Arrow Electronics Reports First-Quarter 2024 Results

Earnings Presentation

Please refer to the earnings presentation, which can be found at investor.arrow.com, as a supplement to the company’s earnings release. The company uses its website as a tool to disclose important information about the company and to comply with its disclosure obligations under Regulation Fair Disclosure.

Webcast and Conference Call Information

Arrow Electronics will host a conference call to discuss first-quarter 2024 financial results on May 2, 2024, at 1:00 PM ET.

A live webcast of the conference call will be available via the events section of investor.arrow.com or by accessing the webcast link directly at https://events.q4inc.com/attendee/743613108. Shortly after the conclusion of the conference call, a webcast replay will be available on the Arrow website for one year.

About Arrow Electronics

Arrow Electronics guides innovation forward for thousands of leading technology manufacturers and service providers. With 2023 sales of $33 billion, Arrow develops technology solutions that help improve business and daily life. Learn more at arrow.com.

Information Relating to Forward-Looking Statements

This press release includes “forward-looking” statements, as the term is defined under the federal securities laws, including but not limited to statements regarding: Arrow’s future financial performance, including its outlook on financial results for the second quarter of fiscal 2024 such as sales, net income per diluted share, non-GAAP net income per diluted share, average tax rate, average diluted shares outstanding, interest and other expense, impact to sales due to changes in foreign currencies, intangible amortization expense per diluted share, restructuring & integration charges per diluted share, and expectations regarding market demand and shareholder returns. These and other forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which could cause actual results or facts to differ materially from such statements for a variety of reasons, including, but not limited to: unfavorable economic conditions; disruptions or inefficiencies in the supply chain; political instability; impacts of military conflict and sanctions; industry conditions; changes in product supply, pricing and customer demand; competition; other vagaries in the global components and the global ECS markets; deteriorating economic conditions, including economic recession, inflation, tax rates, foreign currency exchange rates, or the availability of capital; the effects of natural or man-made catastrophic events; changes in relationships with key suppliers; increased profit margin pressure; changes in legal and regulatory matters; non-compliance with certain regulations, such as export, antitrust, and anti-corruption laws; foreign tax and other loss contingencies; breaches of security or privacy of business information; outbreaks, epidemics, pandemics, or public health crises; and the company's ability to generate positive cash flow. For a further discussion of these and other factors that could cause the company's future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the company's most recent Quarterly Report on Form 10-Q and the company's most recent Annual Report on Form 10-K, as well as in other filings the company makes with the Securities and Exchange Commission. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update publicly or revise any of the forward-looking statements.

Certain Non-GAAP Financial Information

In addition to disclosing financial results that are determined in accordance with accounting principles generally accepted in the United States (“GAAP”), the company also provides certain non-GAAP financial information. The company provides the following non-GAAP metrics: sales, gross profit, operating income (including by business segment), income before income taxes, provision for income taxes, consolidated net income, noncontrolling interests, net income attributable to shareholders, effective tax rate and net income per share on a diluted basis. The foregoing non-GAAP measures are adjusted by certain of the following, as applicable: impact of changes in foreign currencies (referred to as “changes in foreign currencies” or “on a constant currency basis”) by re-translating prior-period results at current period foreign exchange rates; identifiable intangible asset amortization, restructuring, integration, and other charges; net gains and losses on investments; and impact of wind down to inventory. Management believes that providing this additional information is useful to the reader to better assess and understand the company’s operating performance and future prospects in the same manner as management, especially when comparing results with previous periods. Management typically monitors the business as adjusted for these items, in addition to GAAP results, to understand and compare operating results across accounting periods, for internal budgeting purposes, for short- and long-term operating plans, and to evaluate the company's financial performance. However, analysis of results on a non-GAAP basis should be used as a complement to, in conjunction with, and not as a substitute for, data presented in accordance with GAAP. For further discussion of our non-GAAP measures and related adjustments, refer to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company's most recent Quarterly Report on Form 10-Q and the company's most recent Annual Report on Form 10-K.

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)

	Quarter Ended
	March 30, 2024			April 1, 2023

Sales	$	6,924,260		$	8,736,428
Cost of sales		6,066,434			7,622,606
Gross profit		857,826			1,113,822
Operating expenses:
Selling, general, and administrative		583,326			642,431
Depreciation and amortization		41,727			46,679
Restructuring, integration, and other		46,856			2,560
		671,909			691,670
Operating income		185,917			422,152
Equity in losses of affiliated companies		(344	)		(80	)
Gain on investments, net		98			10,311
Employee benefit plan expense, net		(933	)		(853	)
Interest and other financing expense, net		(79,604	)		(79,658	)
Income before income taxes		105,134			351,872
Provision for income taxes		22,036			76,547
Consolidated net income		83,098			275,325
Noncontrolling interests		(503	)		1,575
Net income attributable to shareholders	$	83,601		$	273,750
Net income per share:
Basic	$	1.54		$	4.66
Diluted	$	1.53		$	4.60
Weighted-average shares outstanding:
Basic		54,251			58,731
Diluted		54,815			59,479

ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
(Unaudited)

	March 30, 2024			December 31, 2023

ASSETS
Current assets:
Cash and cash equivalents	$	242,810		$	218,053
Accounts receivable, net		11,062,608			12,238,073
Inventories		4,797,053			5,187,225
Other current assets		798,591			684,126
Total current assets		16,901,062			18,327,477
Property, plant, and equipment, at cost:
Land		5,691			5,691
Buildings and improvements		196,291			195,579
Machinery and equipment		1,624,409			1,632,606
		1,826,391			1,833,876
Less: Accumulated depreciation and amortization		(1,309,303	)		(1,303,136	)
Property, plant, and equipment, net		517,088			530,740
Investments in affiliated companies		58,868			62,741
Intangible assets, net		119,274			127,440
Goodwill		2,054,536			2,050,426
Other assets		612,048			627,344
Total assets	$	20,262,876		$	21,726,168
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	8,940,313		$	10,070,015
Accrued expenses		1,474,605			1,463,915
Short-term borrowings, including current portion of long-term debt		945,698			1,653,954
Total current liabilities		11,360,616			13,187,884
Long-term debt		2,632,250			2,153,553
Other liabilities		500,672			507,424

Equity:
Shareholders’ equity:
Common stock, par value $1:
Authorized - 160,000 shares in both 2024 and 2023
Issued - 57,955 and 57,691 shares in 2024 and 2023		57,955			57,691
Capital in excess of par value		565,166			553,340
Treasury stock (4,725 and 3,880 shares in 2024 and 2023, respectively), at cost		(405,663	)		(297,745	)
Retained earnings		5,873,818			5,790,217
Accumulated other comprehensive loss		(392,130	)		(298,039	)
Total shareholders’ equity		5,699,146			5,805,464
Noncontrolling interests		70,192			71,843
Total equity		5,769,338			5,877,307
Total liabilities and equity	$	20,262,876		$	21,726,168

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Quarter Ended
	March 30, 2024			April 1, 2023
Cash flows from operating activities:
Consolidated net income	$	83,098		$	275,325
Adjustments to reconcile consolidated net income to net cash provided by operations:
Depreciation and amortization		41,727			46,679
Amortization of stock-based compensation		13,447			19,497
Equity in losses of affiliated companies		344			80
Deferred income taxes		(2,801	)		(7,530	)
Loss (gain) on investments, net		13			(10,311	)
Other		1,189			1,321
Change in assets and liabilities, net of effects of acquired businesses:
Accounts receivable, net		1,057,676			1,701,889
Inventories		362,813			(199,521	)
Accounts payable		(1,077,786	)		(1,504,701	)
Accrued expenses		21,053			(132,316	)
Other assets and liabilities		(97,563	)		33,392
Net cash provided by operating activities		403,210			223,804
Cash flows from investing activities:
Acquisition of property, plant, and equipment		(29,535	)		(20,114	)
Other		5,139			10,867
Net cash used for investing activities		(24,396	)		(9,247	)
Cash flows from financing activities:
Change in short-term and other borrowings		(709,675	)		(146,050	)
Proceeds from long-term bank borrowings, net		477,032			34,360
Net proceeds from note offering		—			498,600
Redemption of notes		—			(300,000	)
Proceeds from exercise of stock options		2,929			5,934
Repurchases of common stock		(87,948	)		(303,801	)
Net cash used for financing activities		(317,662	)		(210,957	)
Effect of exchange rate changes on cash		(36,395	)		25,039
Net increase in cash and cash equivalents		24,757			28,639
Cash and cash equivalents at beginning of period		218,053			176,915
Cash and cash equivalents at end of period	$	242,810		$	205,554

ARROW ELECTRONICS, INC.
NON-GAAP SALES RECONCILIATION
(In thousands)
(Unaudited)

	Quarter Ended
	March 30, 2024		April 1, 2023			% Change

Consolidated sales, as reported	$	6,924,260	$	8,736,428		(20.7	)%
Impact of changes in foreign currencies		—		9,370
Consolidated sales, constant currency	$	6,924,260	$	8,745,798		(20.8	)%

Global components sales, as reported	$	5,191,417	$	6,855,793		(24.3	)%
Impact of changes in foreign currencies		—		(4,163	)
Global components sales, constant currency	$	5,191,417	$	6,851,630		(24.2	)%

Americas components sales, as reported	$	1,596,692	$	2,233,453		(28.5	)%
Impact of changes in foreign currencies		—		(672	)
Americas components sales, constant currency	$	1,596,692	$	2,232,781		(28.5	)%

Asia components sales, as reported	$	1,938,218	$	2,376,195		(18.4	)%
Impact of changes in foreign currencies		—		(24,636	)
Asia components sales, constant currency	$	1,938,218	$	2,351,559		(17.6	)%

Europe components sales, as reported	$	1,656,507	$	2,246,145		(26.3	)%
Impact of changes in foreign currencies		—		21,145
Europe components sales, constant currency	$	1,656,507	$	2,267,290		(26.9	)%

Global ECS sales, as reported	$	1,732,843	$	1,880,635		(7.9	)%
Impact of changes in foreign currencies		—		13,533
Global ECS sales, constant currency	$	1,732,843	$	1,894,168		(8.5	)%

Americas ECS sales, as reported	$	907,748	$	998,114		(9.1	)%
Impact of changes in foreign currencies		—		(830	)
Americas ECS sales, constant currency	$	907,748	$	997,284		(9.0	)%

Europe ECS sales, as reported	$	825,095	$	882,521		(6.5	)%
Impact of changes in foreign currencies		—		14,363
Europe ECS sales, constant currency	$	825,095	$	896,884		(8.0	)%

ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS RECONCILIATION
(In thousands except per share data)
(Unaudited)

Three months ended March 30, 2024
	Reported GAAP measure			Intangible amortization expense		Restructuring, Integration and other		Impact of Wind Down ⁽¹⁾		Other ⁽²⁾			Non-GAAP measure
Gross Profit	$	857,826		$	—	$	—	$	10,459	$	—		$	868,285
Operating income		185,917			7,546		46,856		10,459		—			250,778
Income before income taxes		105,134			7,546		46,856		10,459		(98	)		169,897
Provision for income taxes		22,036			1,879		12,014		2,502		(24	)		38,407
Consolidated net income		83,098			5,667		34,842		7,957		(74	)		131,490
Noncontrolling interests		(503	)		135		—		—		—			(368	)
Net income attributable to shareholders	$	83,601		$	5,532	$	34,842	$	7,957	$	(74	)	$	131,858
Net income per diluted share ⁽³⁾	$	1.53		$	0.10	$	0.64	$	0.15	$	—		$	2.41
Effective tax rate ⁽⁴⁾		21.0	%											22.6	%

Three months ended April 1, 2023
	Reported GAAP measure			Intangible amortization expense		Restructuring, Integration and other		Impact of Wind Down		Other ⁽²⁾			Non-GAAP measure
Gross Profit	$	1,113,822		$	—	$	—	$	—	$	—		$	1,113,822
Operating income		422,152			7,980		2,560		—		—			432,692
Income before income taxes		351,872			7,980		2,560		—		(10,311	)		352,101
Provision for income taxes		76,547			2,010		720		—		(2,471	)		76,806
Consolidated net income		275,325			5,970		1,840		—		(7,840	)		275,295
Noncontrolling interests		1,575			134		—		—		—			1,709
Net income attributable to shareholders	$	273,750		$	5,836	$	1,840	$	—	$	(7,840	)	$	273,586
Net income per diluted share ⁽³⁾	$	4.60		$	0.10	$	0.03	$	—	$	(0.13	)	$	4.60
Effective tax rate ⁽⁴⁾		21.8	%											21.8	%

_________________________
(1)		Includes write downs of inventory related to the wind down of a business.
(2)		Other includes gain on investments, net.
(3)		The sum of the components for non-GAAP diluted EPS, as adjusted may not agree to totals, as presented, due to rounding.
(4)		The items as shown in this table, represent the reconciling items for the tax rate as reported and as a non-GAAP measure.

ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)

	Quarter Ended
	March 30, 2024			April 1, 2023
Sales:
Global components	$	5,191,417		$	6,855,793
Global ECS		1,732,843			1,880,635
Consolidated	$	6,924,260		$	8,736,428
Operating income (loss):
Global components (a)	$	225,562		$	417,539
Global ECS		71,459			81,099
Corporate (b)		(111,104	)		(76,486	)
Consolidated	$	185,917		$	422,152

(a)		Global components operating income includes charges of $10.5 million in inventory write downs related to the wind down of a business.
(b)		Corporate operating income (loss) includes restructuring, integration, and other charges of $46.9 million and $2.6 million for the first quarter of 2024 and 2023, respectively. Restructuring, integration, and other charges for the first quarter of 2024 include charges of $42.8 million related to termination of personnel as a part of operating expense reduction initiatives.

NON-GAAP SEGMENT RECONCILIATION

	Quarter Ended
	March 30, 2024		April 1, 2023
Global components operating income, as reported	$	225,562	$	417,539
Intangible assets amortization expense		6,488		6,745
Impact of wind down to inventory		10,459		—
Global components non-GAAP operating income	$	242,509	$	424,284

Global ECS operating income, as reported	$	71,459	$	81,099
Intangible assets amortization expense		1,058		1,235
Global ECS non-GAAP operating income	$	72,517	$	82,334

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