Avnet Inc (AVT) Q1 2027 Earnings Call Transcript

Thank you. I would like to turn the floor over to Lisa Mueller, Director of Investor Relations for Avnet.

Thank you, Operator. I'd like to welcome everyone to Avnet's first quarter fiscal year 2027 earnings conference call. This morning, Avnet released financial results for the first quarter of fiscal year 2027, and the release is available on the Investor Relations section of Avnet's website, along with a slide presentation, which you may access at your convenience. As a reminder, some of the information contained in the news release and on this conference call contain forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent Form 10Q and 10K and subsequent filings with the SEC. These forward-looking statements speak only as of the date of this presentation, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this presentation. Please note, unless otherwise stated, all results provided will be non-GAAP measures. The full non-GAAP to GAAP reconciliation can be found in the press release issue today, as well as in the appendix slide of today's presentation and posted on the Investor Relations website. Today's call will be led by Phil Gallagher, Adnet's CEO, and Ken Jacobson, Adnet's CFO. With that, let me turn the call over to Phil Gallagher.

Thank you, Lisa, and thank you, everyone, for joining us on our first quarter fiscal year 2027 earnings call. We're off to an outstanding start to the new fiscal year. Our first quarter results came in well above our expectations with record performance across all regions of both our electronic components and Fresnel businesses. We achieved record sales of $10.7 billion above the height of our guidance and record adjusted earnings per share of $3.63. We are also well above our expectations. Importantly, the strength we saw at the top line translated into meaningful operating margin and earnings expansion. Once again, demonstrating the earnings power and operating leverage embedded in our business model as demand continues to strengthen. I'm extremely proud of how our team is executing in this dynamic business environment, and I want to thank them for the hard work and dedication. Our results show the strength and resilience of Adnet's position at the center of the technology supply chain, supported by our global scale, broad component line card, diverse end markets, deep customer and supplier relationships, experienced and dedicated employees, and the differentiated capabilities we offer across the business. Across the market today, the environment continues to evolve in ways of play to those strengths. To tighten during the quarter, with lead times extending across most semiconductor and IP&E, which is our interconnect passive electromechanical product categories, as demand broadened across all of our end markets and applications. Pricing increases also began to extend beyond memory, with additional increases expected in the new calendar year. We have a considerable discussion across the industry about what is driving the recent acceleration in growth. The question we frequently get is whether our growth is from true underlying demand or just inventory replenishment. Our point of view on the question. From what we see in our business today, we believe underlying market conditions and ...punishment or changes in customer ordering patterns as markets tighten. But the breadth of the demand across geographies, technologies, and end markets gives us confidence that we're experiencing... Our Key Demand Indicators Our backlog is healthy and growing. The amount of backlog delinquencies continues to increase as lead times extend. We're monitoring it closely. It drives them in for more than just processing. Thank you. They create opportunities across Admin's world-class supply line card and our diversified customer base. and are experiencing the ripple effects of that growth in our business. The opportunity for AdNet extends well beyond direct. This is demonstrated by the breadth and quality of the demand we are seeing outside. I would have added this. Proponents of Lioncart. We operate across a broad set of higher, growing end markets, and maintain deep relationships across our customers and supplier base. And for now, the product design process and support them from new product introduction through their journey to higher volume production. Now, with that, let me turn to the first quarter highlight. Kona's business delivered another record quarter with stronger than expected sequential and year-over-year growth across all. Across all the markets. Thanks, and that work. And demand was higher across all end markets year-on-year, led by data center and industrial. Followed by China, Southeast Asia, and Japan. Year-over-year, resulting in another record quarter for the region. Demand was broad-based and highest in data center. Adnet Integrated Solutions Business. It provides advanced systems integration and services for customers using purpose-built IT hardware. And we are seeing strong demand from our customers serving enterprise, hyperscale, and neocloud data centers. And I'm here. The region also achieved record sales during the quarter, which was led by demand across several verticals, including industrial and transportation. Across EC, we also continue to see strong momentum in the capabilities that differentiate admin well beyond fulfillment component distribution. Continue to provide a strong pipeline of future opportunities. in sales for the call. $6 billion of sales when annualized. As we have said before, every semiconductor-based solution requires a complement of connectors, pads, etc. The next generation system. Complex systems plays directly into the full suite of solutions we provide our customers, combining both semiconductors and IP&E. to provide resiliency to complex and evolving supply chains. Our supply chain services engagements are expanding across a growing set of customers, particularly in data center infrastructure, networking, and transportation, where demand trends remain favorable. Now, turning to Thank you. By combining Farnell's digital and high-service distribution capabilities, Full-scale in customer and supplier relationships. The prize of semi-electors and IF&E was similar to the growth we saw across the EC business. The strength of the business and the operating leverage Furnow can achieve as it grows. Furnow also gives added an important... We're going to encourage engineers during the design phase and complementing our capabilities as customers move toward higher volume production. I think there are several points worth emphasizing. We embrace our position at the center of the technology supply chain. We are primed to benefit from robust growth in the traditional markets we serve, including the powerful emerging megatrends driving electronic component demand, including drones, robotics, and edge intelligence, which are still in the early stages of growth. Second, our growth is broad-based, and we believe it is sustainable. And demand across all of our geographies, end-to-end markets, and our book-to-bill, backlog, and other leading indicators continue to support our confidence in the underlying demand environment and our current outlook. Markets alone, don't deliver results. levels of revenue efficiency. The margin expansion The Operating Leverage and Earnings Power. and suppliers, manage inventory and expenses with discipline. profitability, and returns for all of our stakeholders. So with that, I'll turn it over to Ken to dive deeper into our first quarter results.

Ken? Thank you, Phil, and good morning, everyone. We appreciate your interest in Abnet. Our sales for the first quarter were $10.7 million, up 82% year-over-year. On a sequential basis, sales were higher by 29%. The first quarter had 14 weeks compared to a typical 13-week quarter. Normalizing the first quarter growth by excluding the impact of the extra week, sales grew 71% year-over-year and 21% sequentially. Foreign currency did not have a meaningful impact on our sales growth this quarter. Regionally, on a year-over-year basis, sales increased 109% in the Americas, 79% in Asia, and 64% in NMEA. On a sequential basis, sales increased 39% in the Americas, 30% in Asia, and 19% in NMEA. During the first quarter, sales from Asia represented 48% of total sales compared to 47% of sales last quarter and 49% of sales last year. From the perspective, electronic components had record sales during the quarter, increasing 84% year-over-year and 30% sequentially. Normalized for the impact of the extra week, EC sales grew 73% year-over-year and 22% sequentially. Farnell also had record sales during the quarter, increasing 46% year-over-year and 17% sequentially. From a pricing perspective, memory prices increased during the quarter at similar levels to last quarter. As a result, approximately one-third of both the sequential and year-over-year sales growth was attributable to pricing increases in the memory product category. We did not see a meaningful impact from pricing in other electronic component categories beyond memory during the quarter. Profit margin of 10% decreased about 40 basis points year-over-year in sequentially, primarily due to product and customer mix in the quarter. Electronic components gross profit margin was down about 30 basis points year-over-year in sequentially. EC gross margin declined primarily due to the growth in our Abnet Integrated Solutions business, which had a lower gross margin than the EC average, but contributed meaningfully to the operating margin expansion. Parnell gross margin increased about 200 basis points year-over-year and declined about 60 basis points sequentially. The year-over-year improvement in gross margin is primarily due to the growth of on-the-board components, which come with a higher gross margin. Farnell's gross margins at the product category level remain stable. Thank you. As a percentage of gross profit dollars, operating expenses were 54%, exceeding our near-term target by approximately 600 basis points. We expect to continue to drive ABNIT operating expense to gross profit dollar ratio to low 50s through the remainder of fiscal 2027. Our EC business had a record low operating expense to gross profit dollar ratio of 46% for the quarter, compared to 69% last year and 56% last quarter. The For Now Operating Expense to Gross Profit Dollar Ratio is 65% in the quarter, which is the lowest level since the first quarter of Fiscal 2023. As we move through Fiscal 2027, we will continue to maintain a high level of cost discipline while still making the necessary investments in the business to enable profitable growth. For the first quarter, we reported adjusted operating income of nearly $500 million, and the ABNet adjusted operating margin was 4.7%. more than 200 basis points year over year and more than 80 basis points from last quarter. This represents the fifth consecutive quarter of adjusted operating margin expansion and the highest admin operating margin since fiscal 2023. Adjusted operating income also grew approximately three times greater than sales compared to last year and approximately two times greater than sales compared to last quarter. This is consistent with our continued expectation of driving operating income growth at least twice the rate of sales growth. By operating group, electronic components operating income was $484 million, and EC operating margin was 4.8% in the first quarter, a 71 basis point sequential increase. Similar to last quarter, the sequential improvement in EC operating margin was led by the Americas, including both the core and admin integrated solutions businesses, with all regions increasing their operating margin over 45 basis points sequentially and even more year over year. We expect EC operating margin to reach our near-term role of 5% in the second half of fiscal 2027. Farnell operating income margin of 10.1% was its highest operating margin in more than three years. Farnell operating income margin grew by over 100 basis points sequentially, achieving our near-term target of returning the business to a double-digit operating margin. We expect to continue to expand Farnell operating margin beyond 10% as they continue to grow and their product mix of on-the-board components improves. According to expenses below operating income, first quarter interest expense was $92 million, a sequential increase of $25 million, mainly due to higher debt levels to support working capital investments for stronger than expected sales growth. The increase in interest expense negatively impacted adjusted diluted earnings per share by $0.23 quarter over quarter. Our adjusted effective income tax rate was 23%, consistent with expectations. Adjusted diluted earnings per share of $3.63 was a quarterly record for Avnet and was well above the high end of our guidance. Adjusted diluted earnings per share grew 4.1 times greater than sales compared to last year and grew two times greater than sales compared to last quarter. Turn to the balance sheet and liquidity. During the quarter, we invested $1.2 billion in working capital sequentially to support our profitable sales growth. Of this increase, approximately $2.1 billion came from inventories. The final third was primarily due to a combination of sales growth, As well as the timing of inventory speed near our quarter end of October 3rd, which is later than the quarter end of many of our suppliers. Inventory continues to be a key driver for our business and helps enable us to achieve record sales and earnings during the quarter. We are positioning ourselves appropriately from an inventory perspective so that we can capitalize on the numerous opportunities we see in the markets we serve. Inventory days remained relatively flat sequentially. Our accounts payable and accounts receivable days improved quarter-over-quarter. Overall, working capital days decreased five days quarter-over-quarter to 64 days. We continue to focus on discipline, inventory, and working capital management, which is contributing to the improvements in our return on working capital. Our return on working capital improved by approximately 600 basis points sequentially to 25%, which is the highest level of returns in the past 10 years. The increase in working capital led to an increase in debt of approximately $950 million and an approximate $842 million use of cash from operations for the quarter. Because we expect strong sales growth in the coming quarter, we also anticipate using cash to support that growth. As growth moderates, we expect cash generation to catch up, and we are currently expecting to generate positive cash flow by the end of fiscal 2027. During the quarter, we raised additional capital primarily through various debt instruments and facilities. to support these increased working capital requirements. We expect to continue to raise additional capital over the coming quarters as we support the anticipated growth through the remainder of fiscal 2027 and beyond. We ended the first quarter with a gross leverage of 3.1 times, down from 3.2 times in the fourth quarter, and approximately $1.2 billion of available committed borrowing capacity. We anticipate reaching our target of three times leverage by the second half of fiscal 2027. Cash use for capital expenditures was $24 million during the As expected. With regard to our capital allocation strategy, we continue to prioritize supporting our profitable growth while maintaining a strong and flexible balance sheet. We also increased our quarterly dividend by approximately 6% to $0.37 per share this quarter. Over the past decade, we have more than doubled the dividend, with the average annual increase exceeding 10%. During that same time, we have also returned approximately $1 billion to shareholders through these dividends. We also expect to continue to explore potential tuck-in M&A opportunities that equip us with the capabilities needed to further advance our strategic priorities and provide a strong, risk-adjusted return on capital. Finally, as cash generation improves, we would also expect to revisit our shared buyback program, which still has $226 million of authorization remaining. Second quarter guidance, we're guiding sales on a range of $11.1 billion to $11.4 billion and adjusts the diluted earnings per share in the range of $3.90 to $4.10. Our second quarter guidance assumes current market conditions and electronic component availability, including in the memory product category, persists. Our guidance implies that sequential sales increase of 5% of the midpoint. Adjusted for the extra week in Q1, Q2 sales are expected to increase 12% sequentially at the midpoint on a comparable basis. This guidance also assumes similar interest expense compared to the first quarter, an effective tax rate of between 21% and 25%, and 87 million shares outstanding on a diluted basis. In closing, we're optimistic about the strong start to the fiscal year and the continued momentum we see in our leading indicators for fiscal 2027. Our first quarter results and second quarter guidance demonstrate that our team continues to deliver profitable growth on the value proposition we bring to our customers and suppliers. With that, I will turn it over to the operator to open it up for questions.

Ladies and gentlemen, we will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. Confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question is from Mr. William Stein with Truist Securities. Please proceed with your question.

Great. Thanks for taking my question. Congrats on the great results and outlook. I'm hoping you can talk to us a bit about lead times. We know they're stretching. You cited it in your prepared remarks. I'm wondering if that's challenging your ability to grow, to deliver product and grow, and if so, maybe quantify any impact from that.

Yeah, hey. Thanks, Will. Thanks for the comments. I appreciate it. This is Phil. Yeah, so we did comment on that, and we are seeing we kind of start to go out more, I would say, more broadly. You know, we know what's happening in memory and the likes. We're starting now to see power, well, power's been out. We're starting to see them passes, MLCC, discrete, you know, so it's much more broad. Controllers. But I can't say, and with that, as we also talked about, we're starting to see some additional inflation and pricing as well with ASP starting to get impacted again. Probably most of that is probably starting in the new calendar year. To date, I can only say, well, to date, we've not seen that directly inhibiting our growth currently through the quarter or in our guidance. into next year yet as, you know, things tighten up. So, right now, I would say. You know, particularly their heavy concentration of memory in their bomb, you know, they're having a tougher time. Yes, we have some customers that may be farm producing, maybe as many tablets as they were before, things along those lines. So that's tough to measure. They're done. They're just slowed down. But it's not really broad-based at this point. But, of course, we're watching it because we know what has happened in previous cycles where lead times go out. We start to get into some challenges there. But to date, again, we're not seeing that as an impact.

Great. I appreciate that. As a follow-up, I'd like to ask about guidance and maybe going out a little bit further. You gave us a great December quarter guide, even considering the extra week that I think you just had in September. The December guide is still, I think. Six or seven points above typical seasonality, and understanding you're not guiding further than a quarter, when we look to March, I think normal seasonality is approximately down 1% or 2%. Would that be an appropriate way to think about growth in this part of the cycle, or considering the strength that we're seeing, should we expect stability or sequential growth into March?

Yeah, well, let me take a shot at that, and I'll pass it over to KJ for some comments. Yeah, we don't guide out that far, so you're right, so thanks for saying that. But as far as we look out, you know, the March quarter's kind of been a wild card in the last several years, if you look at it with the Lunar New Year. It did not have much of an effect the year before it did. You know, you're right, typical, which is a word we don't use much anymore because that means typical. You know, March would be down more dramatically in Asia-packed due to Lunar New Year, and the West would come back up. And it was almost offset, but you're right, down 1% or 2%. Right now, as we look at it, again, we're not guiding in the wild card being Lunar New Year. We feel... And just looking at the backlog, which I'm looking at as we speak. I'm optimistic about the March quarter. a little bit better than what

That would also imply, you know, call it a 20 to 40 basis point uplift in gross margin because of the mixed shift to the West. And so I think, you know, the West is looking good. The wild card is the impact of the Lunar New Year in Asia. So the counter to that would be if you have higher growth than that, you know, above seasonal, that's likely because Asia isn't declining as much.

Great. Thank you.

Thank you. Our next question is from Ms. Melissa Fairbanks with Raymond James. Please proceed with your question.

Hey, guys. Thanks very much. So we heard from one of your suppliers earlier this morning. They noted that channel inventories are pretty tight across most geographies, which I think is pretty consistent with what you're seeing as well, but actually exceptionally low in Asia. I know that Asia has been a very strong market for you for several quarters now. Just wondering what you're seeing in terms of your ability to address. Upside demand in Asia and what your own inventories in Asia look like today.

Yeah, thanks. Thanks, Willis. I think I know who you're referencing there. Anyway, so, again, right now, you know, again, as you saw, we grew inventories. I'm sure we'll give you a break out on where that growth was in inventory. We're not comfortable, but very confident, you know, with. Our inventory position now, but as these times go out, we're going to need to make sure we're replenishing appropriately, and I'm looking at our ASIA inventory actually grew sequentially quarter to quarter in total dollars in ASIA PAC, and the inventory days actually... It went up about a day, 1.5 days or so. So, again, right now we're feeling pretty good about the inventory position we have. Again, it can change quickly, you know, based on the market and Will's previous questions, but right now we feel pretty good about it. Now, I also need to qualify. It's a broad question, right? The inventory, you know, so in certain areas of power and discreet and power caps and things like that, those lines. Anything around power is probably going to get a lot tighter than some other products. So inventory, so I give you a broad answer to a broad question. You really need to break it down by commodity and see where we're appropriately pipelined and where we have the inventory positions we need. So there could be some pockets that were shorter than we need to be, but in total, our inventory is in pretty good shape.

I would be happy to break it down by component if you want to give me that data. Look at those sheets. I want to zoom in. So you mentioned that, you know, demand creation activity remains healthy. How much, as much as your mix or just the market mix in general is pivoting to data center, aerospace and defense, networking, you know, kind of some of these higher touch areas, how much is that impacting your demand creation business? Are you able to engage with customers? You know, are they reaching out to you earlier in the design cycle?

Well, it's a really good question, because some of that, obviously, what we're dealing directly into the data center, some of that might be more just fulfillment. So we wouldn't even have demand creation tied to it in many cases, particularly if it's a hyperscaler, because a lot of that's probably being done direct, and we're doing the fulfillment and supply chain piece for that. Um, however... Again, good question, because you would think with the growth that we had and fulfillment increasing in that space, and maybe it's not all demand creation, you would think a percentage of demand creation would come down as a percentage of our sales. It's actually flat, which is really good news. Demand creation revenue, yeah, as a percentage of our total revenues, actually stayed roughly flat. Flat as a percentage. It had to be up to keep pace to stay flat as a percentage of total sales. And it helps the margin profile as well.

Okay, great. Thanks very much, guys.

Thanks, boys. Thank you. Our next question is from Mr. Ruplu Bhattacharya with Bank of America. Please proceed with your question.

Hi, thanks for taking my questions. First question is on inventory. Ken, I think you said of this $2 billion sequential increase, one third was due to supply chain services. How much revenue did supply chain services account for in the quarter, and how should we think about the impact of this going forward, and what inventory days are you targeting? And I have a follow-up.

Yeah, roughly a third of the inventory growth came from inventory build for supply chain services. And again, the revenue there is more of a services revenue, so you're not going to see it a lot on the top line, but we'd see it in the gross margin. You know, I don't think we'd expect it to build meaningfully in the next couple quarters from there, from the supply chain services perspective. You know, that business is growing pretty well, Ruflu. I would say the rest of the business is growing pretty hot as well, so, you know, I think it's contributing overall. I think from an overall inventory days, you know, I think we expect things to continue to, you know, be flattish to down slightly. I think we feel pretty good about the days overall. You know, the returns for the quarter are really good, and the supply chain services business really helps on the returns side of things as well. So we are continuing to ramp that business, especially in data center and automotive-type customers. We're going to continue to build much from here, but be more stable from a supply chain services perspective. $2.4 billion from last quarter, you're going to need some more inventory. And, you know, some of that was timing differences at the end of the quarter as well. And then the last piece that we referenced was, you know, the pricing that, you know, some of the memory-related products, we had a pricing increase during the quarter, and the inventory we had at the end of the quarter, you know, reflects that pricing.

Thanks for the details, sir. Can I ask a follow-up on operating margins? So, obviously, great performance in both Farnell as well as the EC business. EC, you're already at 4.8%, and I think on the call you said you can get to 5% in the second half of fiscal 27. What drives the ceiling, or what is the ceiling in operating margins for that business? How should we think about the puts and takes there? And the same question, I guess, for Farnell. I mean, you're already at double-digit margins. Is there a ceiling to this? Can you get back to, like, the 14, the mid-teens kind of operating margins over time? Should we continue to think 50 hundred basis points every quarter? So can you just give us, you know, how we should think about, like, where the ceiling is for these two businesses in terms of operating margin?

Yeah, maybe I'll comment this way. I think it's higher than 5% for EC and higher than 10% for Farnell, and we'll continue to drive steady progress there. I think the 50 to 100 basis points you mentioned was more of a Farnell commentary versus EC. EC was a little bit more modest. But, look, you know, we're continuing to drive efficiency, and you can see the expenses didn't go up very much. This core of the guidance would imply further improvement from our OE to GP perspective. You know, I think we're going to be in the low 50s, right, and we can see the drive that lower. And so that will help, you know, continue to drive the operating margin improvement. So, you know, I think we want to hit those near-term goals and then reset a little bit. But, again, you know, I think Farnell in the low teens over time and then, you know, EC trending towards 6% over time. But, you know, part of it depends on the growth. Part of it depends on regional mix. But, you know, we'll continue to. Drive efficiency with the expense model and the working capital model to continue to drive the returns up 25% this quarter, but, you know, continue to make traction there as well.

Yeah, Rupert, this is Phil. Thanks for the comment. Yeah, we're proud of the team thus far, but we're not planning on stopping that progression, okay? So Farnell is listening on the call. The plan is to get that to continue to increase quarter and quarter. A lot of people come back to exactly what Ken just said, the regional mix. As Europe gets stronger, that helps all of our businesses, right? We use the higher margin profile, and then the commodity mix as we expand the home board components with Farnell that runs.

Can I just ask, going forward, do you think regional mix remains a bigger contributor to margins or a bigger factor for margins versus product mix or supplier programs or other investments?

I think it goes back to the seasonality more so than, let's say, a fundamental mix shift. I think Asia is performing pretty well. They're well-positioned. You can see the growth over the last three years. So, we don't see Asia. Slowing down, although, you know, in the third quarter with Lunar New Year, they could have, you know, a little bit lower sales just because of less shipping days. But, you know, I think the mix where Asia's, you know, roughly high 40 to 50 percent of our mix kind of continues into the foreseeable future, but we're still going to continue to drive operating margin expansion in the West. So I think it's hard to say exactly where the regional mix lands, but I think for the time being, we should think about it being, you know, flattish, absent seasonality trends.

Okay, great. Thank you so much. Thank you.

Thank you. Our next question is from Mr. Joe Quattrochi with Wells Fargo & Company. Please proceed with your question.

Yeah, thanks. Maybe just following up on that line of thinking, if Asia is stronger than seasonal into the March quarter, do you think you can get EC margins back to that 5% in the second half? Yes.

Yeah, I don't think that's going to be a constraint. I think either way, we'll get it through growth or we'll get it through gross margin expansion from the mix.

And as a follow-up, I think, Ken, I think you heard you say they expect to raise capital over the coming quarters to fund growth. Can you just kind of maybe share some more color on that? Are you expecting to raise some more debt?

Yeah, I mean, I think with the growth we've seen, you know, $3.6 billion in the past six months, we've just needed to have more borrowing capacity to kind of fund those receivables and the inventory. So, you know, we think it starts to normalize a little bit, but we've done notes, we've done term loans, we've done... We're upsizing to our revolving line of credit, and we've done more securitization, so we'll continue to tackle those things, and we'll have some maturities coming due that we'll have to refinance. You know, interest rates aren't most favorable right now, but, you know, we'll be thoughtful about, you know, taking some of those notes out and extending them.

Okay, so maybe if I could sneak one more in. What's embedded in the guide from just a memory pricing perspective in terms of, like, the, you know, benefit to revenue growth you've seen over the last two quarters?

The guide would imply, you know, very modest improvements in pricing. You know, it's just kind of flattish pricing. I think Phil gave some commentary. We're seeing more now. In the new calendar year, so we expect maybe a little bit more impact there. You know, we're still digesting that, but, you know, we're kind of going on a guide of flattish pricing and, you know, consistency.

Thank you.

Thanks, John.

Thank you. Gentlemen, there are no further questions at this time. I will now turn it back to Phil Gallagher for closing remarks.

Great. Thank you very much. And I want to thank everyone for attending today's earnings call. I look forward to speaking to you again at our second quarter fiscal year 2027 earnings report in early February. Have a great rest of the day.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.