Arrow Electronics, Inc.
-- Fourth-Quarter Sales In Line with Guidance -- -- Fourth-Quarter Earnings Per Share of $3.54 and Non-GAAP Earnings Per Share of $3.98, Both Above High End of Guidance --
CENTENNIAL, Colo.--(BUSINESS WIRE)-- Arrow Electronics, Inc. (NYSE:ARW) today announced financial results for its fourth quarter and fiscal year ended Dec. 31, 2023.
“The company delivered fourth-quarter sales in line with our expectations, with earnings per share above the high end of our guidance range in challenging electronic components and IT spending markets,” said Sean Kerins, Arrow’s president and chief executive officer.
“Despite excess inventory throughout the supply chain leading to softer demand in our components business, and a mixed IT spending environment for our enterprise computing solutions business, full-year 2023 results were solid. Arrow generated healthy cashflow from operations that enabled the company to repurchase approximately $750 million of shares throughout the year,” said Mr. Kerins. “Looking ahead, and given the current market dynamics, we’ll manage our cost structure and working capital prudently while continuing to remain committed to growth initiatives where our differentiation provides value to our suppliers and customers.”
Arrow Consolidated
Quarter Ended
Year Ended
December 31,
(in millions except per share data)
2023
2022
Consolidated sales
$
7,849
9,323
33,107
37,124
Net income attributable to shareholders
195
349
904
1,427
Net income per diluted share
3.54
5.66
15.84
21.80
Non-GAAP net income attributable to shareholders(1)
219
351
977
1,465
Non-GAAP net income per diluted share
3.98
5.69
17.12
22.38
In the fourth quarter of 2023, sales decreased 16 percent year over year. Changes in foreign currencies had positive impacts on growth of approximately $126 million on sales and $0.08 on earnings per share on a diluted basis compared to the fourth quarter of 2022.
Full-year 2023 sales decreased 11 percent year over year. Changes in foreign currencies had immaterial impacts on sales and earnings per share on a diluted basis compared to 2022.
Global Components
“During the quarter, we experienced continued weakness in our industrial end markets for components. We saw relative strength in aerospace and defense, and medical device verticals in the west along with sequential growth in data center and transportation markets in Asia,” said Mr. Kerins.
(in millions)
Global components sales
5,636
6,827
25,420
28,788
Global components operating income, as reported
281
443
1,459
1,961
Global components non-GAAP operating income
288
449
1,486
1,988
In the fourth quarter of 2023, global component sales decreased 17 percent year over year. Americas components fourth-quarter sales decreased 23 percent year over year. Europe components fourth-quarter sales decreased 14 percent year over year and decreased 17 percent year over year on a constant currency basis. Asia-Pacific components fourth-quarter sales decreased 15 percent year over year.
Global Enterprise Computing Solutions
“In our enterprise computing solutions business, momentum continued to build in infrastructure software, as-a-service solutions and related services,” said Mr. Kerins. “In EMEA, we achieved year-on-year billings growth in the fourth quarter while our North America results reflected a more muted IT spending environment.”
Global ECS sales
2,213
2,496
7,687
8,336
Global ECS operating income, as reported
145
155
367
409
Global ECS non-GAAP operating income
146
156
372
416
In the fourth quarter of 2023, global enterprise computing solutions (“ECS”) sales decreased 11 percent year over year and decreased 13 percent year over year on a constant currency basis. Europe ECS fourth-quarter sales decreased 2 percent year over year and decreased 7 percent year over year on a constant currency basis. Americas ECS fourth-quarter sales decreased 18 percent year over year.
Other Financial Metrics
“For the full-year 2023, we generated $705 million in cash flow from operations,” said Raj Agrawal, Arrow’s senior vice president and chief financial officer. “Focusing on execution in the fourth quarter enabled us to reduce inventory by more than $600 million sequentially. We generated $287 million in cash flow from operations and repurchased approximately $50 million of shares in the fourth quarter. We now have remaining purchase authorization of approximately $580 million.”
1 A reconciliation of non-GAAP financial measures to GAAP financial measures is presented in the reconciliation tables included herein.
First-Quarter 2024 Outlook
First-Quarter 2024 GAAP to non-GAAP Outlook Reconciliation
NON-GAAP SALES RECONCILIATION
(in billions)
March 30, 2024
April 1, 2023
% Change
December 31, 2023
Global components sales, GAAP
5.00 - 5.40
6.86
(27%) - (21%)
5.64
(11%) - (4%)
Impact of changes in foreign currencies
—
(0.01
)
0.02
Global components sales, constant currency
6.85
(12%) - (5%)
Global ECS sales, GAAP
1.70 - 1.90
1.88
(10%) - 1%
2.21
(23%) - (14%)
0.01
Global ECS sales, constant currency
1.90
(11%) - 0%
2.22
NON-GAAP EARNINGS RECONCILIATION
Reported GAAP measure
Intangible amortization expense
Restructuring & integration charges
Non-GAAP measure
$1.95 to $2.15
$0.10
$0.15
$2.20 to $2.40
Earnings Presentation
Please refer to the earnings presentation, that 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 fourth-quarter and full-year 2023 financial results on Feb 8, 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/921341362. Shortly after the conclusion of the conference call, a webcast replay will be available on the Arrow website for one year.
Interested parties may pre-register online at https://registrations.events/direct/Q4I97132 to obtain a user-specific access code and dial-in information to access the live conference call.
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 first 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 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: non-GAAP sales, operating income (included 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 tax legislation changes. 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.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
December 31, 2023 (Unaudited)
December 31, 2022 (Unaudited)
December 31, 2022
Sales
7,849,157
9,323,023
33,107,120
37,124,422
Cost of sales
6,859,607
8,117,028
28,958,102
32,287,797
Gross profit
989,550
1,205,995
4,149,018
4,836,625
Operating expenses:
Selling, general, and administrative expenses
590,039
635,090
2,412,822
2,567,008
Depreciation and amortization
43,168
45,595
181,116
187,382
Restructuring, integration, and other charges
39,664
2,714
83,916
13,741
672,871
683,399
2,677,854
2,768,131
Operating income
316,679
522,596
1,471,164
2,068,494
Equity in earnings of affiliated companies
2,034
2,938
6,407
7,664
Gain (loss) on investments, net
14,635
8,356
19,284
(2,857
Employee benefit plan expense, net
(1,267
(889
(3,777
(3,503
Interest and other financing expense, net
(82,052
(62,221
(328,724
(185,648
Income before income taxes
250,029
470,780
1,164,354
1,884,150
Provision for income taxes
53,823
116,719
254,991
448,992
Consolidated net income
196,206
354,061
909,363
1,435,158
Noncontrolling interests
1,669
4,659
5,858
8,274
194,537
349,402
903,505
1,426,884
Net income per share:
Basic
3.58
5.71
16.03
22.01
Diluted
Weighted-average shares outstanding:
54,396
61,175
56,359
64,838
55,015
61,739
57,035
65,453
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
ASSETS
Current assets:
Cash and cash equivalents
218,053
176,915
Accounts receivable, net
12,238,073
12,322,717
Inventories
5,187,225
5,319,369
Other current assets
684,126
521,339
Total current assets
18,327,477
18,340,340
Property, plant, and equipment, at cost:
Land
5,691
Buildings and improvements
195,579
184,211
Machinery and equipment
1,632,606
1,583,661
1,833,876
1,773,563
Less: Accumulated depreciation and amortization
(1,303,136
(1,177,107
Property, plant, and equipment, net
530,740
596,456
Investments in affiliated companies
62,741
65,112
Intangible assets, net
127,440
159,137
Goodwill
2,050,426
2,027,626
Other assets
627,344
574,511
Total assets
21,726,168
21,763,182
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
10,070,015
10,460,419
Accrued expenses
1,463,915
1,339,302
Short-term borrowings, including current portion of long-term debt
1,653,954
589,883
Total current liabilities
13,187,884
12,389,604
Long-term debt
2,153,553
3,182,964
Other liabilities
507,424
579,261
Equity:
Shareholders’ equity:
Common stock, par value $1:
Authorized - 160,000 shares in both 2023 and 2022
Issued - 57,691 and 125,424 shares in 2023 and 2022, respectively
57,691
125,424
Capital in excess of par value
553,340
1,208,708
Treasury stock (3,880 and 66,175 shares in 2023 and 2022, respectively), at cost
(297,745
(4,637,345
Retained earnings
5,790,217
9,214,832
Accumulated other comprehensive loss
(298,039
(365,262
Total shareholders’ equity
5,805,464
5,546,357
71,843
64,996
Total equity
5,877,307
5,611,353
Total liabilities and equity
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Cash flows from operating activities:
Adjustments to reconcile consolidated net income to net cash provided by operations:
Amortization of stock-based compensation
6,701
7,921
(2,034
(2,938
Deferred income taxes
(40,942
(14,518
Gain on investments, net
(7,817
(8,356
Other
18,512
939
Change in assets and liabilities:
(1,396,096
(801,426
664,333
(154,022
898,395
779,217
126,949
(90,566
Other assets and liabilities
(220,633
(7,220
Net cash provided by operating activities
286,742
108,687
Cash flows from investing activities:
Acquisition of property, plant, and equipment
(25,510
(24,056
Proceeds from collections of notes receivable
320
Net cash used for investing activities
(23,736
Cash flows from financing activities:
Change in short-term and other borrowings
63,980
(17,700
Repayments of long-term bank borrowings, net
(465,147
(5,018
Proceeds from exercise of stock options
186
906
Repurchases of common stock
(50,492
(324,233
Net cash used for financing activities
(451,473
(346,045
Effect of exchange rate changes on cash
75,000
104,024
Net decrease in cash and cash equivalents
(115,241
(157,070
Cash and cash equivalents at beginning of period
333,294
333,985
Cash and cash equivalents at end of period
Adjustments to reconcile consolidated net income to net cash provided by (used for) operations:
41,569
42,930
(6,407
(7,664
(93,980
(13,050
(Gain) loss on investments, net
(12,466
2,857
22,590
3,612
189,425
(1,430,400
139,313
(1,165,785
(457,382
945,819
38,601
102,193
(246,293
(136,129
Net cash provided by (used for) operating activities
705,449
(33,077
(83,285
(78,836
237
21,125
Proceeds from settlement of net investment hedge
10,725
(72,323
(57,711
866,012
258,816
(Repayments of) proceeds from long-term bank borrowings, net
(1,031,881
1,233,250
Redemption of notes
(300,000
(350,000
Net proceeds from note offering
496,268
17,010
17,340
(770,200
(1,049,487
Settlement of forward-starting interest rate swap
56,711
(142
(137
Net cash (used for) provided by financing activities
(666,222
109,782
74,234
(64,273
Net increase (decrease) in cash and cash equivalents
41,138
(45,279
222,194
Consolidated sales, as reported
(15.8
)%
126,441
Consolidated sales, constant currency
9,449,464
(16.9
Global components sales, as reported
5,636,032
6,827,029
(17.4
75,974
6,903,003
(18.4
Americas components sales, as reported
1,784,764
2,326,995
(23.3
99
Americas components sales, constant currency
2,327,094
Asia components sales, as reported
2,163,421
2,543,294
(14.9
(7,158
Asia components sales, constant currency
2,536,136
(14.7
Europe components sales, as reported
1,687,847
1,956,740
(13.7
83,033
Europe components sales, constant currency
2,039,773
(17.3
Global ECS sales, as reported
2,213,125
2,495,994
(11.3
50,467
2,546,461
(13.1
Americas ECS sales, as reported
1,145,754
1,404,224
200
Americas ECS sales, constant currency
1,404,424
Europe ECS sales, as reported
1,067,371
1,091,770
(2.2
50,267
Europe ECS sales, constant currency
1,142,037
(6.5
(10.8
51,829
37,176,251
(10.9
25,419,899
28,788,003
(11.7
7,690
28,795,693
7,954,713
9,592,547
(17.1
(2,166
9,590,381
9,390,292
11,567,482
(18.8
(122,448
11,445,034
(18.0
8,074,894
7,627,974
5.9
%
132,304
7,760,278
4.1
7,687,221
8,336,419
(7.8
44,139
8,380,558
(8.3
4,160,298
4,847,027
(14.2
(18,850
4,828,177
(13.8
3,526,923
3,489,392
1.1
62,989
3,552,381
(0.7
Three months ended December 31, 2023
Reported
Intangible
Restructuring
GAAP
amortization
& Integration
Non-GAAP
measure
expense
charges
Other(1)
7,491
363,834
(14,635
282,549
1,863
9,331
(3,500
61,517
5,628
30,333
(11,135
221,032
131
1,800
5,497
219,232
Net income per diluted share (2)
0.10
0.55
(0.20
Effective tax rate (3)
21.5
21.8
Three months ended December 31, 2022
8,170
533,480
473,308
2,056
472
(2,003
117,244
6,114
2,242
(6,353
356,064
127
4,786
5,987
351,278
0.04
(0.10
24.8
Year ended December 31, 2023
Restructuring & Integration charges
Non- recurring tax items
31,242
1,586,322
(19,284
1,260,228
7,824
19,969
(942
(4,614
277,228
23,418
63,947
942
(14,670
983,000
539
6,397
22,879
976,603
0.40
1.12
(0.26
21.9
22.0
Year ended December 31, 2022
34,692
2,116,927
1,935,440
8,848
2,931
708
461,479
25,844
10,810
2,149
1,473,961
525
8,799
25,319
1,465,162
0.39
0.17
0.03
23.8
(1)
Other includes (gain) loss on investments, net.
(2)
The sum of the components for diluted EPS, as adjusted may not agree to totals, as presented, due to rounding.
(3)
The items as shown in this table, represent the reconciling items for the tax rate as reported by GAAP measure and as a non-GAAP measure.
SEGMENT INFORMATION
Sales:
Global components
Global ECS
Consolidated
Operating income (loss):
Global components (a)
281,260
442,702
1,459,166
1,961,125
Global ECS (b)
145,053
154,775
367,004
408,519
Corporate (c)
(109,634
(74,881
(355,006
(301,150
(a)
Global components operating income includes $62.2 million in settlement charges recorded as a reduction to operating expense for the year ended December 31, 2023.
(b)
Global ECS operating income includes charges to the allowance for credit losses, which decreased by $2.8 million and increased by $24.0 million for the fourth quarter and the year ended December 31, 2023, respectively, relative to the year-earlier periods.
(c)
Corporate operating loss includes restructuring, integration, and other charges of $39.6 million and $83.9 million for the fourth quarter and the year ended December 31, 2023, respectively, and $2.7 million and $13.7 million for the fourth quarter and year ended December 31, 2022, respectively.
NON-GAAP SEGMENT RECONCILIATION
Intangible assets amortization expense
6,436
6,702
26,500
27,005
287,696
449,404
1,485,666
1,988,130
1,055
1,468
4,742
146,108
156,243
371,746
416,206
Investors: Anthony Bencivenga, 303-566-7456 Vice President, Investor Relations anthony.bencivenga@arrow.com
Media: John Hourigan, 303-824-4586 Vice President, Public Affairs and Corporate Marketing jhourigan@arrow.com