Avnet, Inc. Corporate Overview As of December 6, 2016 1 December 6, 2016
From components to cloud and design to disposal, Avnet brings products, services and solutions to customers that build, sell and use technology globally. 2 December 6, 2016
Who We Are and What We Do Who We Are We are one of the world s largest global distributors of electronic components, computer products and embedded technology serving customers in more than 125 countries. What We Do We connect the world's leading technology companies with more than 100,000 customers by providing cost-effective, valueadded services and solutions. Financial Scope For the fiscal year ending July 2, 2016 we generated revenue of $26.2 billion. 3 December 6, 2016
Company Snapshot Fast Facts FY16 Annual Revenue Headquartered in Phoenix, AZ Founded in 1921 AVT listed on the NYSE in 1960 800+ suppliers An Industry Leader Named to the FORTUNE Most Admired list for technology distribution, 2007-2016 Technology Solutions $9.7B 37% Avnet, Inc. $26.2B 100,000+ customers 100 acquisitions announced or closed since FY91 17,700 employees worldwide Top Business Technology Innovator on the 2016 InformationWeek Elite 100 Number 102 on the 2016 FORTUNE 500 (U.S.) Number 380 on the 2016 FORTUNE Global 500 Asia $7.99B (30%) Americas $10.42B (40%) Electronics Marketing $16.6B 63% Named a World's Most Ethical Company by Ethisphere Institute 2014, 2015 and 2016 EMEA $7.81B (30%) 4 December 6, 2016
Organization Structure Pete Bartolotta Chief Transformation Officer Terry Bassett Chief Strategy, Innovation and M&A Officer Gerry Fay President, Global Business Units MaryAnn Miller Chief HR Officer & Global Marketing and Communications William Amelio Chief Executive Officer Kevin Moriarty Chief Financial Officer Mike O Neill General Counsel & Chief Legal Officer Kevin Summers Chief Information Officer Patrick Zammit President, Technology Solutions 5 December 6, 2016
Operating Groups Electronics Marketing Serving electronics original equipment manufacturers and electronic manufacturing services providers globally, distributing electronic components and embedded systems from leading manufacturers and providing associated design-chain and supply-chain services. Technology Solutions Collaborating with customers and suppliers to create and deliver services, software and hardware solutions that address the business needs of enduser customers locally and around the world. 6 December 6, 2016
Purpose and Vision Our Purpose Our Vision We help technology make the world a better place to live, work and play. We aspire to be the premier partner of choice for our customers, suppliers, employees and shareholders by accelerating their success through our global technology marketing and distribution resources, services and culture. 7 December 6, 2016
Top Priorities Strategy Execution Talent Management 8 December 6, 2016
Avnet s financial strength, solid balance sheet and market leadership give its customers and suppliers complete confidence in its stability and in its ability to invest in long-term, shared growth opportunities. 9 December 6, 2016
FY16 Results Revenue $26.2B 6.1% 2 Y/Y Adjusted Operating Income 1 $895.6M 7.9% Y/Y $4.22 6.0% Y/Y 1 Excluding restructuring, integration and other items. 2 Revenue decreased 6.1% Y/Y on a reported basis and decreased 3.2% Y/Y in constant currency (excluding the translation impact of changes in foreign currency exchange rates). 3 ROWC = Return on Working Capital is defined on slide 28. Adjusted ROWC 3 Cash Flow from EPS 1 Operations 20.1% $224M 153 Basis Points Y/Y 10 December 6, 2016
Revenue and Adjusted EPS 1 $30 $5.00 $4.50 $25 $4.00 $20 $3.50 ($ in Billions) $15 $3.00 $2.50 $2.00 $10 $1.50 $5 $1.00 $0.50 $0 $14.3 $15.7 $18.0 $16.2 $19.2 $26.5 $25.7 $25.5 $27.5 $27.9 $26.2 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 1 A reconciliation of non-gaap financial measures to GAAP financial measures is included in the Non-GAAP Financial Reconciliation and Information section of this presentation $0.00 11 December 6, 2016
Cash Flow from Operations ($ in Millions) Cash flow from working capital and other Cash from operations $1,400 $1,200 $1,118 $1,000 $800 $725 $696 $600 $462 $529 $584 $400 $454 $200 $278 $237 $224 $- $(200) $(19) $(30) $(400) $(600) $(800) FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 12 December 6, 2016
The Power and Impact of Engagement Technology suppliers and customers benefit from Avnet s global scale and scope to effectively reach a wide range of markets across the globe. 13 December 6, 2016
Regional Snapshot Americas FY16 sales: $10.42B Employees: 6,300+ Locations/Offices: 94 Started in region: 1921 EMEA FY16 sales: $7.81B Employees: 6,400+ Locations/Offices: 195 Started in region: 1991 Asia Pacific FY16 sales: $7.99B Employees: 5,000 Locations/Offices: 98 Started in region: 1995 Acquisitions announced or closed since FY91: 31 Acquisitions announced or closed since FY91: 46 Acquisitions announced or closed since FY91: 23 14 December 6, 2016
Vital Link in Global Technology Supply Chain Forward and Reverse Logistics Integrated Supply Chain Expertise Semiconductors Interconnect, Passive and Electro-mechanical Devices Embedded Systems EMS / ODM IT Original Equipment Manufacturers Non-IT Original Equipment Manufacturers Resellers, ISVs and System Builders End Users Software Software and Services Vendors Avnet effectively manages the complexity of the technology supply chain in a cost-efficient manner, delivering value to suppliers and customers. 15 December 6, 2016
Services Capabilities Avnet offers a breadth and depth of services capabilities: Supply-chain and design-chain Logistics solutions Product assembly Device programming Computer system configuration and integration Asset disposition Financing Marketing services Technical seminars Core distribution services 16 December 6, 2016
Global Logistics Global FY16 Footprint: Performance 2.5 99 Billion Million Square Units Shipped Feet 2.6 Million Part Numbers Stocked 6.7 Million Orders Processed 407,000 Systems Integrated 254 Million Devices Programmed Global Facility Network Distribution Centers System Integration Centers IC Programming Centers Global Services Trade Compliance Regulation Transportation Management Regulatory Quality Compliance 17 December 6, 2016
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Global IT Scale and Scope 1,272 physical servers 4,041 logical servers 3,078 terabytes storage 66% of all supplier orders (by volume) are placed electronically 57% of all customer orders received (by volume) are received electronically 28,380 unique average daily visitors to Avnet websites Award Winning Excellence in IT Avnet named to the InformationWeek Elite 100 for the third consecutive year Avnet receives CIO Asia Award Sean Valcamp named Avnet s first Chief Information Security Officer Vice President, Beth McMullen recognized with Outstanding Women in Business award from the Phoenix Business Journal 19 December 6, 2016
Avnet s people initiatives help drive profitable growth by inspiring and engaging employees, which ultimately enhances the customer experience and increases shareholder value. 20 December 6, 2016
Global Headcount Asia 5,000 Americas 6,300 Total 17,700 EMEA 6,400 21 December 6, 2016
The Power and Impact of Engagement Thoughtful organizational development strategies lead to a more productive and engaged workforce, a more engaged customer base and higher shareholder returns. Putting the Service-Profit Chain to Work, Heskett, et al. - Harvard Business Review Employee Retention Profitability People Practices Employee Engagement and Organizational Climate Employee Productivity External Service Value Customer Satisfaction Customer Loyalty Revenue Employee Engagement Customer Engagement Since 2004, Avnet has maintained a focus on employee engagement, and it shows in our results. 22 December 6, 2016
23 December 6, 2016 Avnet delivers value to its customers and suppliers through technical knowledge and industry-centric expertise so they can make the most of opportunities, solve business problems and accelerate their success.
Business Highlights Completed acquisition of Premier Farnell Avnet acquired Orchestra Service GmbH, German IT distributor of EMC storage Avnet released third annual Giving Report Chuck Delph promoted to president, Avnet Electronics Marketing, Americas Bob Bowen joined Avnet as vice president, global trade compliance Eric Williams joined Avnet as vice president, Internet of Things 24 December 6, 2016
Non-GAAP Financial Information and Reconciliation A reconciliation of non-gaap financial information is attached as exhibit 99.2 ( Exhibit 99.2 ) to the Form 8-K filed with the Securities Exchange Commission on August 10, 2016. In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the United States ( GAAP ), the Company also discloses in this document certain non-gaap financial information including adjusted operating income, adjusted operating expenses, adjusted income tax expense, adjusted net income and adjusted diluted earnings per share, as well as sales adjusted for the impact of acquisitions and other items (as defined in the Organic Sales section of this document). There are also references to the impact of foreign currency in the discussion of the Company s results of operations. When the U.S. Dollar strengthens and the stronger exchange rates of the current year are used to translate the results of operations of Avnet s subsidiaries denominated in foreign currencies, the resulting impact is a decrease in U.S. Dollars of reported results. Conversely, when the U.S. Dollar weakens and the weaker exchange rates of the current year are used to translate the results of operations of Avnet s subsidiaries denominated in foreign currencies, the resulting impact is an increase in U.S. Dollars of reported results. In the discussion of the Company s results of operations, results excluding this impact are referred to as excluding the impact of changes in foreign currency exchange rates or constant currency. Management believes organic sales and sales in constant currency are useful measures for evaluating current period performance as compared with prior periods and for understanding underlying trends. In order to determine the translation impact of changes in foreign currency exchange rates on sales, income or expense items for subsidiaries reporting in currencies other than the U.S. Dollar, the Company adjusts the average exchange rates used in current periods to be consistent with the average exchange rates in effect during the comparative period. Management believes that operating income and operating expenses adjusted for (i) restructuring, integration and other expenses and (ii) amortization of acquired intangible assets and other, are useful measures to help investors better assess and understand the Company s operating performance, especially when comparing results with previous periods or forecasting performance for future periods, primarily because management views the excluded items to be outside of Avnet s normal operating results or non-cash in nature. Management analyzes operating income and operating expenses without the impact of these items as an indicator of ongoing margin performance and underlying trends in the business. Management also uses these non-gaap measures to establish operational goals and, in many cases, for measuring performance for compensation purposes. Additional non-gaap metrics management uses are adjusted operating income margin, which is defined as adjusted operating income (as defined above) divided by sales and adjusted operating expense to gross profit ratio, which is defined as adjusted operating expenses (as defined above) divided by gross profit. Management also believes income tax expense, net income and diluted EPS adjusted for (i) the impact of the items described above, (ii) certain items impacting other expense and (iii) certain items impacting income tax expense is useful to investors because it provides a measure of the Company s net profitability on a more comparable basis to historical periods and provides a more meaningful basis for forecasting future performance. Additionally, because of management s focus on generating shareholder value, of which net profitability is a primary driver, management believes net income and diluted EPS excluding the impact of these items provides an important measure of the Company s net profitability for the investing public. Other metrics management monitors in its assessment of business performance include return on working capital (ROWC), return on capital employed (ROCE) and working capital velocity (WC velocity). ROWC is defined as annualized adjusted operating income (as defined above) divided by the sum of the monthly average balances of receivables and inventories less accounts payable. ROCE is defined as annualized, tax effected adjusted operating income (as defined above) divided by the monthly average balances of interest-bearing debt and equity (including the impact of adjustments to operating income discussed above) less cash and cash equivalents. WC velocity is defined as annualized sales divided by the sum of the monthly average balances of receivables and inventories less accounts payable. Any analysis of results and outlook on a non-gaap basis should be used as a complement to, and in conjunction with, results presented in accordance with GAAP. 25 December 6, 2016
Non-GAAP Financial Information and Reconciliation Fiscal Year 2016 Operating Income Income Before Income Taxes Net Income $ in thousands, except per share data Diluted EPS GAAP results $ 787,669 $ 163,978 $ 506,531 $ 3.80 Restructuring, integration and other expenses 79,318 26,975 52,343 0.39 Foreign currency loss Amortization of intangible assets and other 28,614 8,856 19,758 0.15 Income tax adjustments 16,527 (16,527 ) (0.12) Total adjustments 107,932 52,358 55,575 0.42 Adjusted results $ 895,601 $ 216,336 $ 562,106 $ 4.22 26 December 6, 2016
Non-GAAP Financial Information and Reconciliation ROWC, ROCE and WC Velocity The following table (in thousands) presents the calculation for ROWC: Q4 FY16 Q4 FY15 Sales $ 6,226,812 $ 6,796,331 Sales, annualized (a) $ 24,907,248 $ 27,185,324 Adjusted operating income (1) $ 194,709 $ 243,814 Adjusted annualized operating income (b) $ 778,836 $ 975,256 Adjusted effective tax rate (2) 27.8 % 27.7 % Adjusted annualized operating income, after tax (c) $ 562,397 $ 705,305 Average monthly working capital Accounts receivable $ 4,768,442 $ 4,979,668 Inventories $ 2,935,788 $ 2,593,545 Accounts payable $ (3,154,351) $ (3,234,283) Average working capital (d) $ 4,549,879 $ 4,338,930 Average monthly total capital (e) $ 6,177,923 $ 5,898,475 ROWC = (b) / (d) 17.1 % 22.5 % WC Velocity = (a) / (d) 5.5 6.3 ROCE = (c) / (e) 9.1 % 12.0 % (1) See reconciliation to GAAP amounts in the preceding tables in this Non-GAAP Financial Information and Reconciliation section. (2) Adjusted effective tax rate for each quarterly period in a fiscal year is based upon the currently anticipated annual effective tax rate, excluding the tax effect of the items in the above reconciliation to GAAP amounts in this Non-GAAP Financial Information and Reconciliation section. 27 December 6, 2016
Non-GAAP Financial Information and Reconciliation ROWC The following table (in thousands) presents the calculation for ROWC: Adjusted operating income (1) Average monthly working capital Accounts receivable Inventories Accounts payable Average working capital ROWC = (a) / (b) Fiscal Year 2016 (a) $ 895,601 $ 4,815,529 $ 2,814,071 $ (3,166,749) (b) $ 4,462,851 20.1 % (1) See reconciliation to GAAP amounts in the preceding tables in this Non-GAAP Financial Information section. 28 December 6, 2016