Arrow Electronics Reports First-Quarter 2023 Results

View all news Arrow Electronics Reports First-Quarter 2023 Results May 04, 2023 -- First-Quarter Earnings Per Share of $4.60; Non-GAAP Earnings Per Share of $4.60 -- -- Revenue and EPS Exceeding Midpoint of Guidance -- Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter 2023 sales of $8.74 billion, a decrease of 4 percent year over year, and a decrease of 2 percent year over year on a constant currency basis1. First-quarter net income was $274 million, or $4.60 per share on a diluted basis, compared with net income of $365 million, or $5.31 per share on a diluted basis, in the first quarter of 2022. Non-GAAP net income1 was $274 million, or $4.60 per share on a diluted basis, in the first quarter of 2023, compared with non-GAAP net income of $373 million, or $5.43 per share on a diluted basis, in the first quarter of 2022. In the first quarter of 2023, changes in foreign currencies reduced sales by $203 million, and reduced earnings per share on a diluted basis by $0.13, compared to the first quarter of 2022. “The company delivered solid first-quarter results with revenue and earnings per share beating the midpoint of our guidance,” said Sean Kerins, Arrow's president and chief executive officer. “Our dedicated team performed well in a challenging environment for both our suppliers and customers.” Global components first-quarter sales of $6.86 billion reflected a decrease of 5 percent year over year, and a decrease of 3 percent year over year on a constant currency basis. Asia-Pacific components first-quarter sales decreased 19 percent year over year. Americas components first-quarter sales decreased 5 percent year over year. Europe components first-quarter sales increased 17 percent year over year, and increased 23 percent year over year on a constant currency basis. Global components first-quarter operating income was $418 million, and first-quarter non-GAAP operating income was $424 million. “We are pleased with the overall performance of the global components business given the current market conditions, led by strength in the EMEA region. We were encouraged by the momentum of our design engagement in several of our markets,” said Mr. Kerins. Global enterprise computing solutions (ECS) first-quarter sales of $1.88 billion were flat year over year and reflected an increase of 3 percent year over year on a constant currency basis. Europe enterprise computing solutions first-quarter sales increased 7 percent year over year and increased 13 percent year over year on a constant currency basis. Americas enterprise computing solutions first-quarter sales decreased 5 percent year over year. Global enterprise computing solutions first-quarter operating income was $81 million, and first-quarter non-GAAP operating income was $82 million. “Our ECS business continues to perform in line with the overall market for enterprise IT, with better momentum in Europe, and a softer backdrop in the Americas. Additionally, we’re pleased to see signs of an improving supply environment,” said Mr. Kerins. “Enhancing shareholder value remains a top priority,” said Raj Agrawal, senior vice president and chief financial officer. “Our strong financial returns and the effective management of our balance sheet have enabled us to return cash to shareholders by repurchasing $300 million of shares during the first quarter. Returning cash to shareholders through our stock repurchase plan remains one of our priorities. As of the end of the first quarter, our remaining repurchase authorization stands at approximately $1 billion.” 1 A reconciliation of non-GAAP financial measures to GAAP financial measures is presented in the reconciliation tables included herein. SECOND-QUARTER 2023 OUTLOOK Consolidated sales of $8.42 billion to $9.02 billion, with global components sales of $6.64 billion to $7.04 billion, and global enterprise computing solutions sales of $1.78 billion to $1.98 billion Net income per share on a diluted basis of $4.10 to $4.30, and non-GAAP net income per share on a diluted basis of $4.25 to $4.45 Average tax rate of approximately 23.5 percent compared to the long-term range of 23 to 25 percent Average diluted shares outstanding of 57.95 million Interest expense of approximately $90 million Changes in foreign currencies expected to increase year-over-year growth in sales by $12 million, not expected to have a significant impact on earnings per share on a diluted basis compared to the second quarter of 2022 Changes in foreign currencies expected to increase quarter-over-quarter growth in sales by $54 million and earnings per share on a diluted basis by $0.04 compared to the first quarter of 2023 On a constant currency basis, our second-quarter sales guidance implies a sequential growth rate range of down 4 percent to up 2 percent for global components and down 6 percent to up 4 percent for global enterprise computing solutions, when compared to the first quarter of 2023 Second-Quarter 2023 GAAP to non-GAAP Outlook Reconciliation NON-GAAP SALES RECONCILIATION Quarter Ended Quarter Ended (in billions) July 1, 2023 July 2, 2022 % Change July 1, 2023 April 1, 2023 % Change Global components sales, GAAP $6.64 - 7.04 $ 7.46 (11%) - (6%) $6.64 - 7.04 $ 6.86 (3%) - 3% Impact of changes in foreign currencies — 0.01 — 0.04 Global components sales, constant currency $6.64 - 7.04 $ 7.47 (11%) - (6%) $6.64 - 7.04 $ 6.90 (4%) - 2% Global ECS sales, GAAP $1.78 - 1.98 $ 2.00 (11%) - (1%) $1.78 - 1.98 $ 1.88 (5%) - 5% Impact of changes in foreign currencies — 0.01 — 0.02 Global ECS sales, constant currency $1.78 - 1.98 $ 2.01 (11%) - (1%) $1.78 - 1.98 $ 1.90 (6%) - 4% NON-GAAP EARNINGS RECONCILIATION Reported GAAP measure Intangible amortization expense Restructuring & integration charges Non-GAAP measure Net income per diluted share $4.10 to $4.30 $0.10 $0.05 $4.25 to $4.45 CFO Commentary Please refer to the CFO commentary, which can be found at investor.arrow.com, as a supplement to the company’s earnings release. The company uses its website as a tool to disclose important information about the company and to comply with its disclosure obligations under Regulation Fair Disclosure. Conference Call Information Arrow Electronics will host a conference call to discuss first-quarter 2023 financial results on May 4, 2023, at 1:00 PM ET. Register online at https://conferencingportals.com/event/gniMxNyn to obtain dial-in information to access the live conference call. The conference call will also be available via live webcast at investor.arrow.com. Shortly after the conclusion of the conference call, a webcast replay will be available at investor.arrow.com. About Arrow Electronics Arrow Electronics guides innovation forward for over 210,000 leading technology manufacturers and service providers. With 2022 sales of $37 billion, Arrow develops technology solutions that improve business and daily life. Learn more at fiveyearsout.com. Information Relating to Forward-Looking Statements This press release includes “forward-looking” statements, as the term is defined under the federal securities laws, including but not limited to statements regarding: Arrow’s future financial performance, including its outlook on financial results for the second quarter of fiscal 2023 such as sales, net income per diluted share, non-GAAP net income per diluted share, average tax rate, average diluted shares outstanding, interest expense, average USD-to-Euro exchange rate, impact to sales due to changes in foreign currencies, intangible amortization expense per diluted share, restructuring & integration charges per diluted share, and expectation regarding market demand. 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: unfavorable economic conditions; disruptions or inefficiencies in the supply chain, including any potential adverse effects of the ongoing global COVID-19 pandemic; political instability; impacts of military conflict, including the conflict in Ukraine; industry conditions; changes in product supply, pricing and customer demand; 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 export, antitrust, and anti-corruption laws; foreign tax and other loss contingencies; and the company's ability to generate 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 the company's most recent 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 accounting principles generally accepted in the United States (“GAAP”), the company also provides certain non-GAAP financial information. The company provides non-GAAP sales, operating income, income before income taxes, provision for income taxes, consolidated net income, noncontrolling interests, net income attributable to shareholders, effective tax rate and net income per share on a diluted basis, which are non-GAAP measures adjusted for the impact of changes in foreign currencies (referred to as "changes in foreign currencies" or "on a constant currency basis") by re-translating prior-period results at current period foreign exchange rates, identifiable intangible asset amortization, restructuring, integration, and other charges, and net gains and losses on investments. 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- 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, in conjunction with, and not as a substitute for, data presented in accordance with GAAP. ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) (Unaudited) Quarter Ended April 1, 2023 April 2, 2022 Sales $ 8,736,428 $ 9,074,125 Cost of sales 7,622,606 7,866,621 Gross profit 1,113,822 1,207,504 Operating expenses: Selling, general, and administrative expenses 642,431 643,925 Depreciation and amortization 46,679 48,305 Restructuring, integration, and other charges 2,560 4,898 691,670 697,128 Operating income 422,152 510,376 Equity in earnings (losses) of affiliated companies (80 ) 843 Gain on investments, net 10,311 2,011 Employee benefit plan expense, net (853 ) (889 ) Interest and other financing expense, net (79,658 ) (33,985 ) Income before income taxes 351,872 478,356 Provision for income taxes 76,547 112,360 Consolidated net income 275,325 365,996 Noncontrolling interests 1,575 1,247 Net income attributable to shareholders $ 273,750 $ 364,749 Net income per share: Basic $ 4.66 $ 5.38 Diluted $ 4.60 $ 5.31 Weighted-average shares outstanding: Basic 58,731 67,840 Diluted 59,479 68,749 ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value) (Unaudited) April 1, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 205,554 $ 176,915 Accounts receivable, net 10,655,863 12,322,717 Inventories 5,525,782 5,319,369 Other current assets 479,650 521,339 Total current assets 16,866,849 18,340,340 Property, plant, and equipment, at cost: Land 5,691 5,691 Buildings and improvements 185,790 184,211 Machinery and equipment 1,602,073 1,583,661 1,793,554 1,773,563 Less: Accumulated depreciation and amortization (1,214,103 ) (1,177,107 ) Property, plant, and equipment, net 579,451 596,456 Investments in affiliated companies 59,682 65,112 Intangible assets, net 151,221 159,137 Goodwill 2,036,077 2,027,626 Other assets 583,252 574,511 Total assets $ 20,276,532 $ 21,763,182 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 8,976,296 $ 10,460,419 Accrued expenses 1,269,536 1,339,302 Short-term borrowings, including current portion of long-term debt 144,264 589,883 Total current liabilities 10,390,096 12,389,604 Long-term debt 3,719,056 3,182,964 Other liabilities 567,200 579,261 Equity: Shareholders’ equity: Common stock, par value $1: Authorized - 160,000 shares in both 2023 and 2022 Issued - 125,424 shares in both 2023 and 2022 125,424 125,424 Capital in excess of par value 1,203,134 1,208,708 Treasury stock (68,426 and 66,175 shares in 2023 and 2022, respectively), at cost (4,925,140 ) (4,637,345 ) Retained earnings 9,488,582 9,214,832 Accumulated other comprehensive loss (361,468 ) (365,262 ) Total shareholders’ equity 5,530,532 5,546,357 Noncontrolling interests 69,648 64,996 Total equity 5,600,180 5,611,353 Total liabilities and equity $ 20,276,532 $ 21,763,182 ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Quarter Ended April 1, 2023 April 2, 2022 Cash flows from operating activities: Consolidated net income $ 275,325 $ 365,996 Adjustments to reconcile consolidated net income to net cash provided by (used for) operations: Depreciation and amortization 46,679 48,305 Amortization of stock-based compensation 19,497 17,351 Equity in (earnings) losses of affiliated companies 80 (843 ) Deferred income taxes (7,530 ) 1,352 Gain on investments, net (10,311 ) (2,011 ) Other 1,321 686 Change in assets and liabilities: Accounts receivable, net 1,701,889 430,710 Inventories (199,521 ) (460,902 ) Accounts payable (1,504,701 ) (477,825 ) Accrued expenses (132,316 ) (43,641 ) Other assets and liabilities 33,392 (79,426 ) Net cash provided by (used for) operating activities 223,804 (200,248 ) Cash flows from investing activities: Acquisition of property, plant, and equipment (20,114 ) (19,270 ) Proceeds from collections of notes receivable 142 20,169 Proceeds from settlement of net investment hedge 10,725 — Net cash provided by (used for) investing activities (9,247 ) 899 Cash flows from financing activities: Change in short-term and other borrowings (146,050 ) (14,293 ) Proceeds from long-term bank borrowings, net 34,360 845,000 Net proceeds from note offering 498,600 — Redemption of notes (300,000 ) (350,000 ) Proceeds from exercise of stock options 5,934 11,302 Repurchases of common stock (303,801 ) (264,431 ) Net cash provided by (used for) financing activities (210,957 ) 227,578 Effect of exchange rate changes on cash 25,039 (7,632 ) Net increase in cash and cash equivalents 28,639 20,597 Cash and cash equivalents at beginning of period 176,915 222,194 Cash and cash equivalents at end of period $ 205,554 $ 242,791 ARROW ELECTRONICS, INC. NON-GAAP SALES RECONCILIATION (In thousands) (Unaudited) Quarter Ended April 1, 2023 April 2, 2022 % Change Consolidated sales, as reported $ 8,736,428 $ 9,074,125 (3.7 )% Impact of changes in foreign currencies — (202,778 ) Consolidated sales, constant currency $ 8,736,428 $ 8,871,347 (1.5 )% Global components sales, as reported $ 6,855,793 $ 7,199,075 (4.8 )% Impact of changes in foreign currencies — (145,993 ) Global components sales, constant currency $ 6,855,793 $ 7,053,082 (2.8 )% Americas components sales, as reported $ 2,233,453 $ 2,340,543 (4.6 )% Impact of changes in foreign currencies — (1,694 ) Americas components sales, constant currency $ 2,233,453 $ 2,338,849 (4.5 )% Asia components sales, as reported $ 2,376,195 $ 2,931,529 (18.9 )% Impact of changes in foreign currencies — (46,502 ) Asia components sales, constant currency $ 2,376,195 $ 2,885,027 (17.6 )% Europe components sales, as reported $ 2,246,145 $ 1,927,003 16.6 % Impact of changes in foreign currencies — (97,797 ) Europe components sales, constant currency $ 2,246,145 $ 1,829,206 22.8 % Global ECS sales, as reported $ 1,880,635 $ 1,875,050 0.3 % Impact of changes in foreign currencies — (56,785 ) Global ECS sales, constant currency $ 1,880,635 $ 1,818,265 3.4 % Americas ECS sales, as reported $ 998,114 $ 1,047,849 (4.7 )% Impact of changes in foreign currencies — (8,569 ) Americas ECS sales, constant currency $ 998,114 $ 1,039,280 (4.0 )% Europe ECS sales, as reported $ 882,521 $ 827,201 6.7 % Impact of changes in foreign currencies — (48,216 ) Europe ECS sales, constant currency $ 882,521 $ 778,985 13.3 % ARROW ELECTRONICS, INC. NON-GAAP EARNINGS RECONCILIATION (In thousands except per share data) (Unaudited) Three months ended April 1, 2023 Reported GAAP measure Intangible amortization expense Restructuring & Integration charges Other(1) Non-GAAP measure Operating income $ 422,152 $ 7,980 $ 2,560 $ — $ 432,692 Income before income taxes 351,872 7,980 2,560 (10,311 ) 352,101 Provision for income taxes 76,547 2,010 720 (2,471 ) 76,806 Consolidated net income 275,325 5,970 1,840 (7,840 ) 275,295 Noncontrolling interests 1,575 134 — — 1,709 Net income attributable to shareholders $ 273,750 $ 5,836 $ 1,840 $ (7,840 ) $ 273,586 Net income per diluted share (2) $ 4.60 $ 0.10 $ 0.03 $ (0.13 ) $ 4.60 Effective tax rate (3) 21.8 % 21.8 % Three months ended April 2, 2022 Reported GAAP measure Intangible amortization expense Restructuring & Integration charges Other(1) Non-GAAP measure Operating income $ 510,376 $ 9,018 $ 4,898 $ — $ 524,292 Income before income taxes 478,356 9,018 4,898 (2,011 ) 490,261 Provision for income taxes 112,360 2,310 1,205 (486 ) 115,389 Consolidated net income 365,996 6,708 3,693 (1,525 ) 374,872 Noncontrolling interests 1,247 140 — — 1,387 Net income attributable to shareholders $ 364,749 $ 6,568 $ 3,693 $ (1,525 ) $ 373,485 Net income per diluted share (2) $ 5.31 $ 0.10 $ 0.05 $ (0.02 ) $ 5.43 Effective tax rate (3) 23.5 % 23.5 % (1) Other includes gain on investments, net. (2) The sum of the components for diluted EPS, as adjusted may not agree to totals, as presented, due to rounding. (3) The items as shown in this table, represent the reconciling items for the tax rate as reported by GAAP measure and as a non-GAAP measure. ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands) (Unaudited) Quarter Ended April 1, 2023 April 2, 2022 Sales: Global components $ 6,855,793 $ 7,199,075 Global ECS 1,880,635 1,875,050 Consolidated $ 8,736,428 $ 9,074,125 Operating income (loss): Global components $ 417,539 $ 499,342 Global ECS 81,099 85,798 Corporate (a) (76,486 ) (74,764 ) Consolidated $ 422,152 $ 510,376 (a) Corporate operating income (loss) includes restructuring, integration, and other charges of $2.6 million for the first quarter of 2023 and $4.9 million for the first quarter of 2022. NON-GAAP SEGMENT RECONCILIATION Quarter Ended April 1, 2023 April 2, 2022 Global components operating income, as reported $ 417,539 $ 499,342 Intangible assets amortization expense 6,745 6,873 Global components non-GAAP operating income $ 424,284 $ 506,215 Global ECS operating income, as reported $ 81,099 $ 85,798 Intangible assets amortization expense 1,235 2,145 Global ECS non-GAAP operating income $ 82,334 $ 87,943 Source: Arrow Electronics Categories: Press Releases View all news