Arrow Electronics Reports Third-Quarter 2023 Results

-- Third-Quarter Earnings Per Share of $3.53; Non-GAAP Earnings Per Share of $4.14 –

-- Revenue of $8.01 billion in line with guidance --

Arrow Electronics, Inc. (NYSE:ARW) today reported third-quarter 2023 sales of $8.01 billion, a decrease of 14 percent year over year. Third-quarter net income was $199 million, or $3.53 per share on a diluted basis, compared with net income of $342 million, or $5.27 per share on a diluted basis, in the third quarter of 2022. Non-GAAP net income¹ was $233 million, or $4.14 per share on a diluted basis, in the third quarter of 2023, compared with non-GAAP net income of $354 million, or $5.45 per share on a diluted basis, in the third quarter of 2022. Both GAAP and non-GAAP earnings per share in the third quarter of 2023 included a $0.87 benefit related to cash received from a legal settlement in the global components business, and a $0.31 impact for a charge taken to increase accounts receivable reserves associated with a customer in the global enterprise computing solutions (ECS) business.

"The company executed well amidst an inventory correction in the semiconductor market and a softer information technology market, delivering non-GAAP earnings per share at the high end of our guidance range," said Sean Kerins, Arrow's president, and chief executive officer.

Global components third-quarter sales of $6.25 billion reflected a decrease of 14 percent year over year. Europe components third-quarter sales increased 3 percent year over year, which was a 4 percent decline in constant currency. Asia-Pacific components third-quarter sales decreased 18 percent year over year. Americas components third-quarter sales decreased 24 percent year over year. Global components third-quarter operating income was $379 million, and third-quarter non-GAAP operating income was $386 million. These results include a $62 million benefit resulting from a legal settlement recorded as a decrease to operating expenses.

"With lead times normalizing, customer inventory remained elevated, impacting order velocity and top-line results across most vertical markets. Despite the market conditions, operating margins are meaningfully higher than in prior market corrections," said Mr. Kerins. "We were encouraged by the level of demand creation activity in the quarter and the continued traction of our supply chain services offering."

Global ECS third-quarter sales of $1.76 billion reflected a decrease of 10 percent year over year. Europe ECS third-quarter sales increased 2 percent year over year, which was a 5 percent decline in constant currency. Americas ECS third-quarter sales decreased 18 percent year over year. Global ECS third-quarter operating income was $55 million, and third-quarter non-GAAP operating income was $56 million. These results include a $22 million charge taken to increase accounts receivable reserves associated with a customer.

"The mix in our ECS business continued to shift toward software related to infrastructure and cybersecurity, as well as cloud solutions. As a result, the business produced year-on-year billings growth albeit with a decline in sales," said Mr. Kerins.

"Non-GAAP earnings per share after adjusting for the legal settlement and accounts receivable item, was at the high end of our guidance range," said Raj Agrawal, senior vice president and chief financial officer. "We were pleased to generate $322 million in cash flow from operations in the third quarter. Additionally, we repurchased approximately $200 million of shares during the third quarter and now have remaining purchase authorization of approximately $622 million."

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

FOURTH-QUARTER 2023 OUTLOOK

• Consolidated sales of $7.50 billion to $8.10 billion, with global components sales of $5.40 billion to $5.80 billion, and global enterprise computing solutions sales of $2.10 billion to $2.30 billion
• Net income per share on a diluted basis of $3.30 to $3.50, and non-GAAP net income per share on a diluted basis of $3.61 to $3.81
• Average tax rate in the range of 23 to 25 percent
• Average diluted shares outstanding of ~55 million
• Interest expense in the range of approximately $90 million
• Changes in foreign currencies expected to increase year-over-year growth in sales by $54 million, and earnings per share on a diluted basis by $0.02 compared to the fourth quarter of 2022
• Changes in foreign currencies expected to decrease quarter-over-quarter growth in sales by $82 million and earnings per share on a diluted basis by $0.07 compared to the third 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 third-quarter 2023 financial results on Nov. 2, 2023, at 1:00 PM ET. Register online at https://conferencingportals.com/event/fEoxDDHd to obtain dial-in information for 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 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 fourth 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 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 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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