Arrow Electronics Reports Second-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 second-quarter 2024 financial results on August 1, 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/244342075. 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 third quarter of fiscal 2024 such as sales, net income per diluted share, non-GAAP net income per diluted share, average tax rate, 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 conditions 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 and changes; 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 and information system failures, including related to current or future implementations, integrations and upgrades; 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, operating income (including by business segment), income before income taxes, 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; impact of wind down to inventory; loss on extinguishment of debt; 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. 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						Six Months Ended
	June 29, 2024			July 1, 2023			June 29, 2024			July 1, 2023

Sales	$	6,892,868		$	8,514,516		$	13,817,128		$	17,250,944
Cost of sales		6,046,424			7,448,467			12,112,858			15,071,073
Gross profit		846,444			1,066,049			1,704,270			2,179,871
Operating expenses:
Selling, general, and administrative		552,595			617,202			1,135,921			1,259,633
Depreciation and amortization		41,037			46,264			82,764			92,943
Restructuring, integration, and other		40,537			10,333			87,393			12,893
		634,169			673,799			1,306,078			1,365,469
Operating income		212,275			392,250			398,192			814,402
Equity in earnings of affiliated companies		1,254			3,061			910			2,981
(Loss) gain on investments, net		(4,615	)		497			(4,517	)		10,808
Loss on extinguishment of debt		(1,657	)		—			(1,657	)		—
Employee benefit plan expense, net		(980	)		(803	)		(1,913	)		(1,656	)
Interest and other financing expense, net		(66,891	)		(84,834	)		(146,495	)		(164,492	)
Income before income taxes		139,386			310,171			244,520			662,043
Provision for income taxes		29,762			72,380			51,798			148,927
Consolidated net income		109,624			237,791			192,722			513,116
Noncontrolling interests		926			1,232			423			2,807
Net income attributable to shareholders	$	108,698		$	236,559		$	192,299		$	510,309
Net income per share:
Basic	$	2.03		$	4.17		$	3.56		$	8.84
Diluted	$	2.01		$	4.12		$	3.53		$	8.74
Weighted-average shares outstanding:
Basic		53,640			56,720			53,944			57,726
Diluted		54,181			57,355			54,496			58,409

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

	June 29, 2024			December 31, 2023

ASSETS
Current assets:
Cash and cash equivalents	$	213,009		$	218,053
Accounts receivable, net		10,886,501			12,238,073
Inventories		4,654,793			5,187,225
Other current assets		1,010,942			684,126
Total current assets		16,765,245			18,327,477
Property, plant, and equipment, at cost:
Land		5,691			5,691
Buildings and improvements		190,109			195,579
Machinery and equipment		1,623,869			1,632,606
		1,819,669			1,833,876
Less: Accumulated depreciation and amortization		(1,319,945	)		(1,303,136	)
Property, plant, and equipment, net		499,724			530,740
Investments in affiliated companies		60,400			62,741
Intangible assets, net		112,470			127,440
Goodwill		2,052,701			2,050,426
Other assets		617,226			627,344
Total assets	$	20,107,766		$	21,726,168
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	8,770,862		$	10,070,015
Accrued expenses		1,687,273			1,463,915
Short-term borrowings, including current portion of long-term debt		860,538			1,653,954
Total current liabilities		11,318,673			13,187,884
Long-term debt		2,479,313			2,153,553
Other liabilities		495,730			507,424

Equity:
Shareholders’ equity:
Common stock, par value $1:
Authorized - 160,000 shares in both 2024 and 2023
Issued - 58,046 and 57,691 shares in 2024 and 2023		58,046			57,691
Capital in excess of par value		574,530			553,340
Treasury stock (5,101 and 3,880 shares in 2024 and 2023, respectively), at cost		(456,123	)		(297,745	)
Retained earnings		5,982,516			5,790,217
Accumulated other comprehensive loss		(415,666	)		(298,039	)
Total shareholders’ equity		5,743,303			5,805,464
Noncontrolling interests		70,747			71,843
Total equity		5,814,050			5,877,307
Total liabilities and equity	$	20,107,766		$	21,726,168

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

	Quarter Ended
	June 29, 2024			July 1, 2023
Cash flows from operating activities:
Consolidated net income	$	109,624		$	237,791
Adjustments to reconcile consolidated net income to net cash provided by (used for) operations:
Depreciation and amortization		41,037			46,264
Amortization of stock-based compensation		8,253			8,852
Equity in earnings of affiliated companies		(1,254	)		(3,061	)
Deferred income taxes		(4,597	)		(25,869	)
Loss on extinguishment of debt		1,657			—
Loss (gain) on investments, net		4,750			(497	)
Other		3,675			1,665
Change in assets and liabilities, net of effects of acquired businesses:
Accounts receivable, net		155,886			(377,117	)
Inventories		130,661			58,148
Accounts payable		(160,026	)		(8,558	)
Accrued expenses		251,990			(83,267	)
Other assets and liabilities		(221,475	)		18,845
Net cash provided by (used for) operating activities		320,181			(126,804	)
Cash flows from investing activities:
Acquisition of property, plant, and equipment		(22,101	)		(16,991	)
Other		1,313			95
Net cash used for investing activities		(20,788	)		(16,896	)
Cash flows from financing activities:
Change in short-term and other borrowings		(434,845	)		344,389
Proceeds from (repayments of) long-term bank borrowings, net		196,575			(43,786	)
Net proceeds from note offering		494,678			(2,332	)
Redemption of notes		(500,000	)		—
Proceeds from exercise of stock options		1,839			10,447
Repurchases of common stock		(75,353	)		(212,416	)
Settlement of forward-starting interest rate swap		—			56,711
Other		(141	)		(142	)
Net cash (used for) provided by financing activities		(317,247	)		152,871
Effect of exchange rate changes on cash		(11,947	)		25,657
Net (decrease) increase in cash and cash equivalents		(29,801	)		34,828
Cash and cash equivalents at beginning of period		242,810			205,554
Cash and cash equivalents at end of period	$	213,009		$	240,382

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


	Six Months Ended
	June 29, 2024			July 1, 2023
Cash flows from operating activities:
Consolidated net income	$	192,722		$	513,116
Adjustments to reconcile consolidated net income to net cash provided by operations:
Depreciation and amortization		82,764			92,943
Amortization of stock-based compensation		21,700			28,349
Equity in earnings of affiliated companies		(910	)		(2,981	)
Deferred income taxes		(7,398	)		(33,399	)
Loss on extinguishment of debt		1,657			—
Loss (gain) on investments, net		4,763			(10,808	)
Other		4,864			2,986
Change in assets and liabilities, net of effects of acquired businesses:
Accounts receivable, net		1,213,562			1,324,772
Inventories		493,474			(141,373	)
Accounts payable		(1,237,812	)		(1,513,259	)
Accrued expenses		273,043			(215,583	)
Other assets and liabilities		(319,038	)		52,237
Net cash provided by operating activities		723,391			97,000
Cash flows from investing activities:
Acquisition of property, plant, and equipment		(51,636	)		(37,105	)
Other		6,452			10,962
Net cash used for investing activities		(45,184	)		(26,143	)
Cash flows from financing activities:
Change in short-term and other borrowings		(1,144,520	)		198,339
Proceeds from (repayments of) long-term bank borrowings, net		673,607			(9,426	)
Net proceeds from note offering		494,678			496,268
Redemption of notes		(500,000	)		(300,000	)
Proceeds from exercise of stock options		4,768			16,381
Repurchases of common stock		(163,301	)		(516,217	)
Settlement of forward-starting interest rate swap		—			56,711
Other		(141	)		(142	)
Net cash used for financing activities		(634,909	)		(58,086	)
Effect of exchange rate changes on cash		(48,342	)		50,696
Net (decrease) increase in cash and cash equivalents		(5,044	)		63,467
Cash and cash equivalents at beginning of period		218,053			176,915
Cash and cash equivalents at end of period	$	213,009		$	240,382

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

	Quarter Ended
	June 29, 2024		July 1, 2023			% Change

Consolidated sales, as reported	$	6,892,868	$	8,514,516		(19.0	)	%
Impact of changes in foreign currencies		—		(52,232	)
Consolidated sales, constant currency	$	6,892,868	$	8,462,284		(18.5	)	%

Global components sales, as reported	$	5,032,031	$	6,682,882		(24.7	)	%
Impact of changes in foreign currencies		—		(44,642	)
Global components sales, constant currency	$	5,032,031	$	6,638,240		(24.2	)	%

Americas components sales, as reported	$	1,572,840	$	2,066,562		(23.9	)	%
Impact of changes in foreign currencies		—		(1,513	)
Americas components sales, constant currency	$	1,572,840	$	2,065,049		(23.8	)	%

Asia components sales, as reported	$	2,019,697	$	2,462,841		(18.0	)	%
Impact of changes in foreign currencies		—		(17,330	)
Asia components sales, constant currency	$	2,019,697	$	2,445,511		(17.4	)	%

EMEA components sales, as reported	$	1,439,494	$	2,153,479		(33.2	)	%
Impact of changes in foreign currencies		—		(25,799	)
EMEA components sales, constant currency	$	1,439,494	$	2,127,680		(32.3	)	%

Global ECS sales, as reported	$	1,860,837	$	1,831,634		1.6		%
Impact of changes in foreign currencies		—		(7,590	)
Global ECS sales, constant currency	$	1,860,837	$	1,824,044		2.0		%

Americas ECS sales, as reported	$	964,070	$	1,000,506		(3.6	)	%
Impact of changes in foreign currencies		—		(1,709	)
Americas ECS sales, constant currency	$	964,070	$	998,797		(3.5	)	%

EMEA ECS sales, as reported	$	896,767	$	831,128		7.9		%
Impact of changes in foreign currencies		—		(5,881	)
EMEA ECS sales, constant currency	$	896,767	$	825,247		8.7		%

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

	Six Months Ended
	June 29, 2024		July 1, 2023			% Change

Consolidated sales, as reported	$	13,817,128	$	17,250,944		(19.9	)	%
Impact of changes in foreign currencies		—		(42,862	)
Consolidated sales, constant currency	$	13,817,128	$	17,208,082		(19.7	)	%

Global components sales, as reported	$	10,223,448	$	13,538,675		(24.5	)	%
Impact of changes in foreign currencies		—		(48,805	)
Global components sales, constant currency	$	10,223,448	$	13,489,870		(24.2	)	%

Americas components sales, as reported	$	3,169,532	$	4,300,015		(26.3	)	%
Impact of changes in foreign currencies		—		(2,185	)
Americas components sales, constant currency	$	3,169,532	$	4,297,830		(26.3	)	%

Asia components sales, as reported	$	3,957,915	$	4,839,036		(18.2	)	%
Impact of changes in foreign currencies		—		(41,966	)
Asia components sales, constant currency	$	3,957,915	$	4,797,070		(17.5	)	%

EMEA components sales, as reported	$	3,096,001	$	4,399,624		(29.6	)	%
Impact of changes in foreign currencies		—		(4,654	)
EMEA components sales, constant currency	$	3,096,001	$	4,394,970		(29.6	)	%

Global ECS sales, as reported	$	3,593,680	$	3,712,269		(3.2	)	%
Impact of changes in foreign currencies		—		5,943
Global ECS sales, constant currency	$	3,593,680	$	3,718,212		(3.3	)	%

Americas ECS sales, as reported	$	1,871,818	$	1,998,620		(6.3	)	%
Impact of changes in foreign currencies		—		(2,539	)
Americas ECS sales, constant currency	$	1,871,818	$	1,996,081		(6.2	)	%

EMEA ECS sales, as reported	$	1,721,862	$	1,713,649		0.5		%
Impact of changes in foreign currencies		—		8,482
EMEA ECS sales, constant currency	$	1,721,862	$	1,722,131		(0.0	)	%

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

Three months ended June 29, 2024
	Reported			Intangible		Restructuring,		Impact of			Non
	GAAP			amortization		Integration		Wind			recurring			Non-GAAP
	measure			expense		and other		Down ⁽¹⁾			tax items		Other ⁽²⁾	measure
Operating income	$	212,275		$	7,456	$	40,537	$	1,627	$	—	$	—		261,895
Income before income taxes		139,386			7,456		40,537		1,627		—		6,272		195,278
Net income attributable to shareholders	$	108,698		$	5,457	$	30,323	$	1,238	$	—	$	4,766	$	150,482
Net income per diluted share ⁽⁴⁾	$	2.01		$	0.10	$	0.56	$	0.02	$	—	$	0.09	$	2.78
Effective tax rate ⁽⁵⁾		21.4	%												22.4	%


Three months ended July 1, 2023
	Reported			Intangible		Restructuring,		Impact of			Non
	GAAP			amortization		Integration		Wind			recurring				Non-GAAP
	measure			expense		and other		Down ⁽¹⁾			tax items		Other ⁽³⁾		measure
Operating income	$	392,250		$	7,908	$	10,333	$	—	$	—	$	—		$	410,491
Income before income taxes		310,171			7,908		10,333		—		—		(497	)		327,915
Net income attributable to shareholders	$	236,559		$	5,780	$	7,736	$	—	$	942	$	(378	)	$	250,639
Net income per diluted share ⁽⁴⁾	$	4.12		$	0.10	$	0.13	$	—	$	0.02	$	(0.01	)	$	4.37
Effective tax rate ⁽⁵⁾		23.3	%													23.1	%

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

Six months ended June 29, 2024
	Reported			Intangible		Restructuring,		Impact of			Non
	GAAP			amortization		Integration		Wind			recurring			Non-GAAP
	measure			expense		and other		Down ⁽¹⁾			tax items		Other ⁽²⁾	measure
Operating income	$	398,192		$	15,002	$	87,393	$	12,086	$	—	$	—	$	512,673
Income before income taxes		244,520			15,002		87,393		12,086		—		6,174		365,175
Net income attributable to shareholders	$	192,299		$	10,989	$	65,165	$	9,195	$	—	$	4,692	$	282,340
Net income per diluted share ⁽⁴⁾	$	3.53		$	0.20	$	1.20	$	0.17	$	—	$	0.09	$	5.18
Effective tax rate ⁽⁵⁾		21.2	%												22.5	%


Six months ended July 1, 2023
	Reported			Intangible		Restructuring,		Impact of			Non
	GAAP			amortization		Integration		Wind			recurring				Non-GAAP
	measure			expense		and other		Down ⁽¹⁾			tax items		Other ⁽³⁾		measure
Operating income	$	814,402		$	15,888	$	12,893	$	—	$	—	$	—		$	843,183
Income before income taxes		662,043			15,888		12,893		—		—		(10,808	)		680,016
Net income attributable to shareholders	$	510,309		$	11,616	$	9,576	$	—	$	942	$	(8,218	)	$	524,225
Net income per diluted share ⁽⁴⁾	$	8.74		$	0.20	$	0.16	$	—	$	0.02	$	(0.14	)	$	8.98
Effective tax rate ⁽⁵⁾		22.5	%													22.5	%

(1)		Includes write downs of inventory related to the wind down of a business.
(2)		Other includes loss (gain) on investments, net and loss on extinguishment of debt.
(3)		Other includes loss (gain) on investments, net.
(4)		The sum of the components for non-GAAP diluted EPS, as adjusted may not agree to totals, as presented, due to rounding.
(5)		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						Six Months Ended
	June 29, 2024			July 1, 2023			June 29, 2024			July 1, 2023
Sales:
Global components	$	5,032,031		$	6,682,882		$	10,223,448		$	13,538,675
Global ECS		1,860,837			1,831,634			3,593,680			3,712,269
Consolidated	$	6,892,868		$	8,514,516		$	13,817,128		$	17,250,944
Operating income (loss):
Global components (a)	$	210,201		$	381,314		$	435,763		$	798,853
Global ECS (b)		102,581			86,228			174,040			167,327
Corporate (c)		(100,507	)		(75,292	)		(211,611	)		(151,778	)
Consolidated	$	212,275		$	392,250		$	398,192		$	814,402

(a)		Global components operating income includes charges of $1.6 million and $12.1 million in inventory write downs related to the wind down of a business for the second quarter and first six months of 2024, respectively.
(b)		Global ECS operating income includes a $20.0 million benefit related to the reversal of an allowance for credit losses due to the collection of certain aged receivables for the second quarter and first six months of 2024.
(c)		Corporate operating (loss) includes restructuring, integration, and other charges of $40.5 million and $87.4 million for the second quarter and first six months of 2024, respectively, and $10.3 million and $12.9 million for the second quarter and first six months of 2023, respectively.

NON-GAAP SEGMENT RECONCILIATION

	Quarter Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Global components operating income, as reported	$	210,201	$	381,314	$	435,763	$	798,853
Intangible assets amortization expense		6,399		6,679		12,887		13,424
Impact of wind down to inventory		1,627		—		12,086		—
Global components non-GAAP operating income	$	218,227	$	387,993	$	460,736	$	812,277

Global ECS operating income, as reported	$	102,581	$	86,228	$	174,040	$	167,327
Intangible assets amortization expense		1,057		1,229		2,115		2,464
Global ECS non-GAAP operating income	$	103,638	$	87,457	$	176,155	$	169,791

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