electronic components to OEMs and EMS providers. The company’s global ECS reportable segment is a leading value-added provider of comprehensive computing solutions and services. The global ECS portfolio of computing solutions includes datacenter, cloud, security, and analytics solutions. Global ECS brings broad market access, extensive supplier relationships, scale, and resources to help its VARs and MSPs meet the needs of their end-users.
The CODM evaluates the performance of both reportable segments based on operating income. Sales, net gross profit, and operating expenses are also monitored closely. This information is used to monitor segment profitability, allocate resources, and make budgeting and forecasting decisions about the reportable segments. The CODM also uses these measures to monitor trends in year over year performance comparisons, sequential quarter performance comparisons, and to compare actual results to forecasts. More disaggregated information about operating expense is generally only reviewed by the CODM on a consolidated basis.
25
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As a result of the company’s philosophy of maximizing operating efficiencies through the centralization of certain functions, operating income for the reportable segments excludes unallocated corporate overhead costs, depreciation on corporate fixed assets, and restructuring, integration, and other costs, as they are not attributable to the individual reportable segments and are included in the corporate line item.
Sales, by reportable segment by geographic area, are as follows:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Sales: |
|
|
|
| ||
Components: |
|
|
|
| ||
Americas | $ | | $ | | ||
EMEA |
| |
| | ||
Asia/Pacific |
| |
| | ||
Global components | $ | | $ | | ||
ECS: |
|
|
|
| ||
Americas | $ | | $ | | ||
EMEA |
| |
| | ||
Global ECS | $ | | $ | | ||
Consolidated | $ | | $ | | ||
Sales by country are as follows:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Sales: |
|
|
|
| ||
China and Hong Kong | $ | | $ | | ||
Germany |
| |
| | ||
Other |
| |
| | ||
Total foreign | $ | | $ | | ||
United States |
| |
| | ||
Total | $ | | $ | | ||
26
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Results of operations by reportable segment are as follows:
Quarter Ended | |||||||||||||
March 29, 2025 | |||||||||||||
(thousands) | Global Components | Global ECS | Corporate | Consolidated | |||||||||
Sales | $ | | $ | | $ | - | $ | | |||||
Cost of sales | | | - | | |||||||||
Gross profit | | | - | | |||||||||
Gross profit margin | % | % | - | % | |||||||||
Operating expenses (a) | | | | | |||||||||
Operating income (loss) (b) (c) | $ | | $ | | $ | ( | $ | | |||||
Operating income margin | % | % | - | % | |||||||||
Quarter Ended | |||||||||||||
March 30, 2024 | |||||||||||||
(thousands) | Global Components | Global ECS | Corporate | Consolidated | |||||||||
Sales | $ | | $ | | $ | - | $ | | |||||
Cost of sales | | | - | | |||||||||
Gross profit | | | - | | |||||||||
Gross profit margin | % | % | - | % | |||||||||
Operating expenses (a) | | | | | |||||||||
Operating income (loss) (b) (c) | $ | | $ | | $ | ( | $ | | |||||
Operating income margin | % | % | - | % | |||||||||
| (a) | Segment operating expenses primarily include employee-related expenses, depreciation and amortization, and allowance for credit losses. |
| (b) | Global components operating income includes recoveries of $ |
| (c) | Corporate operating loss includes restructuring, integration, and other charges of $ |
Total assets, by reportable segment, are as follows:
March 29, | December 31, | |||||
(thousands) |
| 2025 |
| 2024 | ||
Total assets: |
|
|
|
| ||
Global components | $ | | $ | | ||
Global ECS |
| |
| | ||
Corporate |
| |
| | ||
Consolidated | $ | | $ | | ||
27
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
28
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Information Relating to Forward-Looking Statements
This report includes “forward-looking statements,” as the term is defined under the federal securities laws. Forward-looking statements are those statements which are not statements of historical fact. These forward-looking statements can be identified by forward-looking words such as “expects,” “anticipates,” “intends,” “plans,” “may,” “will,” “believes,” “seeks,” “estimates,” and similar expressions. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which could cause actual results or facts to differ materially from such statements for a variety of reasons, including, but not limited to: the incurrence of additional charges not currently contemplated and failure to realize contemplated cost savings due to unanticipated events that may occur, including in connection with the implementation of Arrow Electronics, Inc.’s (the “company”) Operating Expense Efficiency Plan; unfavorable economic conditions; disruptions, shortages, or inefficiencies in the supply chain; political instability and changes; impacts of military conflict and sanctions; industry conditions; changes in product supply, pricing and customer demand; trade protection measures, tariffs, increased trade tensions, trade agreements and policies, and other restrictions, duties, and value-added taxes; competition; other vagaries in the global components and the global ECS markets; deteriorating economic conditions, including economic recession, inflation, tax rates, foreign currency exchange rates, or the availability of capital; the effects of natural or man-made catastrophic events; changes in relationships with key suppliers; increased profit margin pressure; changes in legal and regulatory matters; non-compliance with certain regulations, such as trade, export, antitrust, and anti-corruption laws; foreign tax and other loss contingencies; breaches of security or privacy of business information and information system failures, including related to current or future implementations, integrations and upgrades; outbreaks, epidemics, pandemics, or public health crises; executive orders and regulatory trends and the resulting legal and reputational exposure, including but not limited to those relating to environmental, social, governance, cybersecurity, data privacy, and artificial intelligence issues; and the company’s ability to generate positive cash flow. For a further discussion of these and other factors that could cause the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and the company’s most recent Annual Report on Form 10-K, as well as in other filings the company makes with the Securities and Exchange Commission. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update publicly or revise any of the forward-looking statements.
Certain Non-GAAP Financial Information
In addition to disclosing financial results that are determined in accordance with GAAP, the company also discloses certain non-GAAP financial information in the sections below captioned “Sales”, “Gross Profit”, “Operating Expenses”, “Operating Income”, “Income Tax”, and “Net Income Attributable to Shareholders”. Refer to these sections below for reconciliations of non-GAAP financial measures to the most directly comparable reported GAAP financial measures. Non-GAAP financial information includes the following:
| ● | Non-GAAP sales exclude the impact of changes in foreign currencies by retranslating prior period results at current period foreign exchange rates. |
| ● | Non-GAAP gross profit excludes inventory (recoveries) write-downs related to the wind down of businesses within the global components reportable segment (“impact of wind down to inventory”) and impact of changes in foreign currencies. |
| ● | Non-GAAP operating expenses exclude identifiable intangible asset amortization, restructuring, integration, and other, and the impact of changes in foreign currencies. |
| ● | Non-GAAP operating income excludes identifiable intangible asset amortization, restructuring, integration, and other, and impact of wind down to inventory. |
| ● | Non-GAAP effective tax rate and non-GAAP net income attributable to shareholders exclude identifiable intangible asset amortization, restructuring, integration, and other, impact of wind down to inventory, and gain on investments, net. |
29
Management believes that providing this additional information is useful to the reader to better assess and understand the company’s operating performance and future prospects in the same manner as management, especially when comparing results with previous periods. Management typically monitors the business as adjusted for these items, in addition to GAAP results, to understand and compare operating results across accounting periods, for internal budgeting purposes, for short-term and long-term operating plans, and to evaluate the company’s financial performance. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP. For a discussion of what is included within “Restructuring, integration, and other” refer to the similarly captioned section of this item below.
Key Business Metrics
Management uses gross billings as an operational metric to monitor operating performance of its global ECS reportable segment, including performance by geographic region, as it provides meaningful supplemental information in evaluating the overall performance of the global ECS business. The company uses this key metric to develop financial forecasts, make strategic decisions, and prepare and approve annual budgets. Gross billings represent amounts invoiced to customers for goods and services during a period and does not include the impact of recording sales on a net basis or sales adjustments, such as trade discounts and other allowances. Refer to Note 1 “Summary of Significant Accounting Policies” in the company’s Annual Report on Form 10-K for the year ended December 31, 2024, for further discussion of the company’s revenue recognition policies. The use of gross billings has certain limitations as an analytical tool and should not be considered in isolation or as a substitute for revenue.
Overview
The company sources and engineers technology for thousands of leading manufacturers, services providers, and users of enterprise computing solutions. The company has one of the world’s broadest portfolios of product offerings available from leading electronic components and enterprise computing solutions suppliers. The company’s revenues originate primarily from the sales of semiconductor, interconnect, passive & electromechanical components (“IP&E”), and IT hardware and software products. Coupled with a range of services, solutions, and tools, the company enables its suppliers to distribute their technologies and help its industrial and commercial customers source, build, and leverage these technologies, reduce their time to market, grow their businesses, and enhance their overall competitiveness. The company is a trusted partner in a complex value chain and is uniquely positioned through its electronics components and IT content portfolios to increase value for stakeholders.
The company has two reportable segments, the global components reportable segment and the global ECS reportable segment. The company’s global components reportable segment, enabled by a comprehensive range of value-added capabilities and services, markets and distributes electronic components to OEMs and EMS providers. The company’s global ECS reportable segment is a leading value-added provider of comprehensive computing solutions and services. Its portfolio of computing solutions includes datacenter, cloud, security, and analytics solutions. Global ECS brings broad market access, extensive supplier relationships, scale, and resources to help its VARs and MSPs meet the needs of their end-users. For the first quarter of 2025, approximately 70% and 30% of the company’s sales were from the global components reportable segment and the global ECS reportable segment, respectively.
Strategic initiatives within each reportable segment include the following:
Global components reportable segment:
| ● | Offering a variety of value-added services, including demand creation, design, engineering, global marketing and integration services to promote the future sale of suppliers’ products, which generally lead to longer and more profitable relationships with the company’s suppliers and customers. |
| ● | Focusing on further penetrating the market for IP&E as it tends to be a margin accretive segment of the broader available market. |
| ● | Providing global supply chain service offerings such as procurement, logistics, warehousing, and insights from data analytics. |
30
Global ECS reportable segment:
| ● | Enabling customer cloud solutions through the cloud marketplace and management platform, ArrowSphere, which helps VARs and MSPs to manage, differentiate, and scale their cloud businesses while providing the business intelligence and tools that IT solution providers need to drive growth. ArrowSphere was recently enhanced to include an artificial intelligence enabled digital go-to-market platform aimed at helping the company’s channel partners sell and support a variety of cloud offerings at higher rates. |
| ● | Providing value-added distribution services including marketing, demand generation, delivery of support services, and other value-added services on behalf of its suppliers. |
The company’s long-term financial objectives are to grow sales faster than the market, increase the markets served, grow profits faster than sales, generate earnings per share growth in excess of competitors’ earnings per share growth and market expectations, allocate and deploy capital effectively so that return on invested capital exceeds the company’s cost of capital, and increase return on invested capital. To achieve its objectives, the company seeks to capture significant opportunities to grow across products, markets, and geographies. To supplement its organic growth strategy, the company continually evaluates strategic acquisitions to broaden its product and value-added service offerings, increase its market penetration, and expand its geographic reach. The company is also committed to improving operational efficiency.
Executive Summary
Quarter Ended | |||||||||
March 29, | March 30, | ||||||||
(millions except per share data) | 2025 | 2024 | Change | ||||||
Consolidated sales | $ | 6,814 | $ | 6,924 | (1.6) | % | |||
Global components sales | $ | 4,778 | $ | 5,191 | (8.0) | % | |||
Global ECS sales | $ | 2,036 | $ | 1,733 | 17.5 | % | |||
Gross profit margin | 11.4 | % | 12.4 | % | (100) | bps | |||
Non-GAAP gross profit margin | 11.3 | % | 12.5 | % | (120) | bps | |||
Operating income | $ | 159 | $ | 186 | (14.7) | % | |||
Operating income margin | 2.3 | % | 2.7 | % | (40) | bps | |||
Non-GAAP operating income | $ | 179 | $ | 251 | (28.7) | % | |||
Non-GAAP operating income margin | 2.6 | % | 3.6 | % | (100) | bps | |||
Net income attributable to shareholders | $ | 80 | $ | 84 | (4.6) | % | |||
Earnings per share attributable to shareholders - diluted | $ | 1.51 | $ | 1.53 | (1.3) | % | |||
Non-GAAP net income attributable to shareholders | $ | 95 | $ | 132 | (28.1) | % | |||
Non-GAAP earnings per share attributable to shareholders - diluted | $ | 1.80 | $ | 2.41 | (25.3) | % | |||
Business environment and other trends:
| ● | During 2024, the global components reportable segment experienced a cyclical downturn characterized by elevated customer inventory levels, and a challenging global macroeconomic environment, contributing to lower demand for the company’s products. In the first quarter of 2025, the company noted positive meaningful demand trends, which may indicate the downturn is at a turning point. On a sequential quarter basis, customers are replenishing inventory, and all three regions are performing near or ahead of expectations after adjusting for normal seasonal trends for a typical first quarter (the company experiences different seasonal demand environments throughout each calendar year based on various purchasing patterns across the world). Consistent with historical trends from past cyclical downturns, the company expects the Asia/Pacific region to return to growth ahead of the Americas and EMEA regions. |
| ● | In April 2025, the U.S. announced universal tariffs on most U.S. imports, plus an additional country-specific tariff for select countries, such as China. In response, many countries are considering and implementing retaliatory tariffs on U.S. exports. The company’s global business is facing uncertainty around ongoing developments related to these tariffs, which increases the price of the products that the company purchases from its suppliers and passes to its customers, which in turn may decrease demand for the company’s products. Tariffs and other trade restrictions may also lead to an uncertain and volatile economic environment, including rising inflation, U.S. dollar weakening, elevated interest rates, declining consumer confidence, and increased price-based competition. |
31
| The company is continuing to evaluate and further implement mitigating actions, including potential supply chain optimization and improved solutions around processing tariffs. These tariffs and the associated macroeconomic effects may have an adverse impact on the company’s results of operations and cash flows as well as inflating inventory balances and increasing the risks related to tariff drawbacks. Refer to Part I, Item 1A - Risk Factors in the company’s Annual Report on Form 10‑K for the year ended December 31, 2024, for further discussion related to tariffs and tariff drawbacks. |
Results of Operations
Sales by reportable segment
Following is an analysis of the company’s sales by reportable segment:
| Quarter Ended |
|
| ||||||
March 29, | March 30, | ||||||||
(millions) |
| 2025 |
| 2024 |
| Change |
| ||
Consolidated sales, as reported | $ | 6,814 | $ | 6,924 |
| (1.6) | % | ||
Impact of changes in foreign currencies |
| — |
| (84) |
| ||||
Non-GAAP consolidated sales | $ | 6,814 | $ | 6,840 |
| (0.4) | % | ||
Global components sales, as reported | $ | 4,778 | $ | 5,191 |
| (8.0) | % | ||
Impact of changes in foreign currencies |
| — |
| (56) |
|
| |||
Non-GAAP global components sales | $ | 4,778 | $ | 5,135 |
| (7.0) | % | ||
Global ECS sales, as reported | $ | 2,036 | $ | 1,733 |
| 17.5 | % | ||
Impact of changes in foreign currencies |
| — |
| (28) |
|
| |||
Non-GAAP global ECS sales | $ | 2,036 | $ | 1,705 |
| 19.4 | % | ||
The sum of the components for sales, as reported, and sales on a non-GAAP basis may not agree to totals, as presented, due to rounding.
Reportable segment sales by geographic region
Following is an analysis of the company’s reportable segment sales by geographic region:
Quarter Ended | |||||||||||||||
March 29, | March 30, | ||||||||||||||
2025 | 2024 | ||||||||||||||
(millions) | Sales | % of Sales | Sales | % of Sales | Change | ||||||||||
Americas components sales | $ | 1,569 | 23.0 | % | $ | 1,597 | 23.1 | % | (1.8) | % | |||||
EMEA components sales | 1,340 | 19.8 | % | 1,657 | 23.9 | % | (19.1) | % | |||||||
Asia/Pacific components sales | 1,869 | 27.3 | % | 1,938 | 28.0 | % | (3.6) | % | |||||||
Global components sales | $ | 4,778 | 70.1 | % | $ | 5,191 | 75.0 | % | (8.0) | % | |||||
Americas ECS sales | $ | 910 | 13.4 | % | $ | 908 | 13.1 | % | 0.2 | % | |||||
EMEA ECS sales | 1,126 | 16.5 | % | 825 | 11.8 | % | 36.5 | % | |||||||
Global ECS sales | $ | 2,036 | 29.9 | % | $ | 1,733 | 25.0 | % | 17.5 | % | |||||
Consolidated sales | $ | 6,814 | 100.0 | % | $ | 6,924 | 100.0 | % | (1.6) | % | |||||
The sum of the components for sales by geographic region and consolidated sales may not agree to totals, as presented, due to rounding.
During the first quarter of 2025, the global components reportable segment decrease in sales compared to the year-earlier period was primarily due to the following impacts:
| ● | sales declined in the Americas region primarily due to softer demand for the aerospace & defense vertical; |
32
| ● | sales declined in the EMEA region primarily due to decreased demand for the industrial and transportation verticals; |
| ● | sales declined in the Asia/Pacific region primarily due to softer demand for the consumer vertical. |
Within the global ECS reportable segment, growth was primarily due to an increase in sales in the EMEA region for the first quarter of 2025, relative to the year-earlier period as a result of increased demand for infrastructure software, cloud-related solutions, security, and networking products.
Substantially all of the company’s sales are made on an order-by-order basis, rather than through long-term sales contracts. As such, the nature of the company’s business does not provide for the visibility of material forward-looking information from its customers and suppliers beyond a few months.
33
Gross Billings
The following table summarizes gross billings by geographic region for the global ECS reportable segment:
Quarter Ended | |||||||||
March 29, | March 30, | ||||||||
(millions) | 2025 |
| 2024 | Change | |||||
Americas ECS gross billings | $ | 2,308 | $ | 2,364 | (2.4) | % | |||
EMEA ECS gross billings |
| 2,331 |
| 2,045 | 14.0 | % | |||
Global ECS gross billings | $ | 4,639 | $ | 4,408 | 5.2 | % | |||
The sum of the components for global ECS gross billings may not agree to totals, as presented, due to rounding.
Gross Profit
Following is an analysis of the company’s consolidated gross profit:
| Quarter Ended |
| |||||||
March 29, | March 30, | ||||||||
(millions) |
| 2025 |
| 2024 |
| Change | |||
Consolidated gross profit, as reported | $ | 774 | $ | 858 |
| (9.8) | % | ||
Impact of wind down to inventory | (2) | 10 | |||||||
Impact of changes in foreign currencies |
| — | (12) |
|
|
| |||
Non-GAAP consolidated gross profit | $ | 772 | $ | 856 |
| (9.9) | % | ||
Consolidated gross profit as a percentage of sales, as reported |
| 11.4 | % | 12.4 | % | (100) | bps | ||
Non-GAAP consolidated gross profit as a percentage of sales |
| 11.3 | % | 12.5 | % | (120) | bps | ||
Global components gross profit, as reported | $ | 555 | $ | 646 |
| (14.1) | % | ||
Impact of wind down to inventory | (2) | 10 | |||||||
Impact of changes in foreign currencies |
| — | (8) |
|
|
| |||
Non-GAAP global components gross profit | $ | 552 | $ | 648 |
| (14.8) | % | ||
Global components gross profit as a percentage of sales, as reported |
| 11.6 | % | 12.4 | % | (80) | bps | ||
Non-GAAP global components gross profit as a percentage of sales |
| 11.6 | % | 12.6 | % | (100) | bps | ||
Global ECS gross profit, as reported | $ | 219 | $ | 212 |
| 3.2 | % | ||
Impact of changes in foreign currencies | — | (4) | |||||||
Non-GAAP global ECS gross profit | $ | 219 | $ | 208 |
| 5.2 | % | ||
Global ECS gross profit as a percentage of sales, as reported |
| 10.8 | % | 12.2 | % | (140) | bps | ||
Non-GAAP global ECS gross profit as a percentage of sales |
| 10.8 | % | 12.2 | % | (140) | bps | ||
The sum of the components for non-GAAP gross profit may not agree to totals, as presented, due to rounding.
Global components gross profit margins decreased during the first quarter of 2025 compared with the year-earlier period due to regional mix shifting towards the Asia/Pacific region. Global components supply chain services offerings continued to have a positive impact on gross margins.
Global ECS gross profit margins decreased during the first quarter of 2025 compared with the year-earlier period primarily due to a shift in sales mix towards more sales recognized on a gross basis in the EMEA region relative to the first quarter of 2024. Refer to Note 1 “Summary of Significant Accounting Policies” in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.
34
Operating Expenses
Following is an analysis of the company’s consolidated operating expenses as of:
| Quarter Ended |
| |||||||
March 29, | March 30, | ||||||||
(millions) |
| 2025 |
| 2024 |
| Change | |||
Consolidated operating expenses, as reported | $ | 615 | $ | 672 |
| (8.4) | % | ||
Identifiable intangible asset amortization |
| (5) |
| (8) |
|
|
| ||
Restructuring, integration, and other |
| (17) |
| (47) |
|
|
| ||
Impact of changes in foreign currencies |
| — |
| (7) |
|
|
| ||
Non-GAAP consolidated operating expenses | $ | 593 | $ | 611 |
| (3.0) | % | ||
Consolidated operating expenses as a percentage of sales |
| 9.0 | % |
| 9.7 | % | (70) | bps | |
Non-GAAP consolidated operating expenses as a percentage of non-GAAP sales |
| 8.7 | % |
| 8.9 | % | (20) | bps | |
Global components operating expenses, as reported | $ | 384 | $ | 420 |
| (8.7) | % | ||
Identifiable intangible asset amortization |
| (4) |
| (6) |
|
| |||
Impact of changes in foreign currencies |
| — |
| (5) |
|
| |||
Non-GAAP global components operating expenses | $ | 379 | $ | 410 |
| (7.5) | % | ||
Global components operating expenses as a percentage of sales |
| 8.0 | % |
| 8.1 | % | (10) | bps | |
Non-GAAP global components operating expenses as a percentage of non-GAAP sales |
| 7.9 | % |
| 8.0 | % | (10) | bps | |
Global ECS operating expenses, as reported | $ | 142 | $ | 141 |
| 0.8 | % | ||
Identifiable intangible asset amortization |
| (1) |
| (1) |
|
| |||
Impact of changes in foreign currencies |
| — |
| (3) |
|
| |||
Non-GAAP global ECS operating expenses | $ | 141 | $ | 137 |
| 2.7 | % | ||
Global ECS operating expenses as a percentage of sales |
| 7.0 | % |
| 8.1 | % | (110) | bps | |
Non-GAAP global ECS operating expenses as a percentage of non-GAAP sales |
| 6.9 | % |
| 8.0 | % | (110) | bps | |
Corporate operating expenses, as reported | $ | 90 | $ | 111 |
| (18.9) | % | ||
Restructuring, integration, and other |
| (17) |
| (47) |
|
| |||
Non-GAAP corporate operating expenses | $ | 73 | $ | 64 |
| 13.4 | % | ||
The sum of the components for non-GAAP operating expenses may not agree to totals, as presented, due to rounding.
Global components operating expenses decreased during the first quarter of 2025 compared to the year-earlier period primarily due to a decrease of $18.1 million in employee-related costs primarily due to cost reduction initiatives and lower sales incentives.
Global ECS operating expenses increased during the first quarter of 2025 compared to the year-earlier period primarily due to an increase in employee-related costs due to higher sales incentives, in line with the increase in sales discussed above.
Corporate operating expenses decreased during the first quarter of 2025 compared to the year-earlier period primarily due to a decrease of $29.5 million due to lower restructuring, integration and other charges (see discussion below) partially offset by higher stock-based compensation expense.
35
Restructuring, Integration, and Other
Restructuring initiatives and integration costs are due to the company’s continued efforts to lower costs, drive operational efficiency, integrate acquired businesses, and consolidate certain operations, as necessary. The company recorded restructuring, integration, and other charges as follows:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(millions) |
| 2025 |
| 2024 | ||
Restructuring, integration and related costs | ||||||
Operating Expense Efficiency Plan costs (a) | $ | 9 | $ | — | ||
Other plans | 1 | — | ||||
Other expenses | ||||||
Operating expense reduction costs not related to restructuring initiatives (b) | 4 | 43 | ||||
Early lease termination costs | 1 | 3 | ||||
Other charges | 2 | 1 | ||||
Total | $ | 17 | $ | 47 | ||
The sum of the components for restructuring, integration, and other may not agree to totals, as presented, due to rounding.
| (a) | See details related to the Operating Expense Efficiency Plan discussed below. |
| (b) | These costs are primarily related to employee severance and benefit costs. As of March 29, 2025, the accrued liabilities related to these costs totaled $6.8 million and substantially all accrued amounts are expected to be spent in cash within one year. |
Operating Expense Efficiency Plan
On October 31, 2024, in response to evolving business needs and as part of an initiative to optimize operating expenses, the company announced a multi-year restructuring plan (the “Operating Expense Efficiency Plan” or “the Plan”). The Plan is designed to improve operational efficiency through the following measures: (i) reorganizing and consolidating certain areas of the company’s operations to centralize functions and streamline resources, with a focus on more cost-efficient regions; (ii) enhancing warehouse and logistics operations; (iii) investing in information technology to support automation and process improvements; (iv) consolidating the company’s global real estate footprint; (v) reducing third-party spending; and (vi) winding down certain non-core businesses that are not aligned with the company’s strategic objectives. The company expects to substantially complete the Plan by the end of fiscal year 2026, subject to, among other things, local legal and consultation requirements.
Under the Plan, the company anticipates to incur pre-tax restructuring charges of no more than $185.0 million. While the composition of these costs will continue to evolve over time, the company currently expects to incur approximately $90.0 million of employee severance and other personnel cash expenditures; approximately $70.0 million of non-cash asset impairments, inventory write-downs and foreign currency translation adjustment write-offs related to the wind-down of certain business operations; and approximately $25.0 million of other related cash expenditures.
As a result of the Plan, the company expects to reduce annual operating expenses by approximately $90.0 million to $100.0 million by the end of fiscal year 2026. The estimates of charges or savings related to the Plan could differ materially from actual charges or savings recognized.
Refer to Note I, “Restructuring, Integration, and Other” of the Notes to the Consolidated Financial Statements for further discussion of the company’s restructuring and integration activities.
36
Operating Income
Following is an analysis of the company’s consolidated operating income, and operating income for the company’s two reportable segments:
| Quarter Ended |
| |||||||
March 29, | March 30, | ||||||||
(millions) |
| 2025 |
| 2024 |
| Change | |||
Consolidated operating income, as reported | $ | 159 | $ | 186 |
| (14.7) | % | ||
Identifiable intangible asset amortization |
| 5 |
| 8 |
|
|
| ||
Restructuring, integration, and other |
| 17 |
| 47 |
|
|
| ||
Impact of wind down to inventory | (2) | 10 | |||||||
Non-GAAP consolidated operating income | $ | 179 | $ | 251 |
| (28.7) | % | ||
Consolidated operating income as a percentage of sales |
| 2.3 | % |
| 2.7 | % | (40) | bps | |
Non-GAAP consolidated operating income as a percentage of sales |
| 2.6 | % |
| 3.6 | % | (100) | bps | |
Global components operating income, as reported | $ | 171 | $ | 226 |
| (24.0) | % | ||
Identifiable intangible asset amortization |
| 4 |
| 6 |
|
|
| ||
Impact of wind down to inventory | (2) | 10 | |||||||
Non-GAAP global components operating income | $ | 173 | $ | 243 |
| (28.5) | % | ||
Global components operating income as a percentage of sales |
| 3.6 | % |
| 4.3 | % | (70) | bps | |
Non-GAAP global components operating income as a percentage of sales |
| 3.6 | % |
| 4.7 | % | (110) | bps | |
Global ECS operating income, as reported | $ | 77 | $ | 71 |
| 8.2 | % | ||
Identifiable intangible asset amortization |
| 1 |
| 1 |
|
|
| ||
Non-GAAP global ECS operating income | $ | 78 | $ | 73 |
| 7.9 | % | ||
Global ECS operating income as a percentage of sales |
| 3.8 | % |
| 4.1 | % | (30) | bps | |
Non-GAAP global ECS operating income as a percentage of sales |
| 3.8 | % |
| 4.2 | % | (40) | bps | |
The sum of the components of consolidated operating income do not agree to totals, as presented, because unallocated corporate amounts are not included in the table above. Refer to Note M “Segment and Geographic Information” of the Notes to the Consolidated Financial Statements for further discussion.
The decrease in consolidated operating income as a percentage of sales for the first quarter of 2025 relates primarily to the changes in sales, gross profit margins and operating expenses discussed above.
Interest and Other Financing Expense, Net
The company recorded net interest and other financing expense as follows:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(millions) |
| 2025 |
| 2024 | ||
Interest and other financing expense, net | $ | (56) | $ | (80) | ||
The decreases in interest and other financing expenses, net for the first quarter of 2025 compared to the year-earlier period were primarily related to lower average daily borrowings on floating rate credit facilities. Refer to the section below titled “Liquidity and Capital Resources” for more information on changes in borrowings.
Income Tax
Income taxes for the interim periods presented have been included in the accompanying consolidated financial statements on the basis of an estimated annual effective tax rate. The determination of the consolidated provision for income taxes requires management to make certain judgments and estimates. Changes in the estimated level of annual pre-tax earnings, tax laws, and changes resulting from tax audits can affect the overall effective income tax rate, which impacts the level of income tax expense and net income. Judgments and estimates related to the company’s projections and assumptions are inherently uncertain, therefore, actual results could differ from projections.
37
Following is an analysis of the company’s consolidated effective income tax rate:
| Quarter Ended | ||||||
March 29, | March 30, | ||||||
| 2025 |
| 2024 |
| |||
Effective income tax rate |
| 22.6 | % | 21.0 | % | ||
Identifiable intangible asset amortization |
| 0.1 | % | 0.2 | % | ||
Restructuring, integration, and other | 0.2 | % | 1.2 | % | |||
Impact of wind down to inventory | — | % | 0.3 | % | |||
Non-GAAP effective income tax rate |
| 22.9 | % | 22.6 | % | ||
The sum of the components for non-GAAP effective income tax rate may not agree to totals, as presented, due to rounding.
The increase in the effective tax rate for the first quarter of 2025, compared to the year-earlier period, is mainly attributed to changes in the mix of tax jurisdictions where income was generated.
Net Income Attributable to Shareholders
Following is an analysis of the company’s consolidated net income attributable to shareholders:
Quarter Ended | ||||||
March 29, | March 30, | |||||
(millions) |
| 2025 |
| 2024 | ||
Net income attributable to shareholders, as reported | $ | 80 | $ | 84 | ||
Identifiable intangible asset amortization* |
| 5 |
| 7 | ||
Restructuring, integration, and other |
| 17 |
| 47 | ||
Impact of wind down to inventory | (2) | 10 | ||||
Tax effect of adjustments above |
| (5) |
| (16) | ||
Non-GAAP net income attributable to shareholders | $ | 95 | $ | 132 | ||
The sum of the components for non-GAAP net income attributable to shareholders may not agree to totals, as presented, due to rounding.
* Identifiable intangible asset amortization excludes amortization attributable to the noncontrolling interest.
The decrease in net income attributable to shareholders in the first quarter of 2025 compared to the year-earlier period relates primarily to changes in sales, gross margins, and income tax as discussed above.
Liquidity and Capital Resources
Management believes that the company’s current cash availability, its current borrowing capacity under its revolving credit facility and asset securitization programs, and its expected ability to generate future operating cash flows are sufficient to meet its projected cash flow needs for the next 12 months and the foreseeable future. The company’s current committed and undrawn liquidity stands at over $3.1 billion in addition to $231.9 million of cash on hand at March 29, 2025. The company also may issue debt or equity securities in the future and management believes the company will have adequate access to the capital markets, if needed. The company continually evaluates its liquidity requirements and may seek to amend its existing borrowing capacity or access the financial markets as deemed necessary.
The company’s principal sources of liquidity are existing cash and cash equivalents, cash generated from operations and cash provided by its revolving credit facilities and debt. The company’s principal uses of liquidity include cash used in operations, investments to grow working capital, scheduled interest and principal payments on its borrowings, and the return of cash to shareholders through share repurchases.
38
The following table presents selected financial information related to liquidity:
March 29, | December 31, | ||||||||
(millions) |
| 2025 |
| 2024 |
| Change | |||
Working capital | $ | 6,351 | $ | 6,693 | $ | (342) | |||
Cash and cash equivalents |
| 232 |
| 189 |
| 43 | |||
Short-term debt |
| 531 |
| 350 |
| 181 | |||
Long-term debt |
| 2,313 |
| 2,774 |
| (461) | |||
Working Capital
The company maintains a significant investment in working capital which the company defines as accounts receivable, net, plus inventories less accounts payable. The change in working capital during the first quarter of 2025 was primarily attributable to decreases in accounts receivable.
Working capital as a percentage of sales, which is defined as working capital divided by annualized quarterly sales, decreased to 23.3% for the first quarter of 2025, compared to 25.0% in the year-earlier period. The decrease was primarily due to increases in accounts payable.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments, which are readily convertible into cash, with original maturities of three months or less. At March 29, 2025 and December 31, 2024, the company had cash and cash equivalents of $231.9 million and $188.8 million, respectively, of which $176.4 million and $164.0 million, respectively, were held outside the United States.
The company has $5.5 billion of undistributed earnings of its foreign subsidiaries which it deems indefinitely reinvested, and recognizes that it may be subject to additional foreign taxes and U.S. state income taxes, if it reverses its indefinite reinvestment assertion on these foreign earnings. The company also has $2.1 billion of foreign earnings that are not deemed permanently reinvested and are available for distribution in future periods as of March 29, 2025.
Revolving Credit Facilities and Debt
The following tables summarize the company’s credit facilities:
Outstanding Borrowings | |||||||||
Borrowing | March 29, | December 31, | |||||||
(millions) |
| Capacity |
| 2025 |
| 2024 | |||
North American asset securitization program | $ | 1,500 | $ | 200 | $ | 633 | |||
Revolving credit facility |
| 2,000 |
| — |
| 30 | |||
Commercial paper program (a) |
| 1,200 |
| 176 |
| — | |||
Uncommitted lines of credit |
| 500 |
| — |
| — | |||
| (a) | Amounts outstanding under the commercial paper program are backstopped by available commitments under the company’s revolving credit facility. |
39
Average Daily Balance Outstanding | ||||||||||||
Quarter Ended | Effective Interest Rate | |||||||||||
March 29, | March 30, | March 29, | March 30, | |||||||||
(millions) |
| 2025 |
| 2024 |
| 2025 | 2024 | |||||
North American asset securitization program | $ | 552 | $ | 724 | 4.82 | % | 6.44 | % | ||||
Revolving credit facility |
| 1 |
| 5 | 5.47 | % | 6.44 | % | ||||
Commercial paper program |
| 348 |
| 657 | 4.79 | % | 5.80 | % | ||||
Uncommitted lines of credit |
| 263 |
| 287 | 4.82 | % | 5.82 | % | ||||
The company also has an EMEA asset securitization program under which it continuously sells its interest in designated pools of trade accounts receivable of certain of its subsidiaries in the EMEA region. Receivables sold under the program are excluded from “Accounts receivable, net” and no corresponding liability is recorded on the company’s consolidated balance sheets. During the first quarter of 2025 and 2024, the average daily balance outstanding under the EMEA asset securitization program was $307.9 million and $457.1 million, respectively. Refer to Note E “Accounts Receivable” of the Notes to the Consolidated Financial Statements for further discussion.
The following table summarizes recent events impacting the company’s capital resources:
(millions) |
| Activity |
| Date |
| Notional Amount | |
4.00% notes, due April 2025 (a) | Repaid | April 2025 | $ | 350 | |||
3.25% notes, due September 2024 | Repaid | September 2024 | $ | 500 | |||
5.15% notes, due August 2029 | Issued | August 2024 | $ | 500 | |||
5.875% notes, due April 2034 | Issued | April 2024 | $ | 500 | |||
6.125% notes, due March 2026 | Repaid | April 2024 | $ | 500 | |||
| (a) | Subsequent to the balance sheet date, in April 2025, the company repaid the $350.0 million principal amount of its 4.00% notes due April 2025. |
Refer to Note G “Debt” of the Notes to the Consolidated Financial Statements for further discussion of the company’s short-term and long-term debt and available financing.
Cash Flows
The following table summarizes the company’s cash flows by category for the periods presented:
Quarter Ended | |||||||||
March 29, | March 30, | ||||||||
(millions) |
| 2025 |
| 2024 |
| Change | |||
Net cash provided by operating activities | $ | 352 | $ | 403 | $ | (51) | |||
Net cash used for investing activities |
| (25) |
| (24) |
| (1) | |||
Net cash used for financing activities |
| (342) |
| (318) |
| (24) | |||
Cash Flows from Operating Activities
The net amount of cash provided by the company’s operating activities during the first quarter of 2025 and 2024 was $351.7 million and $403.2 million, respectively. The change in cash provided by operating activities during 2025, compared to the year-earlier period, relates primarily to the timing of payments.
Cash Flows from Investing Activities
The net amount of cash used for investing activities during the first quarter of 2025 and 2024 was $25.0 million and $24.4 million, respectively.
40
Cash Flows from Financing Activities
The net amount of cash used for financing activities was $342.1 million during the first quarter of 2025 compared to $317.7 million used for financing activities in the year-earlier period. The change in cash used for financing activities relates primarily to an increase in repayments of long-term bank borrowings offset by lower share repurchases and an increase in short-term borrowings in 2025.
Capital Expenditures
Capital expenditures for the first quarter of 2025 and 2024 were $25.0 million and $29.5 million, respectively. The company expects capital expenditures to be approximately $100.0 million for the fiscal year 2025.
Share Repurchase Program
The company repurchased 0.5 million shares of its common stock for $49.9 million and 0.8 million shares of its common stock for $100.0 million in the first quarter of 2025 and 2024, respectively, under its share repurchase program, excluding excise taxes. As of March 29, 2025, approximately $273.8 million remained available for repurchase under the share repurchase program. The share repurchase authorization does not have an expiration date and the pace of the repurchase activity will depend on factors such as the company’s working capital needs, cash requirements for acquisitions, debt repayment obligations or repurchases of debt, share price, and economic and market conditions. The share repurchase program may be accelerated, suspended, delayed, or discontinued at any time subject to the approval of the company’s Board of Directors.
Contractual Obligations
The company has contractual obligations for short-term and long-term debt, interest on short-term and long-term debt, purchase obligations, operating leases, and other sources and uses of capital that are summarized in the sections titled “Contractual Obligations” and “Additional Capital Requirements and Sources” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Refer to the section above titled “Revolving Credit Facilities and Debt” for updates to the company’s short-term and long-term debt obligations. Refer to the section above titled “Restructuring, Integration, and Other” for updates related to discussion of planned restructuring costs. Refer to Note H “Financial Instruments Measured at Fair Value” of the Notes to Consolidated Financial Statements for further discussion on hedging activities. As of March 29, 2025, there were no other material changes to the capital requirements and sources of the company. Refer to Note D “Investments in Affiliated Companies” of the Notes to Consolidated Financial Statements for discussion of proceeds from the sale of investments in certain equity securities which occurred subsequent to March 29, 2025, and will be recorded in the second quarter of 2025.
Critical Accounting Estimates
The company’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires the company to make significant estimates and judgments that have had or are reasonably likely to have a material impact on the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. The company has established detailed policies and control procedures intended to ensure the appropriateness of such estimates and assumptions and their consistent application from period to period. The company bases its estimates on historical experience and on various other assumptions that are believed reasonable under the circumstances; the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes to the company’s critical accounting estimates for the quarter ended March 29, 2025. Refer to the section titled “Critical Accounting Estimates” in Part II, Item 7, Management’s Discussion and Analysis
41
of Financial Condition and Results of Operations, in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Impact of Recently Issued Accounting Standards
See Note B “Impact of Recently Issued Accounting Standards” of the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements, including the anticipated dates of adoption and the effects on the company’s consolidated financial position and results of operations.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
During the three months ended March 29, 2025, there were no material changes in market risk for changes in foreign currency exchange rates and interest rates from the information provided in Part II, Item 7A – Quantitative and Qualitative Disclosures About Market Risk in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The company’s management, under the supervision and with the participation of the company’s Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the company’s disclosure controls and procedures as of March 29, 2025 (the “Evaluation”). Based upon the Evaluation, the company’s Chief Executive Officer and Chief Financial Officer concluded that the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended) were effective as of March 29, 2025.
Changes in Internal Control over Financial Reporting
There were no changes in the company’s internal control over financial reporting during the company’s most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.
42
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
The information set forth under the heading “Environmental Matters” and “Other” in Note L “Contingencies” in the Notes to Consolidated Financial Statements in Item 1 Part I of this Report, is incorporated herein by reference.
Item 1A.Risk Factors
There have been no material changes to the company’s risk factors from those discussed in Part I, Item 1A - Risk Factors in the company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
The following table shows the share repurchase activity for the quarter ended March 29, 2025:
|
|
|
| Approximate | ||||||
Total Number of | Dollar Value of | |||||||||
Shares | Shares that May | |||||||||
Total | Purchased as | Yet be | ||||||||
Number of | Average | Part of Publicly | Purchased | |||||||
Shares | Price Paid | Announced | Under the | |||||||
(thousands except share and per share data) |
| Purchased |
| per Share (a) |
| Program |
| Programs (b) | ||
January 1 through January 25, 2025 |
| — | $ | — |
| — | $ | 324,063 | ||
January 26 through February 22, 2025 |
| 179,180 |
| 111.29 |
| 179,180 |
| 304,122 | ||
February 23 through March 29, 2025 |
| 273,645 |
| 109.63 |
| 273,645 |
| 273,790 | ||
Total |
| 452,825 |
|
| 452,825 |
|
| |||
| (a) | Average price paid per share excludes 1% excise tax on stock repurchases. |
| (b) | The company’s share repurchase program does not have an expiration date. As of March 29, 2025, the total authorized dollar value of shares available for repurchase was $1.0 billion of which $726.2 million has been utilized, and the $273.8 million in the table represents the remaining amount available for repurchase under the program. |
Item 5.Other Information
Trading Arrangements
During the quarter ended March 29, 2025, none of the company’s directors or officers
43
44
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ARROW ELECTRONICS, INC. | |||
Date: | May 1, 2025 | By: | /s/ Rajesh K. Agrawal |
Rajesh K. Agrawal | |||
Senior Vice President and Chief Financial Officer | |||
(Duly Authorized Officer and Principal Financial Officer) | |||
/s/ Yun Cho | |||
Yun Cho | |||
Vice President, Corporate Controller, and Chief Accounting Officer | |||
(Principal Accounting Officer) | |||
45