Avnet Inc Q1 FY2023 Earnings Call

Thank you, Paul. Earlier this afternoon, Avnet released financial results for the first quarter fiscal year 2023. The release is available on the Investor Relations section of the company’s website. A copy of the slide presentation that will accompany today’s remarks can be found via the link in the earnings release, as well as on the IR section of Avnet’s website. Some of the information contained in the news release and on this conference call contain forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance and the company’s actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Avnet’s most recent Form 10-Q and 10-K and subsequent filings with the SEC. These forward-looking statements speak only as of the date of this presentation and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this presentation. Today’s call will be led by Phil Gallagher, Avnet’s CEO; and Ken Jacobson, Avnet’s CFO. With that, let me turn the call over to Phil Gallagher. Phil.

Thank you, Joe. And thank you everyone for joining us on our first quarter fiscal year 2023 earnings conference call. In the prior fiscal year, we delivered record results and continue to take strategic steps to position Avnet as a more durable company with an increasingly critical role in the global technology supply chain. We are well positioned to continue to deliver value to our customers, suppliers and shareholders, even in the face of a more challenging and uncertain operating environment. I am pleased to share that we kicked off the fiscal year with another quarter of solid financial results, including meaningful sales growth across all regions and improved profitability year-over-year. We achieved these results despite the macro headwinds affecting certain areas of our business, which I will touch on in a minute. In the quarter, we achieved sales of $6.8 billion. This exceeded the higher end of our guidance, up 6% sequentially and over 20% year-over-year. On a constant currency basis, sales increased nearly 29% year-over-year. Efficient management of our operations also enabled us to drive solid operating margins of 4.3%, which is the third consecutive quarter of greater than 4% operating margin. Further, the combination of solid sales and effective management of operations allowed us to increase operating income three times greater than revenues on a year-over-year basis. A significant driver of our results in the quarter was, of course, the continued execution by our incredible global team. Our team has effectively managed market complexities and has served as great partners to our customers and suppliers as they face fast changing supply chain conditions and uncertainties. We are more deeply engaged with our customers and suppliers than ever before, which enables us to maintain the necessary expertise and capabilities to help them navigate today’s supply chain complexity. And with the structural and organizational changes we made to our business over the last two years, we are well positioned to continue serving as a control tower for our customers and suppliers. In the quarter, demand remains strong globally in key vertical segments like transportation, industrial, and aerospace and defense. And we have continued to invest in inventory to meet this demand. You will see that inventory levels were higher at the end of the first quarter as compared to the prior quarter, which Ken will speak to you further in his commentary. This reflects our need to support sustained sales levels in Asia and quarterly increases for specific supply chain engagements. Overall, we continue to be very comfortable with our days of inventory heading into our second quarter. With that, let me turn to the highlights for our business. At the topline, our Electronic Components business saw sequential and year-over-year growth across all three regions. In constant currency, Electronic Components sales were up nearly 9% sequentially and up over 31% year-over-year, reaching $6.3 billion in the quarter. These results were primarily driven by another record quarter of sales in Asia and consistent strong sales growth in both the Americas and EMEA regions. Increased sales in Asia were driven primarily by growth in the transportation and industrial markets. The team in Asia has also successfully gained share in the region, leading to record quarter billings. The Americas and EMEA regions both benefited from strength in key verticals, notably industrial, transportation, and aerospace and defense. We are very pleased with the growth in these markets as highlighted at our Investor Day in June. This is proof that we are well diversified across the end markets we serve and reinforces our expectation that these end markets will continue to have positive long-term growth prospects. Further, our enhanced focus on growing key supplier relationships and addressing their supply chain needs continues to bring benefits across all of our regions. We continue to coordinate closely with customers and suppliers to effectively manage our backlog. As a result of those actions, our overall book-to-bill ratio continues to moderate as it was near parity leading into our second quarter. We continue to benefit from our unique engineering capabilities with our field application engineers and digital design tools, resulting in another record revenue quarter for demand creation. We believe this continued strength is indicative of the increasing value of the capabilities we provide to customers and suppliers, and it’s important to support our margins in a more uncertain operating environment. Turning to our Farnell business. Farnell sales and profitability were impacted by currency fluctuations, particularly weakness in the British pound, and ongoing component shortages that are affecting Farnell’s ability to fully meet demand for single-board computers. Even with that, the backlog for single-board computers remains robust and we expect to realize such sales when product becomes available. Additionally, Farnell recently became the exclusive licensed distributor of the Raspberry Pi single-board computer and we are really excited about this development, which will increase our market share and favorably impact Farnell’s revenue in the mid-term. Operating margins for Farnell were above 12% during the quarter, impacted by the weakening of the British pound. We expect currency fluctuation to have a continued impact on Farnell into the second quarter. We remain excited about Farnell and continue to see opportunities to leverage Farnell’s and Electronic Components' unique and synergistic collaboration to better serve our Avnet customers. To conclude, I want to reiterate that we are stronger and a much more durable company today through the changes we have made to our business and I believe our recent trends and results reflect that. While we cannot control the overall market, I am confident in our team's ability to execute in a challenging and uncertain environment and continue to deliver value to our supplier and customer partners. There’s never been a greater need for the capabilities that Avnet has and we look forward to continuing to play a critical role at the center of the technology supply chain. With that, I will turn it over to Ken to dive deeper into our first quarter results.

Thank you, Phil. Good afternoon, everyone, and thank you for participating on today’s call. As Phil mentioned, we are very pleased with our first quarter performance. Our teams' continued execution resulted in significant sales and operating income growth with excellent returns and we are encouraged by the great start to fiscal year 2023. In the first quarter, our sales were $6.8 billion, up 21% year-over-year, well exceeding the top end of our guidance range. Sales growth in constant currency was 29% year-over-year with each region contributing to the growth. We also grew sales 6% quarter-over-quarter, or over 8% in constant currency, which is well above our typical seasonal trend. We had strong sales in the first quarter across all of our regions, led by our Asia team, which delivered a record $2.9 billion of sales. On a year-over-year basis, sales grew 33% in the Americas, 42% in Europe in constant currency, and 18% in Asia in constant currency. From an operating group perspective, Electronic Components sales grew 23% year-over-year or 31% in constant currency. Electronic Components sales grew 7% quarter-over-quarter or 9% in constant currency. Farnell sales declined 6% year-over-year, but grew 2% in constant currency. Farnell sales continue to be negatively impacted by the continued shortage of certain components needed to complete single-board computers. Excluding sales of certain single-board computers, Farnell sales grew 7% year-over-year. For the first quarter, gross margin of 11.4% was down 85 basis points quarter-over-quarter. This decline was primarily driven by a higher Asia regional sales mix and from declines in gross margin due to product and customer mix. We continue to maintain discipline around expenses in the quarter as adjusted operating expenses were $475 million for the quarter, down 4% sequentially and down 1% year-over-year. Adjusted operating expense as a percentage of gross profit dollars was less than 62% in the first quarter, which is the lowest it has been over the past several years. Adjusted operating income of $293 million increased 64% year-over-year and grew three times greater than sales, demonstrating our ability to continue to drive operating leverage as we grow our business. Our adjusted operating income margin was 4.4% in the first quarter, which is the third consecutive quarter with greater than 4% operating income margin. Electronic Components operating income was $267 million, up 65% year-over-year. Electronic Components operating income margin was 4.2%, up over 100 basis points year-over-year. Most notably, our Americas business continued to make progress towards our operating margin improvement goals. This is the eighth consecutive quarter of Americas’ year-over-year operating margin improvements and we are encouraged by the momentum our Americas team has coming into the December quarter. Farnell operating income was $52 million, up 4% year-over-year, despite the 6% decline in sales. Farnell operating income margin was 12.1% in the quarter, up over 120 basis points year-over-year. The quarter-over-quarter decline in Farnell operating income margin was primarily driven by a combination of lower sales and a lower gross margin because of the foreign currency impact on Farnell’s pricing and related gross margin. Turning to expenses below operating income, interest expense of $45 million in the first quarter increased by $50 million quarter-over-quarter, primarily due to higher debt balances to support working capital investments and from rising interest rates. This increase in interest expense negatively impacted adjusted diluted earnings per share by $0.12 quarter-over-quarter. Our effective income tax rate was 23% in the quarter as expected. Adjusted diluted earnings per share were $2 for the quarter, which increased 64% year-over-year. Turning to the balance sheet and liquidity. During the quarter, we invested in working capital to support our sales growth resulting in approximately $700 million increase quarter-over-quarter. Avnet’s working capital increased approximately $300 million from additional receivables and approximately $400 million from additional inventories. With respect to our inventory, we are comfortable with the quality and age of our inventory. The increase in inventory was driven by several factors including support for sustained sales levels in Asia and an approximately $120 million increase specific to single supply chain engagements that came in at the end of the quarter. We expect the inventory related to this specific engagement to ship early in the quarter. Additionally, we continue to work with our customers and suppliers to come to mutually beneficial solutions as certain customers have high levels of inventory as a way for the golden screw components. As a result of this working capital increase, working capital days were 73 days for the quarter, which is within our acceptable range of working capital days. Our returns on working capital continue to be significantly higher than our cost of capital. The increases in working capital led to an increase in debt of approximately $700 million and a corresponding $650 million use of cash from operations. The increase in debt led to a gross leverage of 1.9 times at the end of the quarter, still well within our required leverage ratios. At the end of the quarter, we had approximately $600 million of available borrowing capacity and we expect to generate positive operating cash flows in our second quarter, because of seasonal declines in sales from our western regions. In our first quarter, we purchased approximately $150 million of shares, which represented nearly 4% of outstanding shares. Over the last two quarters, we have retired approximately 6% of outstanding shares. There is $383 million left on our current share repurchase authorization entering the second quarter. We expect to continue to buy back shares at similar levels during the second quarter as our shares continue to trade at a meaningful discount to book value and a lower multiple than our shares have historically traded out. During the quarter, we also increased our quarterly dividend to $0.29 per share and over an 11% increase from the prior quarterly dividend. During fiscal 2023, we expect our capital expenditures to increase primarily to support a new warehouse in Europe. Turning to guidance, for the second quarter of fiscal 2023, we are guiding sales in the range of $6.35 billion to $6.65 billion and adjusted diluted EPS in the range of $1.80 to $1.90. Our second quarter guidance today is based on current market conditions, including a $60 million negative impact on our sales guidance at the midpoint from the recent strengthening of the U.S. dollar as compared to the first quarter. This guidance implies a sequential sales decline of down 1% to down 5% in constant currency and assumes a typical seasonal decline in sales in our western regions as those regions have fewer shipping days compared to last quarter because of the holidays. This guidance assumes similar interest expense to the first quarter, an effective tax rate of between 21% and 25% and 94 million outstanding shares on a diluted basis. In closing, I want to thank our team for delivering another quarter of sales and earnings growth. We believe that we are well positioned to continue to gain market share in the future. Avnet’s diversification of suppliers, products and end markets we serve are key differentiators that will enable us to continue to deliver positive financial results despite uncertain and changing market conditions.

Thank you. Our first question comes from Melissa Fairbanks with Raymond James. Please proceed with your question.

Hi, guys. Congratulations on a great quarter and guide; it's really refreshing to see amid all this uncertainty. I was just wondering from modeling purposes, OpEx was at kind of a record low as a percentage of sales. Just wondering going forward, how sustainable that is, if OpEx needs to kind of trend higher as we go forward or can we expect to see this kind of operating leverage in the model?

Hello, Melissa. This is Ken. Generally speaking, the absolute level of operating expenses remains stable. As sales continue to decline, we have some options regarding overall operating expenses. However, we are optimistic about the current level of expenses, depending on sales volume. The percentage of gross profit may vary slightly, but we are confident in the operating expenses from the last quarter, and we believe they can be maintained throughout the fiscal year.

Okay. Great. Great. And maybe just one quick follow-up, I imagine you are probably going to get a lot of questions on the inventory balance. I am just wondering is there any risk to the inventory due to price inflation. Meaning as you have been able to accumulate the inventory, some of these supply constraints ease, is there any risk going forward as we get into maybe some normalization of pricing next year that the value of inventory is overstated?

Yeah. I would say we don’t see a huge risk there. We do have some price protections on lowering prices, if that happens to come from the suppliers. But at the same time, we have commitments from our customers and we work through the inventory levels, but we don’t see a huge risk in terms of taking inventory losses and things like that because of pricing.

Yeah. Melissa just to… I apologize for my voice and the cough. I have quite some allergies here. But yeah, it was well within our range for inventory and the returns we model around the inventory, and as important, the quality of the inventory is extremely good, our reserves are well in line and the aging inventory is not increasing. So it’s relatively current.

Okay. Excellent. Great. That’s all for me. Thank you.

Thanks.

Thank you.

Thank you. Our next question is from Matt Sheerin with Stifel. Please proceed with your question.

Yes. Thanks for taking my questions. Phil, just trying to get your perspective on the outlook, it looks like you are down a little bit seasonally, your book-to-bill finally at parity after how many quarters of very positive. Some of the suppliers, the semiconductor suppliers and other component suppliers are modeling or at least looking more cautiously to Q4. Texas Instruments last night guided down double digits; other component suppliers are starting to see some inventory correction going on at customers. It doesn’t sound like you are seeing that in a big way yet, is it that you are lagging the cycle or are there still those hard to get parts or customers are still dealing with that imbalance and they are not going to start cutting their inventory until that straightens out?

Yes, that's correct. Thank you for your question, Matt. We have provided our outlook based on our current backlog for the next three to six months, and it's a straightforward reflection of our regional performance. We believe this is an attainable target at this moment. As we assess the industrial, defense/aero, and transportation segments, we still see solid growth there. We are less exposed in the consumer space and, to some extent, in the compute sector compared to others. Additionally, Matt, we are closely monitoring the backlog. I’m encouraged that the book-to-bill ratios are decreasing, and we are influencing that trend since the past 12 to 24 months have been unrealistic. We are not experiencing significant cancellations but have noted some project delays. We are actively managing our customers' backlogs in collaboration with them, ensuring they get the necessary components. However, we aren't observing a desire to remove orders from the books. We are working diligently to ensure our estimates are grounded in reality. This is the outlook we anticipate over the next three months based on input from our teams.

Okay. Thanks for that. And then on the gross margin, I understand why that was down sequentially because of the mix. Looking forward, as you said, North America and Europe have fewer selling days. So would you expect gross margin to remain at these levels and be down, I guess, meaningfully year-over-year or is there some pricing power or other reasons why gross margin could be higher?

Yeah. Matt, I would say flattish, but we are still going to have a higher mix of Asia in our second quarter due to the holidays, but that gets offset by a better product and customer mix than we had this quarter to kind of offset some of that impact. So flattish is probably the right way to think about it. And then when you get into the third and fourth quarters, you would have a higher mix of west, you get some of that margin back on a gross margin perspective.

Okay. And just lastly on the SG&A, it was noted that it was down year-on-year, how much of that is related to FX and that the natural hedge that you have in regions like the U.K. and Europe, where the currency is in favor basically a favorable swing for you on the OpEx side?

Yeah. From a currency perspective, somewhere between $35 million and $40 million, Matt, was the benefit we got with overall OpEx from a reported perspective.

But on a year-over-year basis?

Year-over-year basis, yeah.

Okay. Terrific. Thanks very much.

Thanks, Matt.

Thank you. Our next question comes from Jim Suva with Citigroup. Please proceed with your question.

Thank you. I have a question regarding your operating margin. Phil mentioned there are a few delays, but nothing significant to worry about regarding cancellations. What are your thoughts on the sustainability of operating margins at these levels? Investors are concerned that if average selling prices decline and there are more order delays and cancellations, it could pressure operating margins. Can you help address this issue? That would be appreciated.

Yeah. I guess, I would say, we feel pretty good about the second-quarter operating margin still being above 4% it’s implied in the guidance. As you look out, clearly there would be an impact on our operating margins that we have a deterioration in sales, a meaningful deterioration. So that’s a given. I think when we think about it, we feel really good in the mid- to long-term that we can sustain that level of margins and so there might be some temporary declines as those market factors come through the model. But generally, we feel good about our OpEx levels and feel good about some opportunities like demand creation, supply chain services, IP that can still give us some positives on the gross margin, but clearly, we would lose some if the sales go down meaningfully.

Great. And a quick follow-up, interest expense outlook, a little bit more on that and does it include a plan November increase by the Fed, just so we can kind of think about that?

Yeah. I would say it contemplates potential increase there and we are looking at kind of flattish from the first quarter.

Thank you. Congratulations.

Thanks, Jim.

Thank you.

Thank you. Our next question comes from William Stein with Truist Securities. Please proceed with your question.

Great. Thanks for taking my questions. First, I am hoping you can elaborate on the control tower topic. You mentioned this at the Analyst Day. I am not sure how deep we dug into this topic, but I understand it provides your customers with a way to envision their inventory across various channels. Can you maybe spend a minute or two talking about how your customers are using you for this and what the financial implications are on your business? Thank you.

Sure, Will. This is Phil. Yeah. We started coining that term as we went through the pandemic and resolve supply chains breakdown, we are right at the center of that, technology supply chain and that’s the value we bring to the market is managing supply chains, of course, demand creation as well. So we have had many customers and suppliers from all verticals, frankly, started to come to help them rebuild their supply chain. There’s just a lot of, I will use the word transparency loss from the end OEMs where the manufacturing was, multiple manufacturing sites, hundreds of suppliers, tens of thousands of SKUs. And things started to break down, and it lost a lot of that visibility and the one you are right, we had at Investor Day was Milwaukee, right, and they spoke very clearly about that, how we were able to build them, we call it, control tower. They can help aggregate their many different SKUs, many different suppliers and then filter that or drive that to the right. In this case, EMS provider that’s driving the manufacturing for them. So it’s really a visibility on the transparency and then there’s analytics in there to help them with their forecasting and demand on the front-end, as well as what’s coming in from the suppliers as we manage lead times coming in to the MRPs. So hopefully that helps explain what we are talking about there.

A follow-up if I can. Can you talk about the distribution of parts that are still in a shortage situation? I think certainly the microcontroller companies, for example, those buying from foundry on very trailing edge. They talk about how this is still in a so protracted shortage situation and then there are other components like memory, broadly speaking, that’s in severe oversupply. Can you talk about the mix between those two dynamics unusual to have sort of disparate things happening at the same time? We know they are happening to have it for a while, but can you talk about how that’s trending the mixes between those two dynamics?

I will do my best. There are many different commodity breakouts, so I’ll provide a high-level overview. Recently, with some lead times improving, we are seeing an increase in inventory, which is actually a positive development. Starting with interconnects, lead times have generally decreased slightly, but they still range widely from about eight weeks to around 30 weeks, though it has improved to about two weeks at the beginning of 2022. However, we do not expect similar improvements in the defense and aerospace sectors, which are likely to face extended lead times, especially for low aerospace connectors. Moving on to capacitors, specifically MLCCs and general purpose types, those lead times have returned to more normal levels. Nevertheless, high-capacity capacitors used in automotive applications and high-voltage large case sizes continue to have lead times exceeding 30 weeks. There's significant variation in lead times for passive components, making it challenging to summarize. On the semiconductor side, particularly for consumer and computing products, we are seeing reductions in lead times. As you mentioned, memory lead times have decreased recently. Yet, demand continues to exceed supply for MCUs and power discretes, with lead times around 40 to 52 weeks for many components like op-amps, voltage regulators, and programmable logic, although some improvement has been seen. In the controller space, there's not much change; lead times are fairly consistent across the board, ranging from 20 weeks for low-end versions to 52 to 60 weeks for higher-end models. While we can go through every commodity in detail, we provide updates to our customers who are using our control towers and supply chain services. We are willing to hold a separate session for anyone on this call who is interested in what we are observing in the market overall. In summary, the situation is a mixed bag, contributing to the complexity, disparities, and confusion regarding the market outlook.

Thank you.

Thank you, Will.

Thank you. Our next question comes from Ruplu Bhattacharya with Bank of America. Please proceed with your question.

Hi. Thanks for taking my question. My first question is on Farnell. I was wondering how did that e-commerce sales impact revenues this quarter. And then if you can touch on the margin performance, I mean, you had pretty strong margins even this quarter, 12% plus, but last quarter it was very strong at 14%. So just a sequential margin decline, how much would you say was the FX, how much was volume, just any color on that sequential trend and how should we think about Farnell margins for the third quarter?

I’ll start and then let Ken take over. Thank you, Ruplu. E-commerce sales continue to be very strong, particularly in board computing, with components in semiconductors and IP&E making up about 73% of our activity. The revenue from Farnell remains in the 52% to 54% range, and we are quite pleased with those figures as well as with Farnell's overall performance. There were a few other factors that had an impact, and I’ll let Ken address the foreign exchange issues with the pound and the effects on single-board computing that led to some volume loss.

Yeah. From an operating margin perspective, I would say it’s about 60%-40%, 60% that was driven by just the sales decline and 40% was driven by the impact on gross margin for the pricing because of FX.

Okay. Thanks for the details there. For my follow-up, can I ask a question on the core business? It looks like you again had a strong quarter with Asia, how should we think about that trend going forward, do you think that region sustains and the demand there versus Europe and North America, just your thoughts on regional mix going into the next quarter? And then just the same question on margins for sequentially between the June and the September quarters, what were some of the impacts there and how should we think about core margins in the December quarter?

We are extremely pleased with our team's performance in Asia-Pac despite the mixed signals; it was another record quarter for us in the region. We are closely monitoring our backlog, ensuring its reality and integrity, and our leadership team is very proactive in keeping it as organized as possible as we move forward. Looking ahead to Q2, we see steady performance in Asia-Pac from September to December, which is encouraging. As we approach the March quarter, we will assess how the traditional Chinese New Year and other holidays in Asia may affect that month. We will discuss this in more detail next quarter, but currently, the December quarter looks promising for us in Asia. Ken, could you address the margin?

Yeah. So from an overall Asia mix, you are going to see an increase in Asia sales for this next quarter because the west has a little bit softer sales because of the holidays, less shipping days. So and then you get into the third quarter, you would see Asia become less percentage and the west become higher. So that’s kind of how to think about it from a seasonality, not talking about anything in the Q3 sales levels, just more in general the cadence of the business. I would say from a core business operating margin perspective, we will have a higher Asia mix, so that will put pressure on the operating margin, but I think we will have a better product and customer mix offsetting that. So flattish is the right way to think about the core operating margin into this next quarter and we would expect all things being equal and seasonality that goes up as we get into our third and fourth quarters with the higher mix of west business that has a higher gross margin.

Got it. Thanks for the details. Phil, if I can just have one more quick follow up. Did you, Phil, mention what was demand creation as a percent of total revenue and how should we think about that going forward?

Yeah. We did, Ruplu, is roughly 30%, 31% of our total revenue and with the revenue being as high as it was, there’s another record demand creation dollars. The funnel looks good moving forward, registrations and design wins still a big part of our success story as we move forward. So, pretty bullish on our demand creation.

Okay. Thanks for all the details. Appreciate it.

Thanks, Ruplu.

Thank you. Our next question comes from Joseph Cardoso with JPMorgan. Please proceed with your question.

Hey. Thanks for the question. First one is just a quick one and a follow-up on the Farnell margins this quarter. In prior quarters, you called out pricing benefits that you have seen in the margins themselves. So I was just curious, did you see any pricing benefits on Farnell margins in the September quarter and if so, what was the magnitude of that?

Yeah. I wouldn’t say we saw any pricing benefits from the Farnell margin, if anything a couple of those commodities where the lead times have come down, we might have got a little pressure on it, but I would say the pressure we saw this quarter is really purely FX and the difference in pricing due to various currencies between U.S.-based competitors and Farnell being a primarily U.K.-based company, so that was the main pressure. A little bit of noise here and there, but nothing meaningful to point out.

No. Understood. Thanks for the clarity. And then just my follow up, last quarter, you spoke about seeing ASP inflation for EC. I think it was somewhere in the range of 7% to 8% high single-digits I suppose, are you still seeing that same level or has there been any shift in terms of where you are seeing EC inflation? And then kind of more importantly, how are you thinking about that trend going forward? Are you seeing any signs that we are kind of cycling past the peak and could we start to see some moderation? Thanks for the question, guys.

Hey, Joe. Let me take a shot. I think you kind of broke up at least on our end, the future of the pricing inflation we talked about last quarter, right?

Correct.

Yeah. Okay. Yeah. See, our last quarter we said roughly 20% to 25% of our growth would have been for ASP price increases, it doesn’t affect our margin as much. I am not sure that’s part of your question is more GP dollars than anything, not GP percent and then this quarter we started to see some of that moderate. So some of that would have been from carryover, but a lot of the price increases have seemed to work through the system at this point. So, in the quarter, we got very little impact on any further price increases, but year-on-year, we would have seen some of that. Ken any comment?

No. I think that’s about right. And as far as the long-term, I mean, I think hearing mixed bag, but we don’t necessarily hear a lot of commentary at least from our supplier partners about them lowering prices. So, yes, the price increases have moderated, but not a lot on lowering prices and so that’s kind of how we are viewing it right now, but clearly continue to monitor the tone and conversation around ASP.

Thanks for the question. Appreciate all the color, guys.

Thank you, Joe.

Thank you. There are no further questions at this time. I’d like to turn the call back over to Phil Gallagher for any closing remarks.

Thank you very much. I want to express my gratitude to everyone for attending today’s earnings call and once again thank the Avnet team around the world for their outstanding performance. We look forward to speaking with all of you again at our fiscal second quarter earnings report in January. Have a good rest of the year. Thank you.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.