- Quarterly sales of $4.7 billion within guidance despite macroeconomic headwinds and tariffs
- Fiscal year sales rose 3 per cent, SG&A expenses were reduced by $117 million, or 6 per cent, and cash flow from continuing operations totaled $591 million
Avnet, Inc. announced results for the fourth quarter and fiscal year ended June 29, 2019.
Fiscal fourth-quarter key financial metrics
- Sales of $4.7 billion, which were in line with guidance, declined 7.5 per cent from a year ago and 0.4 per cent from the prior quarter. Sales guidance for the fiscal fourth quarter anticipated lower-than-historical seasonality and emerging macroeconomic headwinds across all geographies.
- GAAP diluted loss per share from continuing operations, which includes $137 million of goodwill impairment expense, totaled $0.33; on an adjusted basis, diluted earnings per share was $0.95.
- GAAP operating margin of 0.6 per cent, adjusted operating margin of 3.3 per cent.
- Selling, general and administrative (SG&A) expenses declined $40.6 million, or 8.1 per cent, over the prior-year quarter and benefited from the acceleration of planned cost optimization actions and a disciplined approach to spending while prioritizing investments to drive growth.
- Cash flow from operations totaled $335 million, up sequentially from $269 million in the fiscal third quarter.
- Returned $138 million to shareholders with $117 million in stock buybacks and dividends totaling $21 million.
- Reduced revolving debt by $354 million with net debt of $1.2 billion at the end of the quarter.
- Recorded a goodwill impairment totaling $137 million related to the Electronic Components operating group as a result of the declining macroeconomic environment and business outlook.
- For the fiscal year ended June 29, 2019, Avnet generated cash flow from continuing operations totaling $591 million, repurchased nearly 13 million shares (more than 10 per cent) of Avnet stock and reduced SG&A expenses by $117 million, or 6 per cent, compared to a year ago.
CEO commentary
“Avnet continued to execute well in our fiscal fourth quarter despite rapidly changing market conditions,” said Avnet CEO Bill Amelio. “We are pleased to have delivered revenues within our target range. We did see margin pressure that was greater than anticipated due to mix and the softening of customer demand, which was exacerbated by global trade tensions and associated tariffs. We remain committed to the multi-pronged strategy we laid out at our 2018 Investor Day, which regardless of market fluctuations, promises to deliver superior service, innovation, and support to our customers, suppliers, and partners, as well as enhance value for our shareholder’s long term.”
CFO commentary
“During the fourth fiscal quarter, we generated strong operating cash flow of $335 million and put the cash to work repurchasing stock and paying a dividend, in accordance with our capital allocation strategy,” stated Tom Liguori, Avnet Chief Financial Officer. “As we continue to monitor the prevailing market conditions, including current inventory corrections, we have pulled forward our three year $245 million cost reduction plan by accelerating $50 million of annual savings and efficiency improvements to be completed by the end of the first quarter of fiscal 2020, while still making investments in key growth areas including IoT and Farnell.”
Additional fourth quarter fiscal 2019 highlights and key developments
- IoT pipeline rose 5 per cent quarter over quarter to $630 million and continues to expand to new markets including retail and healthcare.
- Avnet’s distribution center and warehouse in Chandler, Arizona became an authorized Foreign Trade Zone (FTZ) increasing global logistics efficiency, improving cash flow, reducing customs related fees, and mitigating potential exposure from punitive tariffs that may be imposed on imports.
- Farnell announced the launch of the new Raspberry Pi 4 Model B Computer, the most powerful Raspberry Pi model ever made.
- Avnet’s community, Hackster.io reached 1 million members, bringing Avnet’s total community members, when combined with element14, to 1.6 million.
- At Mobile World Congress Shanghai, Avnet showcased key parts of its end-to-end IoT solution including the highly scalable IoTConnect cloud-based software platform. We also highlighted our IoT connectivity solutions, all of which provide greater security while affording flexible cellular connectivity.
- Farnell added more than 159,000 SKUs to its e-commerce site, providing customers access to a wider breadth of technology and products.
