Avnet Reports Second Quarter Fiscal 2021 Financial Results

Rhea-AI Summary

Avnet, Inc. (Nasdaq: AVT) reported its Q2 2021 results, showcasing sales of $4.7 billion, a 2.9% increase from the previous year, driven by record sales in Asia of $2.2 billion. GAAP diluted EPS was $0.19, a significant improvement from a loss in the prior quarter. Non-GAAP adjusted EPS rose 33% to $0.48. Operating income margin improved to 1.2%. The company achieved net working capital of 75 days, generating $85 million in cash flow. Avnet aims for Q3 sales guidance of $4.3B to $4.7B with non-GAAP EPS between $0.52 and $0.58.

Positive

• Sales increased to $4.7 billion, up 2.9% year-over-year.
• Record sales in Asia reached $2.2 billion, up 16% year-over-year.
• GAAP EPS improved to $0.19, a 200% increase from the previous quarter.
• Non-GAAP adjusted EPS rose 33% to $0.48.
• Achieved net working capital of 75 days, generating $85 million in cash flow.
• Operating income margin improved to 1.2% from 0.4% in the prior quarter.

Negative

• Sales of Texas Instruments products drastically decreased by 87.6% year-over-year to $49.6 million.
• Farnell sales declined 1.6% year-over-year and 4.4% quarter-over-quarter.
• Americas and EMEA sales dropped by 7.2% and 5.6% year-over-year, respectively.

Avnet, Inc. (Nasdaq: AVT) today announced results for its second quarter ended January 2, 2021.

Fiscal Second Quarter Key Financial Highlights:

• Sales of $4.7 billion up from $4.5 billion in the prior year quarter, supported by record sales in Asia of $2.2 billion, up 16% year over year.
  • On constant currency basis, organic sales increased 4.8% after adjusting for 14 weeks of activity in the prior quarter.
• GAAP diluted earnings per share of $0.19, compared with a GAAP diluted loss per share of $0.19 in the prior quarter, a 200% increase.
  • Non-GAAP adjusted diluted earnings per share of $0.48, compared with $0.36 in the prior quarter, a 33% increase.
• Farnell operating margins increased sequentially 97 basis points to 4.5%.
• GAAP operating income margin of 1.2%, compared with 0.4% the prior quarter, and an adjusted operating income margin of 1.7%, compared with 1.4% in the prior quarter.
• Achieved net working capital of 75 days, generating $85 million of cash flow from operations.
• Sales of Texas Instruments (TI) products were $50 million compared with $399 million in the prior year.
  • When excluding TI, organic sales grew 9.3% year over year on a constant currency basis.

CEO Commentary

“Improvements in our Farnell, EMEA and Americas businesses, complemented by a record revenue quarter in Asia, reflect our continued progress in driving operational efficiencies and enhancing key business lines through strategic investments. We’ve seen tangible results from this back to the basics strategy over the past two quarters with increased sales, improving returns on capital and a stronger balance sheet. As a result, we are better positioned today to manage our backlog and working capital to navigate uncertainties resulting from COVID-19,” said Avnet Chief Executive Officer Phil Gallagher. “I am incredibly proud of our team’s resilience amidst the challenges this past year. They’ve delivered significant value in providing uninterrupted service at a global scale and in working collaboratively with our customers and suppliers to manage forecasts, navigate current market dynamics and mitigate supply chain risk.”

Key Financial Metrics

($ in millions, except per share data)
Second Quarter Results (GAAP)
		Dec – 20				Dec – 19				Change Y/Y			Sep – 20				Change Q/Q
Sales		$	4,668.2			$	4,534.8			2.9	%		$	4,723.1			(1.2)	%
Operating Income			57.2				46.5			23.1	%			18.5			209.3	%
Operating Income Margin			1.2	%			1.0	%		21	bps			0.4	%		84	bps
Diluted Earnings (Loss) Per Share (EPS)		$	0.19			$	0.05			280.0	%		$	(0.19)			200.0	%
Second Quarter Results (Non-GAAP)(1)
		Dec – 20				Dec – 19				Change Y/Y			Sep – 20				Change Q/Q
Sales		$	4,668.2			$	4,534.8			2.9	%		$	4,723.1			(1.2)	%
Adjusted Operating Income			79.6				82.2			(3.2)	%			65.1			22.3	%
Adjusted Operating Income Margin			1.7	%			1.8	%		(11)	bps			1.4	%		32	bps
Adjusted Diluted Earnings Per Share (EPS)		$	0.48			$	0.40			20.0	%		$	0.36			33.3	%
Segment and Geographical Mix
		Dec – 20				Dec – 19				Change Y/Y			Sep – 20				Change Q/Q
Electronic Components (EC) Sales		$	4,342.4			$	4,203.6			3.3	%		$	4,382.2			(0.9)	%
EC Operating Income Margin			2.4	%			2.2	%		17	bps			1.9	%		46	bps
Farnell Sales		$	325.8			$	331.2			(1.6)	%		$	340.9			(4.4)	%
Farnell Operating Income Margin			4.5	%			6.0	%		(155)	bps			3.5	%		97	bps
Americas Sales		$	1,101.5			$	1,186.6			(7.2)	%		$	1,205.7			(8.7)	%
EMEA Sales			1,346.3				1,425.8			(5.6)	%			1,480.7			(9.1)	%
Asia Sales			2,220.4				1,922.4			15.5	%			2,036.7			9.0	%
TI Sales
		Dec – 20				Dec – 19				Change Y/Y			Sep – 20				Change Q/Q
Sales of TI Products		$	49.6			$	399.2			(87.6)	%		$	241.0			(79.4)	%

_________________________
(1)		A reconciliation of non-GAAP financial measures to GAAP financial measures is presented in the “Non-GAAP Financial Information” section of this press release.

CFO Commentary

“During the second quarter, we delivered sales of $4.7 billion and adjusted diluted earnings per share of $0.48, driven by strong execution and a streamlined cost structure that has allowed us to achieve increased revenue without adding significant operating expense. Our year over year top line growth and careful working capital management enabled us to achieve our goal of 75 net working capital days,” said Avnet CFO Tom Liguori. “Our $75 million operating expense reduction plan was fully implemented in the quarter, driving our ninth consecutive quarter of positive operating cash flows. We remain on track to achieve our $245 million operating expense reduction plan by the end of fiscal year 2022. We are delivering improved financial and competitive performance, building Avnet’s core distribution business while still strategically investing in Farnell, where we see tremendous opportunity to deliver profitable growth.”

Additional Second Quarter Fiscal 2021 Updates

• Returned $21 million to shareholders with dividends paid during the quarter.
• Achieved highest quarterly transportation revenue in 6 quarters in the Americas and Asia.
• Farnell selected as the authorized global distributor for National Instruments (NI).
• Avnet rejoined the Electronic Components Industry Association (ECIA) as a distributor member.
• Named Infineon’s Best Performance GC Distribution Partner, Greater China PSS and Industrial Power Control Greater China.
• Named Micron’s Top EBU Demand Creation and Leading Automotive Tier One.

Outlook for the Third Quarter of Fiscal 2021 Ending on April 3, 2021

		Guidance Range		Midpoint
Sales		$4.3B – $4.7B		$4.5B
Non-GAAP Diluted EPS(1)		$0.52 – $0.58		$0.55

_________________________
(1)		A reconciliation of non-GAAP guidance to GAAP guidance is presented in the “Non-GAAP Financial Information” section of this press release.

The above guidance is based upon market conditions existing as of today, seasonally lower revenues in Asia, gross margin improvement due to the mix shift from Asia to Americas and EMEA, and ongoing cost reduction programs. It excludes amortization of intangibles, any potential restructuring, integration, and other expenses and certain income tax adjustments. The above sales guidance assumes approximately $50 million in lower sales of Texas Instruments products as compared to the second quarter of fiscal 2021. The above guidance assumes 100 million average diluted shares outstanding and average U.S. Dollar to Euro and GBP currency exchange rates are as shown below:

		Q3 Fiscal
		2021		Q2 Fiscal		Q3 Fiscal
		Guidance		2021		2020
Euro		$1.21		$1.19		$1.10
GBP		$1.36		$1.32		$1.28

Today’s Conference Call and Webcast Details

Avnet will host a quarterly webcast and teleconference today at 1:30 p.m. PT and 4:30 p.m. ET to discuss its financial results and provide a corporate update. The webcast can be accessed via Avnet’s Investor Relations web page at: https://ir.avnet.com/events-presentations.

Those who would still like to participate in the live call can dial 877-407-8112 or 201-689-8840. A replay of the conference call will be available for 90 days, through April 27, 2021 at 5:00 p.m. ET, and can be accessed by dialing: 877-660-6853 or 201-612-7415 and using Conference ID: 13713922.

Forward-Looking Statements

This document contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the financial condition, results of operations and business of the Company. You can find many of these statements by looking for words like “believes,” “plans,” “expects,” “anticipates,” “should,” “will,” “may,” “estimates” or similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties. You should understand that the following important factors, in addition to those discussed elsewhere in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2020 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, could affect the Company’s future results of operations, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements: the scope and duration of the COVID-19 pandemic and its impact on global economic systems, access to financial markets and the Company’s employees, operations, customers, and supply chain; competitive pressures among distributors of electronic components; an industry down-cycle in semiconductors; relationships with key suppliers and allocations of products by suppliers; risks relating to the Company’s international sales and operations, including risks relating to the ability to repatriate cash, foreign currency fluctuations, duties and taxes, and compliance with international and U.S. laws; risks relating to acquisitions, divestitures and investments; adverse effects on the Company’s supply chain, operations of its distribution centers, shipping costs, third-party service providers, customers and suppliers, including as a result of issues caused by natural and weather-related disasters, pandemics and health related crisis, social unrest or warehouse modernization and relocation efforts; risks related to cyber-attacks and the Company’s information systems, including related to current or future implementations; general economic and business conditions (domestic, foreign and global) affecting the Company’s operations and financial performance and, indirectly, the Company’s credit ratings, debt covenant compliance, and liquidity and access to financing; geopolitical events, including the uncertainty caused by the United Kingdom’s exit from, and agreement for a new partnership with, the European Union; and legislative or regulatory changes affecting the Company’s businesses.

Any forward-looking statement speaks only as of the date on which that statement is made. Except as required by law, the Company assumes no obligation to update any forward-looking statement to reflect events or circumstances that occur after the date on which the statement is made.

About Avnet

Avnet is a global electronic components distributor with extensive design, product, marketing and supply chain expertise for customers and suppliers at every stage of the product lifecycle. For the past 100 years, Avnet has helped its customers and suppliers around the world realize the transformative possibilities of technology. Learn more about Avnet at www.avnet.com. (AVT_IR)

AVNET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
		Second Quarters Ended								Six Months Ended
		January 2,				December 28,				January 2,				December 28,
		2021				2019				2021				2019
		(Thousands, except per share data)
Sales		$	4,668,172			$	4,534,806			$	9,391,232			$	9,164,814
Cost of sales			4,156,919				4,009,193				8,363,899				8,095,362
Gross profit			511,253				525,613				1,027,333				1,069,452
Selling, general and administrative expenses			442,084				464,873				913,241				921,377
Restructuring, integration and other expenses			11,948				14,265				38,369				38,863
Operating income			57,221				46,475				75,723				109,212
Other (expense) income, net			(1,333	)			(1,963	)			(20,831	)			2,969
Interest and other financing expenses, net			(21,485	)			(33,904	)			(43,787	)			(67,535	)
Income before taxes			34,403				10,608				11,105				44,646
Income tax expense (benefit)			15,240				6,940				10,831				(774	)
Net income		$	19,163			$	3,668			$	274			$	45,420
Earnings per share:
Basic		$	0.19			$	0.04			$	0.00			$	0.45
Diluted		$	0.19			$	0.04			$	0.00			$	0.44
Shares used to compute earnings per share:
Basic			98,937				100,431				98,917				101,781
Diluted			99,932				101,302				99,897				102,839
Cash dividends paid per common share		$	0.21			$	0.21			$	0.42			$	0.42

AVNET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
		January 2,			June 27,
		2021			2020
		(Thousands)
ASSETS
Current assets:
Cash and cash equivalents		$	376,333		$	477,038
Receivables, net			3,105,317			2,928,386
Inventories			2,816,421			2,731,988
Prepaid and other current assets			156,375			191,394
Total current assets			6,454,446			6,328,806
Property, plant and equipment, net			403,270			404,607
Goodwill			834,795			773,734
Intangible assets, net			38,812			65,437
Operating lease assets			284,886			275,917
Other assets			248,104			256,696
Total assets		$	8,264,313		$	8,105,197
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term debt		$	311,800		$	51
Accounts payable			1,935,661			1,754,078
Accrued expenses and other			520,463			472,924
Short-term operating lease liabilities			58,400			53,313
Total current liabilities			2,826,324			2,280,366
Long-term debt			895,639			1,424,791
Long-term operating lease liabilities			259,599			253,719
Other liabilities			372,018			419,923
Total liabilities			4,353,580			4,378,799
Shareholders’ equity			3,910,733			3,726,398
Total liabilities and shareholders’ equity		$	8,264,313		$	8,105,197

AVNET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
		Six Months Ended
		January 2, 2021				December 28, 2019
		(Thousands)
Cash flows from operating activities:
Net income		$	274			$	45,420
Non-cash and other reconciling items:
Depreciation			44,002				49,822
Amortization			30,474				41,257
Amortization of operating lease assets			28,111				31,354
Deferred income taxes			(311	)			(15,518	)
Stock-based compensation			15,331				14,503
Asset impairment expense			15,166				—
Other, net			17,004				22,157
Changes in (net of effects from businesses acquired and divested):
Receivables			(94,831	)			185,598
Inventories			51,185				94,182
Accounts payable			130,768				(52,711	)
Accrued expenses and other, net			(29,779	)			(71,858	)
Net cash flows provided by operating activities			207,394				344,206
Cash flows from financing activities:
Borrowings (repayments) under accounts receivable securitization, net			11,800				(35,400	)
Repayments under senior unsecured credit facility, net			(239,430	)			(1,376	)
Repayments under bank credit facilities and other debt, net			(1,480	)			(1,301	)
Repurchases of common stock			—				(198,630	)
Dividends paid on common stock			(41,512	)			(42,426	)
Other, net			(2,301	)			(4,887	)
Net cash flows used for financing activities			(272,923	)			(284,020	)
Cash flows from investing activities:
Purchases of property, plant and equipment			(30,022	)			(44,252	)
Acquisitions of assets			(18,371	)			(51,509	)
Other, net			725				(13,098	)
Net cash flows used for investing activities			(47,668	)			(108,859	)
Effect of currency exchange rate changes on cash and cash equivalents			12,492				(8,622	)
Cash and cash equivalents:
— decrease			(100,705	)			(57,295	)
— at beginning of period			477,038				546,105
— at end of period		$	376,333			$	488,810

Non-GAAP Financial Information

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company also discloses certain non-GAAP financial information including (i) adjusted operating income, (ii) adjusted operating expenses, (iii) adjusted other income (expense), (iv) adjusted income tax expense, (v) adjusted income from continuing operations, (vi) adjusted diluted earnings per share from continuing operations, and (vii) sales adjusted for the impact of significant acquisitions and other items (as defined in the Organic Sales section of this document).

There are also references to the impact of foreign currency in the discussion of the Company’s results of operations. When the U.S. Dollar strengthens and the stronger exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results. Conversely, when the U.S. Dollar weakens and the weaker exchange rates of the current year are used to translate the results of operations of Avnet’s subsidiaries denominated in foreign currencies, the resulting impact is an increase in U.S. Dollars of reported results. In the discussion of the Company’s results of operations, results excluding this impact are referred to as “constant currency.” Management believes organic sales and sales in constant currency are useful measures for evaluating current period performance as compared with prior periods and for understanding underlying trends. In order to determine the translation impact of changes in foreign currency exchange rates on sales, income or expense items for subsidiaries reporting in currencies other than the U.S. Dollar, the Company adjusts the average exchange rates used in current periods to be consistent with the average exchange rates in effect during the comparative period.

Management believes that operating income and operating expenses adjusted for restructuring, integration and other expenses, goodwill and intangible asset impairment expenses and amortization of acquired intangible assets and other, are useful measures to help investors better assess and understand the Company’s operating performance. This is especially the case when comparing results with previous periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of Avnet’s normal operating results or non-cash in nature. Management analyzes operating income and operating expenses without the impact of these items as an indicator of ongoing margin performance and underlying trends in the business. Management also uses these non-GAAP measures to establish operational goals and, in most cases, for measuring performance for compensation purposes. Management measures operating income for its reportable segments excluding restructuring, integration and other expenses, goodwill and intangible asset impairment expenses and amortization of acquired intangible assets and other.

Additional non-GAAP metrics management uses is adjusted operating income margin, which is defined as adjusted operating income (as defined above) divided by sales.

Management also believes income tax expense (benefit), net income and diluted earnings (loss) per share adjusted for the impact of the items described above and certain items impacting other income (expense) and income tax expense (benefit) are useful to investors because they provide a measure of the Company’s net profitability on a more comparable basis to historical periods and provide a more meaningful basis for forecasting future performance. Adjustment to income tax expense (benefit) and the effective income tax rate include the effect of changes in tax laws including recent tax law changes in the U.S., certain changes in valuation allowances and unrecognized tax benefits, income tax audit settlements and adjustments to the adjusted interim effective tax rate based upon the expected annual adjusted effective tax rate. Additionally, because of management’s focus on generating shareholder value, of which net profitability is a primary driver, management believes income from continuing operations and diluted earnings (loss) per share from continuing operations excluding the impact of these items provides an important measure of the Company’s net profitability for the investing public.

Any analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, results presented in accordance with GAAP. All amounts below relate to Avnet’s continuing operations.

			Fiscal					Quarters Ended
			Year to Date					January 2,				October 3,
			2021*					2021				2020
			($ in thousands, except per share amounts)
GAAP selling, general and administrative expenses			$		913,241			$	442,084			$	471,158
Amortization of intangible assets and other					(30,592	)			(10,417	)			(20,175	)
Adjusted operating expenses					882,649				431,667				450,983
GAAP operating income			$		75,723			$	57,221			$	18,502
Restructuring, integration and other expenses					38,369				11,948				26,420
Amortization of intangible assets and other					30,592				10,417				20,175
Adjusted operating income					144,683				79,586				65,097
GAAP income (loss) before income taxes			$		11,105			$	34,403			$	(23,297	)
Restructuring, integration and other expenses					38,369				11,948				26,420
Amortization of intangible assets and other					30,592				10,417				20,175
Other expenses - equity investment impairments					15,274				51				15,223
Adjusted income before income taxes					95,340				56,819				38,521
GAAP income tax expense (benefit)			$		10,831			$	15,240			$	(4,408	)
Restructuring, integration and other expenses					7,178				2,577				4,601
Amortization of intangible assets and other					7,066				2,037				5,029
Other expenses - equity investment impairments					52				26				26
Income tax expense items, net					(13,498	)			(10,788	)			(2,710	)
Adjusted income tax expense					11,629				9,092				2,538
GAAP net income (loss)			$		274			$	19,163			$	(18,889	)
Restructuring, integration and other expenses (net of tax)					31,191				9,371				21,819
Amortization of intangible assets and other (net of tax)					23,526				8,380				15,146
Other expenses - equity investment impairments (net of tax)					15,222				25				15,197
Income tax expense items, net					13,498				10,788				2,710
Adjusted net income					83,711				47,727				35,983
GAAP diluted earnings (loss) per share			$		0.00			$	0.19			$	(0.19	)
Restructuring, integration and other expenses (net of tax)					0.31				0.09				0.22
Amortization of intangible assets and other (net of tax)					0.24				0.09				0.15
Other expenses - equity investment impairments (net of tax)					0.15				-				0.15
Income tax expense items, net					0.14				0.11				0.03
Adjusted diluted EPS					0.84				0.48				0.36

_________________________

* May not foot/cross foot due to rounding and differences in average diluted shares between quarterly periods compared to the fiscal year to date.

					Quarters Ended
	Fiscal Year				June 27,				March 28,				December 29,				September 29,
	2020*				2020*				2020*				2019*				2019*
	($ in thousands, except per share amounts)
GAAP selling, general and administrative expenses	$	1,842,122			$	451,099			$	469,646			$	464,873			$	456,503
Amortization of intangible assets and other		(81,555	)			(18,952	)			(21,071	)			(21,454	)			(20,078	)
Adjusted operating expenses		1,760,567				432,147				448,576				443,419				436,426
GAAP operating (loss) income	$	(4,628	)		$	1,920			$	(115,760	)		$	46,475			$	62,738
Restructuring, integration and other expenses		81,870				23,796				19,211				14,265				24,598
Goodwill and intangible asset impairment expenses (benefits)		144,092				(1,744	)			145,836				-				-
Amortization of intangible assets and other		81,555				18,952				21,071				21,454				20,078
Adjusted operating income		302,889				42,924				70,358				82,194				107,414
GAAP (loss) income before income taxes	$	(128,107	)		$	(16,144	)		$	(158,086	)		$	12,086			$	34,038
Restructuring, integration and other expenses		81,870				23,796				19,211				14,265				24,598
Goodwill and intangible asset impairment expenses (benefits)		144,092				(1,744	)			145,836				-				-
Amortization of intangible assets and other		81,555				18,952				21,071				21,454				20,078
Other expenses and early debt redemption		21,582				2,054				15,526				4,002				-
Adjusted income before income taxes		200,992				26,914				43,558				51,807				78,713
GAAP income tax expense (benefit)	$	(98,574	)		$	(68,304	)		$	(29,425	)		$	6,870			$	(7,714	)
Restructuring, integration and other expenses		18,648				4,659				4,372				3,377				6,240
Goodwill and intangible asset impairment expenses		6,433				207				6,226				-				-
Amortization of intangible assets and other		16,119				3,613				4,307				3,964				4,235
Other expenses and early debt redemption		6,238				506				4,992				740				-
Income tax benefit (expense) items, net		47,655				22,996				15,119				(4,071	)			13,611
Adjusted income tax (benefit) expense		(3,481	)			(36,323	)			5,591				10,880				16,372
GAAP net (loss) income	$	(29,533	)		$	52,160			$	(128,661	)		$	5,216			$	41,752
Restructuring, integration and other expenses (net of tax)		63,222				19,137				14,839				10,888				18,358
Goodwill and intangible asset impairment expenses (benefits) (net of tax)		137,659				(1,951	)			139,610				-				-
Amortization of intangible assets and other (net of tax)		65,436				15,339				16,764				17,490				15,843
Other expenses and early debt redemption (net of tax)		15,344				1,548				10,534				3,262				-
Income tax (benefit) expense items, net		(47,655	)			(22,996	)			(15,119	)			4,071				(13,611	)
Adjusted net income		204,473				63,237				37,967				40,927				62,341
GAAP diluted (loss) earnings per share	$	(0.29	)		$	0.53			$	(1.29	)		$	0.05			$	0.40
Restructuring, integration and other expenses (net of tax)		0.63				0.19				0.15				0.11				0.18
Goodwill and intangible asset impairment expenses (benefits) (net of tax)		1.37				(0.02	)			1.39				-				-
Amortization of intangible assets and other (net of tax)		0.65				0.15				0.17				0.17				0.15
Other expenses and early debt redemption (net of tax)		0.15				0.02				0.11				0.03				-
Income tax (benefit) expense items, net		(0.47	)			(0.23	)			(0.15	)			0.04				(0.13	)
Adjusted diluted EPS		2.04				0.64				0.38				0.40				0.60

_________________________

* May not foot/cross foot due to rounding and differences in average diluted shares between quarterly periods compared to the fiscal year to date.

Sales of TI Products

In December, the termination of the Company’s electronic components distribution agreement with Texas Instruments (“TI”) was completed. Sales of TI products by quarter are outlined in the following table:

		Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter
		January 2,			October 3,			June 27,			March 28,			December 28,
		2021			2020			2020			2020			2019
		(in millions)
Sales of TI Products		$	49.6		$	241.0		$	322.5		$	400.6		$	399.2

Organic Sales

Organic sales is defined as sales adjusted for the impact of significant acquisitions, divestitures and other items by adjusting Avnet’s prior and current periods (if necessary) to include the sales of acquired businesses and exclude the sales of divested businesses as if the acquisitions and divestitures had occurred at the beginning of the earliest period presented. Additionally, fiscal 2021 sales are adjusted for the estimated impact of the extra week of sales in the first quarter of fiscal 2021 due to the 14-week fiscal first quarter and the 53-week fiscal year. Organic sales in constant currency is defined as organic sales (as defined above) excluding the impact of changes in foreign currency exchange rates.

As a result of declining sales due to the termination of the TI distribution agreement discussed further above, organic sales growth rates have also been adjusted to exclude sales of TI products.

The following table presents the reconciliation of reported sales to organic sales for the second quarter and first six months of fiscal 2021.

	Quarter Ended										Six Months Ended
		Sales						Organic															Organic
		As Reported						Sales			Sales						Organic						Sales
		and Organic			TI Sales			Adj for TI			As Reported			Estimated			Sales			TI Sales			Adj for TI
		Q2-Fiscal			Q2-Fiscal			Q2-Fiscal			Q2-Fiscal			Extra			Q2-Fiscal			Q2-Fiscal			Q2-Fiscal
		2021			2021(1)			2021(1)			2021			Week(2)			2021			2021(1)			2021(1)
		(in millions)
Avnet		$	4,668.2		$	49.6		$	4,618.6		$	9,391.2		$	306.0		$	9,085.2		$	290.6		$	8,794.6
Avnet by region
Americas		$	1,101.5		$	14.0		$	1,087.5		$	2,307.1		$	77.0		$	2,230.1		$	82.5		$	2,147.6
EMEA			1,346.3			20.8			1,325.5			2,827.0			97.0			2,730.0			123.7			2,606.3
Asia			2,220.4			14.8			2,205.6			4,257.1			132.0			4,125.1			84.4			4,040.7
Avnet by segment
EC		$	4,342.4		$	49.6		$	4,292.8		$	8,724.5		$	284.0		$	8,440.5		$	290.6		$	8,149.9
Farnell			325.8			—			325.8			666.7			22.0			644.7			—			644.7

_________________________
(1)		Sales adjusted for the impact of the termination of the TI distribution contract.
(2)		The impact of the additional week of sales in the first quarter of fiscal 2021 is estimated.

The following table presents reported and organic sales growth rates for the second quarter and first six months of fiscal 2021 compared to fiscal 2020.

		Quarter Ended												Six Months Ended
						Sales				Organic																				Organic
						As Reported				Sales								Sales								Organic				Sales
		Sales				and Organic				Adj for TI								As Reported								Sales				Adj for TI
		As Reported				Year-Year %				Year-Year %				Sales				Year-Year %				Organic				Year-Year %				Year-Year %
		and Organic				Change in				Change in				As Reported				Change in				Sales				Change in				Change in
		Year-Year				Constant				Constant				Year-Year				Constant				Year-Year				Constant				Constant
		% Change				Currency				Currency(1)				% Change				Currency				% Change				Currency				Currency(1)
Avnet		2.9		%		0.7		%		9.3		%		2.5		%		0.7		%		(0.9	)	%		(2.7	)	%		3.7		%
Avnet by region
Americas		(7.2	)	%		(7.2	)	%		(0.5	)	%		(4.0	)	%		(4.0	)	%		(7.2	)	%		(7.2	)	%		(2.7	)	%
EMEA		(5.6	)			(11.4	)			(4.5	)			(2.4	)			(7.4	)			(5.8	)			(10.8	)			(6.2	)
Asia		15.5				14.6				25.7				10.1				9.6				6.7				6.2				15.1
Avnet by segment
EC		3.3		%		1.1		%		10.5		%		2.7		%		0.9		%		(0.7	)	%		(2.4	)	%		4.5		%
Farnell		(1.6	)			(4.5	)			(4.5	)			(0.1	)			(2.5	)			(3.3	)			(5.8	)			(5.8	)

_________________________
(1)		Sales growth rates excluding the impact of the termination of the TI distribution agreement.

Historical Segment Financial Information

						Fiscal 2021
		Fiscal				Second Quarter				First Quarter
		Year to Date				January 2,				October 3,
		2021*				2021				2020
		(in millions)
Sales:
Electronic Components		$	8,724.5			$	4,342.4			$	4,382.2
Farnell			666.7				325.8				340.9
Avnet sales		$	9,391.2			$	4,668.2			$	4,723.1
Operating income:
Electronic Components		$	188.4			$	103.9			$	84.4
Farnell			26.6				14.6				12.0
			215.0				118.5				96.4
Corporate expenses			(70.3	)			(39.0	)			(31.3	)
Restructuring, integration and other expenses			(38.4	)			(11.9	)			(26.4	)
Amortization of acquired intangible assets and other			(30.6	)			(10.4	)			(20.2	)
Avnet operating income		$	75.7			$	57.2			$	18.5
Sales by geographic area:
Americas		$	2,307.1			$	1,101.5			$	1,205.7
EMEA			2,827.0				1,346.3				1,480.7
Asia			4,257.1				2,220.4				2,036.7
Avnet sales		$	9,391.2			$	4,668.2			$	4,723.1

_________________________

* May not foot/cross foot due to rounding

					Fiscal Year 2020
					Quarters Ended
						Fourth Quarter				Third Quarter				Second Quarter				First Quarter
		Fiscal Year				June 27,				March 28,				December 28,				September 28,
		2020*				2020*				2020*				2019				2019
		(in millions)
Sales:
Electronic Components		$	16,340.1			$	3,867.6			$	3,974.7			$	4,203.6			$	4,294.2
Farnell			1,294.2				292.1				335.1				331.2				335.8
Avnet		$	17,634.3			$	4,159.7			$	4,309.8			$	4,534.8			$	4,630.0
Operating income (loss):
Electronic Components		$	349.1			$	58.9			$	84.8			$	93.1			$	112.3
Farnell			75.5				10.4				23.4				20.0				21.8
			424.6				69.3				108.2				113.1				134.1
Corporate expenses			(121.6	)			(26.3	)			(37.8	)			(30.9	)			(26.7	)
Restructuring, integration and other expenses			(81.9	)			(23.8	)			(19.2	)			(14.3	)			(24.6	)
Goodwill and intangible asset impairment expenses			(144.1	)			1.7				(145.8	)			-				-
Amortization of acquired intangible assets and other			(81.6	)			(19.0	)			(21.1	)			(21.4	)			(20.1	)
Avnet operating (loss) income		$	(4.6	)		$	1.9			$	(115.8	)		$	46.5			$	62.7
Sales by geographic area:
Americas		$	4,755.3			$	1,149.3			$	1,203.6			$	1,186.6			$	1,215.8
EMEA			5,753.4				1,344.2				1,512.5				1,425.8				1,470.9
Asia			7,125.6				1,666.2				1,593.7				1,922.4				1,943.3
Avnet		$	17,634.3			$	4,159.7			$	4,309.8			$	4,534.8			$	4,630.0

_________________________

* May not foot/cross foot due to rounding

Guidance Reconciliation

The following table presents the reconciliation of non-GAAP adjusted diluted earnings per share guidance to the expected GAAP diluted earnings per share guidance for the third quarter of fiscal 2021.

		Low End of				High End of
		Guidance Range				Guidance Range
Adjusted diluted earnings per share guidance		$	0.52			$	0.58
Restructuring, integration and other expense (net of tax)			(0.12	)			(0.08	)
Amortization of intangibles and other (net of tax)			(0.09	)			(0.07	)
Income tax expense adjustments			(0.05	)			0.05
GAAP diluted earnings per share guidance		$	0.26			$	0.48

 

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FAQ

What were Avnet's Q2 2021 sales and earnings results?

Avnet reported sales of $4.7 billion and GAAP diluted EPS of $0.19 for Q2 2021.

How much did Avnet's earnings per share (EPS) increase in Q2 2021?

Avnet's non-GAAP adjusted EPS increased by 33% to $0.48 in Q2 2021.

What factors contributed to Avnet's sales increase in Q2 2021?

The sales increase was driven primarily by record sales in Asia which were up 16% year-over-year.

What is the sales guidance for Avnet in Q3 2021?

Avnet's sales guidance for Q3 2021 is between $4.3 billion and $4.7 billion.

What was Avnet's operating income margin in Q2 2021?

Avnet's GAAP operating income margin improved to 1.2% in Q2 2021.