Arrow Electronics Reports Second-Quarter 2023 Results

-- Second-Quarter Earnings Per Share of $4.12; Non-GAAP Earnings Per Share of $4.37 --

-- Revenue in line with guidance; Non-GAAP EPS above midpoint of guidance --

Arrow Electronics, Inc. (NYSE:ARW) today reported second-quarter 2023 sales of $8.51 billion, a decrease of 10 percent year over year. Second-quarter net income was $237 million, or $4.12 per share on a diluted basis, compared with net income of $370 million, or $5.54 per share on a diluted basis, in the second quarter of 2022. Non-GAAP net income¹ was $251 million, or $4.37 per share on a diluted basis, in the second quarter of 2023, compared with non-GAAP net income of $386 million, or $5.78 per share on a diluted basis, in the second quarter of 2022.

"The company posted solid second-quarter results in a softer semiconductor market and a mixed information technology spending environment, delivering revenue and earnings per share within our guidance range," said Sean Kerins, Arrow's president, and chief executive officer.

Global components second-quarter sales of $6.68 billion reflected a decrease of 10 percent year over year. Europe components second-quarter sales increased 19 percent year over year. Asia-Pacific components second-quarter sales decreased 22 percent year over year. Americas components second-quarter sales decreased 17 percent year over year. Global components second-quarter operating income was $381 million, and second-quarter non-GAAP operating income was $388 million.

"While demand in the west broadly remained resilient, customer inventory levels were elevated in the quarter. Americas components results were impacted by further declines in the shortage market, which we now believe to be largely normalized. In Asia, we experienced continued demand softness in China," said Mr. Kerins. "We were encouraged by our sequential inventory reduction, pricing stability and growth in design-related activity."

Global enterprise computing solutions (ECS) second-quarter sales of $1.83 billion reflected a decrease of 8 percent year over year. Europe enterprise computing solutions second-quarter sales decreased 1 percent year over year. Americas enterprise computing solutions second-quarter sales decreased 14 percent year over year. Global enterprise computing solutions second-quarter operating income was $86 million, and second-quarter non-GAAP operating income was $87 million.

"We continue to see customers migrate to solutions delivered on an as-a-service basis. Our ECS results reflect this trend as we saw relative strength in cloud, software and services, and improved operating margin year over year," said Mr. Kerins.

"Reflecting our confidence in our ability to generate cash and consistent with our desire to drive shareholder returns, we repurchased approximately $200 million of shares during the second quarter," said Raj Agrawal, senior vice president and chief financial officer. "As of the end of the second quarter, our remaining repurchase authorization stands at approximately $824 million."

¹ A reconciliation of non-GAAP financial measures to GAAP financial measures is presented in the reconciliation tables included herein.

THIRD-QUARTER 2023 OUTLOOK

• Consolidated sales of $7.78 billion to $8.38 billion, with global components sales of $6.00 billion to $6.40 billion, and global enterprise computing solutions sales of $1.78 billion to $1.98 billion
• Net income per share on a diluted basis of $3.25 to $3.45, and non-GAAP net income per share on a diluted basis of $3.40 to $3.60
• Average tax rate in the range of 23 to 25 percent
• Average diluted shares outstanding of ~56 million
• Interest expense in the range of $85 million to $90 million
• Changes in foreign currencies expected to increase year-over-year growth in sales by $212 million, and earnings per share on a diluted basis by $0.11 compared to the third quarter of 2022
• Changes in foreign currencies expected to increase quarter-over-quarter growth in sales by $42 million and earnings per share on a diluted basis by $0.04 compared to the second quarter of 2023
• On a constant currency basis, our third-quarter sales guidance implies a sequential growth rate range of down 11 percent to down 5 percent for global components and down 4 percent to up 7 percent for global enterprise computing solutions, when compared to the second quarter of 2023

CFO Commentary and Earnings Presentation

Please refer to the CFO commentary and 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.

Conference Call and Webcast Information

Arrow Electronics will host a conference call to discuss second-quarter 2023 financial results on Aug. 3, 2023, at 1:00 PM ET. Register online at https://conferencingportals.com/event/fEoxDDHd to obtain dial-in information to access the live conference call. The conference call will also be available via live webcast at investor.arrow.com. Shortly after the conclusion of the conference call, a webcast replay will be available at investor.arrow.com.

About Arrow Electronics

Arrow Electronics guides innovation forward for over 210,000 leading technology manufacturers and service providers. With 2022 sales of $37 billion, Arrow develops technology solutions that help improve business and daily life. Learn more at fiveyearsout.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 2023 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; outbreaks, epidemics, pandemics, or public health crises; and the company's ability to generate 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 non-GAAP sales, operating income, 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, which are non-GAAP measures adjusted for the 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.

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