Morning, everyone.. We'll get started. Good morning. I'm Joe Burke, Vice President, Treasury and Investor Relations, Avnet, Inc. It's my pleasure to welcome you to Avnet Investor Day 2022. We have a great turnout here in Midtown, New York, and it's great to see people in real life for a change. Thank you. Also wanna give a welcome to those who are listening in via the webcast. We appreciate everyone's time to visit with us today and learn more about Avnet. It's been four years since our last Investor Day here in 2018 at the Nasdaq MarketSite. Since that time, there have been a lot of changes in the world. There's been a lot of changes at Avnet too. Changes to make the company more durable, stronger, and to be able to handle whatever the market brings us. Today, we are excited to share with you our plans to deliver what's next for our customers, our suppliers, and importantly, to our shareholders. Today, you will hear from a deep bench of talented and tenured senior executives here at Avnet, the strategies and initiatives underway to sustain growth and to broaden our business into our higher margin segments. Before we get started, as a reminder, some of what you will hear today contains forward-looking statements, including statements about our business strategy, growth, and financial results, which all are based on our predictions and expectations as of today. Our actual results could differ materially due to a number of risks and uncertainties as specified in our most recent filings with the SEC, our 10-K and our 10-Q. We undertake no obligation to update publicly or revise any of these projections or forward-looking statements after today. With that, I will go over today's agenda. First, we are honored to have with us today, Avnet's Chairman of the Board, Rod Adkins, who will kick things off with opening remarks. Rod will be followed by Avnet's CEO, Phil Gallagher, with his unique view from the top. Alex Iuorio will give his view on the market, detailing projected growth in the vertical markets we serve, product types, and much more. Dayna Badhorn, our new Americas President, will kick off the broadening the business segment. Dayna will share her vision of how we're going to accelerate the Americas going forward. As we've told you before, the Americas are a needle mover for us, so Dayna will dive into that. Our president of Avnet EMEA, Slobodan Puljarevic, or Puli, as he'll be named hereon, will discuss our IP&E business, interconnect passive and electromechanical, and which we see as a key driver for our future margin expansion. We'll wrap up the morning with a 45-minute panel discussion with a special group of supplier and customer partners, and that'll be led by Alex Iuorio. That will end at 12:35 P.M., at which time we will take a 30-minute lunch break. It'll be grab-and-go lunches right outside here, which you'll be able to take back to your seat. The afternoon segment will begin at 1:05 P.M. Eastern Time. We'll begin promptly then. David Paulson and Ken Jacobson will discuss supply chain opportunities and what their team is doing to help customers and suppliers mitigate supply chain risk. Peggy Carrieres will dive into our technical sales enablement, demand creation, engineering, and digital capabilities. We'll then continue with our broadening the business segment. Mario Orlandi, President of Avnet EMEA, will start things off with a focus on our growth plans related to our embedded business. Chris Breslin, President of Farnell, will provide a closer look at the Farnell value proposition and the unique synergies derived from the Avnet-Farnell combination. Wrapping things up, our CFO, Tom Liguori, will take a look at things from a financial perspective, put it all together in our looking ahead segment. We'll open up at 2:45 P.M. Eastern our Q&A. Those listening in on the webcast will be able to pose questions via the online chat box. Phil will wrap up our presentation with concluding comments, and we will adjourn the meeting at 3:30 P.M. Eastern Time. At which time we are hosting a networking hour right out here on the 10th floor. All are welcome. At this point, I have the privilege of introducing Rod Adkins, Avnet's Chairman of the Board of Directors. For those of you who don't know Rod has been on our board since 2015. Rod has a 33-year career at IBM, where he held several senior leadership roles, technical and leadership roles. While at IBM, Rod had the relationship responsibilities for Avnet. Although Rod has been on our board for seven years, he's had decades of experience with Avnet. Rod is a highly engaged director, not only focusing on governance, performance, and metrics, but also on the people aspect of the business as well. Avnet is very fortunate to have a leader with his technology background and experience on our board. With that, it's my pleasure to welcome up Rodney C. Adkins. Thank you, Joe. Good morning, everyone. Good morning, Chairman. It's great being here. First of all, let me extend my welcome to you, and I would be remiss if I didn't say thank you, because I wanna thank you for investing your time in us today. As you heard from Joe, we have a highly comprehensive agenda. This is agenda that where he described it's sort of built on where you'll get a closer look at Avnet. You'll get an opportunity to hear it from what I would describe as the extended team of colleagues. What I wanna do, it's a number of things I can talk about, but I decided to prioritize this to three points that I wanna leave you with. These three points, I wanna just touch quickly, and these will be quick points just to set the stage. I wanna comment on the leadership team, number one. The second thing I wanna comment on is our focus on shareholder value. The final point I wanna wrap up on is active board engagement with leadership. This is a question I constantly get, as not only a member of the board here at Avnet, but also in my other board roles with UPS, Grainger, PayPal, and others. It's just one of those points that constantly come up, so I thought it would be a good idea to comment on it. On the first point, the leadership team, as you heard from Joe, I've been on this board for seven years. I'm approaching four years as the chairman. I actually had the opportunity during that period of time to work with three CEOs. I must tell you that Phil Gallagher is a great choice. He is a great choice based on company performance, he is a great choice based on the breadth of his relationships, he's a great choice in terms of engagement, and he's a great choice in terms of leadership. You know, another measurement of leadership you could look at is the team that a leader sorta assembles and surround themselves with. You're gonna see more of the team today, where he has assembled, in my opinion, a very experienced and skillful team that will continue to focus on what we are describing as the next phase of growth for Avnet. Great leadership team from a board perspective. The second point is on shareholder value. I think we've been making the case, and we'll continue to make the case around why we think we are the preferred distribution partner for what we will describe as the full lifecycle of solutions. You know, starting from conceptual design all the way through how we help customers manage on distribution and logistics. I know a number of you have been with Avnet over the years, and you've been through, frankly, our ups and downs in terms of performance. I think now we can sort of assert that we have a better recipe for consistent execution. You're gonna hear from Phil and Tom and others in terms of that execution is grounded by how we will continue to deliver on growth and margin expansion, how we will continue to improve our operational efficiency, and how we continue to invest in what we describe as new growth opportunities. When you sort of put that recipe together, this is how we will continue to generate favorable shareholder returns. The final point I wanna comment on is active board engagement with management. You know, I was just thinking through this. You know, since joining the board, we have turned over this board, over 60% of the Avnet board, during my tenure. As part of that turnover equation, we do, I think, have one of the most diverse boards in the industry. I'm gonna use diversity in a much broader sense because no matter what dimension you look at in terms of gender, in terms of ethnicity, you know, in terms of geographic skills and experiences, we have a very diverse board. We also have added to the board deeper skills, you know, in terms of industry expertise, but we also have other skills, what I would call domain skills, that we added to the board, that will be useful as Avnet continues to focus on this next phase of growth. I, you know, when you look at the board, the board, I think, is, in terms of skills, experiences, and background, a very solid board. The engagement with management is active, and I think you should expect, as investors, the role that we play, as board members, and we focus on a lot of different things, but I will comment on quickly five things that I think a good board should always focus on. First and foremost, number one, the strategy of the company. Because at the end of the day, this is about sustainability and durability in terms of having back to the recipe, a consistent equation of performance and generating value and return. The second thing we focus on with management is financial performance. That's how we all get measured. The board is highly engaged in that area with the leadership team. Third, talent and succession management in terms of having the right leadership team today, but also making sure that we have a bench for tomorrow. The fourth area, which is becoming more and more important, is compliance and trust. Business controls. How do you adhere to regulatory requirements? Trust, given this unprecedented growth of information and data and what we're dealing with, companies are looking at enterprises like Avnet to be sort of a trusted partner. The final area is vitality. This is not just the vitality of the company, but it's also the, as I described, the vitality of the board in terms of making sure that we have the right talent, skills, and capabilities and experiences along with education and training to keep the capabilities going to run the enterprise. Those are the five things that. There are always more, but those are my top five things in terms of what we will continue to focus on as a board. Those were three things that I picked out of a list of things, but I do think on behalf of the Avnet board, I think we have the right leadership team. We do have, and you'll hear more, throughout the day in terms of our game plan or the right recipe, around driving growth. The Avnet board is in active engagement on a continuous basis with the leadership team. With that, I wanna sort of conclude here by just making a comment that last year, and I've been fortunate because this is actually the second company I've been associated with to have had the opportunity to celebrate a centennial. Last year, Avnet celebrated being a 100-year-old enterprise. Sometimes you have to pause and think about that, because when you think about the dynamics and the change that we deal with, you know, this is a company that constantly transforms itself to be in a ready position as the market moves. Which I think is a huge major milestone for Avnet. In a special way, we had the opportunity to do this with the tenth CEO of Avnet. With that as an introduction, I like to bring up Phil Gallagher, CEO of Avnet, who will give you a much more deeper perspective around Avnet's performance and future. Phil. Thank you, Rod. Thank you very much. That's a bit overwhelming. Thank you, Rod, very much. And thank you for being here and flying in specifically for this event. Let me just go back one. Go back up there. Okay. So again, thanks, Chairman. I appreciate that humbling kickoff. I just have a few comments. Well, we kicked off the opening bell today, so I'm still calming down off of that one. It was really exciting to have the team here because we do have the extended leadership team here, which you'll see here as Joe introduced, was really high energy and just a great way to start today. I wanna thank and reiterate Rod's appreciation for all of you being here today. Those that are live, those that are online, as Joe pointed out, it is great to see the faces that I'm meeting for the first time. We've been on teleconferences or Teams or what have you, and others I haven't seen for a long time, and it's good to see you again, whether it's Jim, Matt, Melissa, whoever, Nick, et cetera. It's really, thank you very much for that. Hope all are well. As Rod pointed out, you know, we brought in a lot of the extended leadership team, 'cause you hear from Tom and myself and Joe all the time or anytime any of you want. We thought this time, some of your feedback, by the way, "Hey, we wanna meet the people who are actually getting the job done. Okay, let's get some of the regional presidents in, some of the staff that drives the execution, the supply chains, demand creation, et cetera. You're gonna hear from all of them as Joe pointed out. A lot of it is, you know, where we were. Rod kinda touched on this, you know, where are we today? Then where are we going? Okay, or some of you say, "Hey," we get this on the earnings call, "Well, hey, but what's next?" Okay, well, you're gonna hear about what's next, but even more important than that is how are we gonna do it, right? The what is easy. Okay. The how is the bigger challenge. Again, that's what you're gonna hear from the team. Very excited to be here. Thank you, again, for the introduction, Rod. Then let me just kick it off 'cause we wanna be sure we stay on time. Okay. We'll get ample time for Q&A, and really important at the breaks, just, again, you're gonna meet the team, any and all questions, don't have to tell this group that, are welcome. Okay. Well, look, it's who we are. We're leading technology distributor. We're in the center of technology supply chain. It's what we do. This one, this is a very fundamental slide that I share all the time internally. This is kinda getting back to our fundamentals and back to our foundation. Not going backwards, but just saying, what's really important? There's three pillars in our business. You got suppliers, okay, which you'll hear from some today. I call that the upstream. You got the customers downstream. We need to take care of those suppliers 'cause those suppliers are what we bundle our value proposition around to the customers. I mean, it sounds very fundamental, but in between, you've gotta have employees, you gotta have employee engagement, you gotta have the right team. Through that, you drive execution and performance. Gotta have the right team. Our vision to be preferred distributor partner at the center of the world's technology supply chain. We've been kinda coining that, the center of technology supply chain. You know, doing that through your core values, right? Again, easy to say, harder to do. Gotta have integrity. We have trusted partners that we've been with for over 60 years in some cases, some even longer. You know, people talk about trust. You build trust, you know, a penny at a time. You build it over time. Unfortunately, some people spend it like a buck, so it doesn't take long to lose the trust. That is. You know, you don't build a 100-year company, 101 now, without trust. Customer focus, upstream, downstream, suppliers are in this. We've gotta take care of our customers. If we don't have customers, we're out of business, okay? Through that, we gotta hold ourselves accountable and responsible and have ownership. Okay, not look around for other issues. Hold ourselves responsible, hold ourselves accountable. Teamwork's my favorite. Okay. Teamwork. I'm not a big fan of the I word. It doesn't work. Nobody does anything by themselves. It's about the team, okay? It's about we. How do we... Particularly these last several years, we've all dealt with the different issues from pandemic, to supply chains, to shortages, et cetera. You know what I'm talking about. As a team, we'll get through that. Not easy, but teams are successful, not Is. Then inclusiveness, okay. Diversity of thought, of race, gender. We've gotta have inclusion, okay? Everybody's voice matters. All right? By the way, I'll come back to that at the end of the day. We actually have some compensation tied around inclusion at the executive level. Supply chain management, we intentionally use the words never been more vital. A little tactful, maybe. I kinda coined a thing that people take supply chains for granted till they can't get what they need, whether it's chips, connectors, plywood, Sub-Zero, La-Z-Boy chairs. It's across the board. People realize, "Hey, what's going on with these supply chains? What's happening out there?" It's for us, and you'll hear from David Paulson and some others, it's been a real opportunity. We're seeing customers and suppliers come to us, and you're gonna hear from some of them today, by the way, during Alex's panel, come to us and say, "Hey, we need some help. We need to rebuild our supply chain." Effectively, you're gonna hear from our leadership team, as well as customers, suppliers, what have we done to scale our size and scale, okay, from a component standpoint. Building on the first slide, you know, we got to take care of our suppliers. We've gotta have the best relationships with our suppliers in the world, and we feel really good about our supplier line card. You gotta have strong customer relationships. We continue to pulse our customers with net promoter scores. We do the same thing with our suppliers. We've gotta be locked and set. We know the role we have in the supply chain. Unmasked offering. You're gonna hear again from some of the supply chain folks today of what we're offering to our customers and our suppliers, both upstream and downstream. Tom will talk about the disciplined approach we've had around earnings and shareholder returns that the chairman talked about. We're absolutely committed to that. You're gonna get a view looking forward of what we're doing to drive further discipline around that area. This is some of the team. There's over 100+ years experience. We call this the functional leadership team, if you will. Kinda more of the corporate staff. They're all here with the exception of Beth, so please encourage you to engage with them. I encourage them to engage with you. Of course, you'll be hearing from Tom in greater detail, but we got a great leadership team, over a hundred years of experience just at the functional level. This is part of the team you're gonna hear from. The only one I'll just help you out, the only one that's not here is Prince. He saw this ringing a bell. He sent me the thumbs up. Sent it from Taiwan. We just couldn't get him in from Asia. You're gonna hear from this team. This team, I won't introduce them all now, they'll have their chance. We have over 208 years' experience just with this leadership team. Okay, so we know what we're doing. We've built trust over long periods of time, and we also know what not to do. Maybe the last several years, maybe we kinda got off track of that a little bit. We're on track. We're on offense. We've got a great team driving the execution. Hey, we think we're stronger and more durable today. As I said in the beginning, we kinda got back to the. Again, I don't wanna say back to the basics, but we got our foundation set. We know what we need to do. We know what we need to stop doing. Okay? The first thing we did, we got our arms around our suppliers, as I talked about earlier. We gotta have strong supplier relationships. We went back and said, "Okay, what's the organization need to look like?" Yeah, we managed expenses pretty well through this, and again, Tom will touch on that a little bit later. We aligned what's the strategy, and then structure follows strategy. What you see today, and what you're gonna hear from this team, very well aligned, very well focused. They've got their areas of responsibility. There's no confusion on who owns what. The results, improved earnings. We got the strongest balance sheet. Joe's been treasurer for multiple decades. One of the strongest balance sheets we've had in years with low debt. Improved our working capital metrics. Disciplined financial policies continue. We got through the COVID situation. We were much more conservative at that point in time, had to strengthen the balance sheet, which we've done, which is now gonna give us some of the resiliency to go look at some other things. Okay. Organic investments, maybe some M&A. Don't get anxious. Tuck in. Tom will be very clear. Tuck in M&As that make sense around our core. Okay. We're gonna be very, very careful around that. Okay. We've got the strength to go do it, and whether it be buybacks, dividend commitment, et cetera. We feel really, really good about where we're at right now. Hey, some fun facts. We were founded over a hundred years ago. We were founded post-World War I. There were surplus parts coming out of the war. Transistors were big back then. Obviously, still are today. We're based in Arizona. I wanna thank the Nasdaq. We're now listed on the Nasdaq the last four years. As I said, we opened the bell, and they've been a great not only just a host, but a great partner as well. We're listed as number 180 coming out of last year on the Fortune 500. 14,000+ employees, 2.6 million engineers, more and more in the software space. You'll hear from Mario talk about that. 1 million+ customers when you compound it with, combine it with Farnell, which you'll be hearing more. Talk about the on the next slide, our position globally, and we ship 245 billion units per year. This is really important. You go back, I've been with the company going on 40 years. It'll be 40 years in November, so again, just blessed to be in this position. Never thought that when I started out of Philly. A lot of it back then, if you just look at in Americas alone, a lot of it was local inventory. Everything was local back in the 1980s, right? We had 50+ locations in the U.S. at the time, barely in Mexico and Canada. You started to centralize everything. Of course, things globalized, right? You got global connectivity, and you got the global size and scale. We did all the M&A to expand into Europe and Asia, and thank goodness, Roy Vallee and Leon Machiz teams saw that back when they did, 'cause they enabled us to continue to drive the growth that we're seeing today. We all talk a lot about, you know, global. Still key and critical to scale and leverage that we get on the global front. Then, of course, you got the design centers, and we got programming centers tied around globally, where we program parts for major OEM customers, and they want the part here in New York to be the same part program tested in Asia, same part program tested in Mexico and back into Eastern Europe or Germany or Italy. We can do that. But notice the 300+ other sites. That's continuing to grow. You know, particularly being accelerated in the last couple of years with what happened with products being, you know, lead times going out, ships getting caught in the Suez Canal, of course, COVID and the continuous supply chain issues. There's a kind of a movement afoot, not going all back to local, but hey, we want some proximity to inventory. We want inventory a little bit closer to where our manufacturing plant is. We might even put in a little bit of a buffer inventory and pay for that modest cost of capital to carry it. These are you know, the supply chain architects under Dave, that's what they're doing. We're starting to re-engineer these supply chains. It's an and not an or, right? This is something that you're gonna continue to hear about, and we're talking to our partners about constantly. You know, we touched on this a little bit earlier, so we didn't get here overnight. We've been around for 100 years. Started in radio parts in 1921. Of course, it migrated into switches and fasteners, connectors. They're all still around today. You get into the microprocessor, the microcontroller, memory in the 1980s. Today it's all that, plus what I just talked about with the compounding supply chain challenges. You don't get to where we are without resiliency and adaptability. Okay. By the way, many of you celebrated with us. Many of our suppliers celebrated this with us, 'cause we cannot do it alone. It's a real thank you to our customers and our suppliers, and of course, our employees. Just some numbers on a through Q3, kind of rolling 12 or past 12 months. You can see electronic components numbers. Tom will go into these in a lot more detail. And then you can see Farnell. You're gonna hear us talk a lot about Avnet and Farnell. We're really proud of the performance of what we've accomplished in the last year plus, over the last few years actually. We have a ways to go. We definitely have. I always tell the team, "Great job. We've got more work to do." You see the differences in the business. You know, the Farnell, like somebody, you know, they ask, "Well, what's the SKUs?" Well, SKUs are part numbers. You see on the Avnet Core side, we've got roughly 300,000 part numbers in inventory. We typically go, let's say, about that wide, but really deep as we manage all those, you know, supply chains, where Farnell's gonna be pushing over 1 million SKUs. You know, you can see the average order size on the Avnet side, $4,300 per line. You know, it's $380 on Farnell. Again, you'll hear from Chris and how we're doubling down. I mean, Avnet is doubling down on Farnell. We're really, really excited about the opportunity there. Farnell is or the execution and the continued opportunity. Yeah, Farnell is roughly 8% of our sales and 25%-28% of our profits. It makes sense we're gonna continue to invest in Farnell. We'll break this down for you a little bit more and give you some further outlooks when Tom comes up and closes out the day. You know, we've got some room. We've got some real opportunity. It's really a unique position we have with Farnell and Avnet combined. We, the friends, are gonna continue to stay separate because there's a different value proposition of what Farnell does versus what Avnet does, or what Avnet does versus what Farnell does. We share customers. We get leads from Farnell. Avnet's helped Farnell build their line card out. I don't wanna get into mentioning lines because if I miss one I'll get in trouble. We help them with our line card and our leverage, okay, at Avnet to help Farnell. E-commerce, you know, 70+% of the line items transacted in Farnell are online. I mean, just boom, click and go. It's roughly 53%-54% of the revenues. Okay. How can we take that expertise? How can Farnell help power Avnet's e-commerce? How can Avnet's digital tools complement Farnell? Because there's a difference between e-com and digital. We tend to overlap them, but customers want more digital self-serve tools. You'll hear Peggy talk about this a little bit later in demand creation. It's an and, not an or, but we've got to continue to drive digital in everything that we do as it drives productivity and efficiency, better customer experience, better supplier experience, so on and so forth. These two companies have great complementary, okay, and great synergistic collaboration. Really excited about where we are. We're just hitting stride in some of that area. This is the life cycle. You can come into Avnet anywhere you want. We've got really, really large OEMs that are now coming into us, and some large suppliers have come in and said, "Hey, we need help with the supply chain." There may not be as much design, but we're helping them re-architect and rebuild their supply chain, okay, in places we may not have been playing before, okay. On the other hand, if you got an idea or a concept and you need engineering support, you need design services, you need software support, you need embedded design support, we've got that, too. New product introduction, we're gonna drive as much of that through Farnell as we can. As we just showed their number of line items, activity, the way they inventory, that's what customers want, and they do it really, really well. This is the life cycle where we're building our investments around, both organically, and we'll continue to complement through strategic, as we like to call them, tuck-in M&A. First thing I wanna say is, we're being very public here. Obviously, you know, with this slide, most of these slides, we didn't create them for today, particularly this one. This is a report card that we put out on our strategies. Each one of these up there, from revenue growth to employee engagement to e-commerce, are just commented on, supply chain services, the KPI with each and every one of these. We review them monthly on our global town halls, quarterly, and with the board. That is right out of the board of directors deck that we went through two weeks ago with the board. These are the priorities as we move forward. It's gotta drive results, but that's kind of the what. How are we gonna do that? Through our people, through the acceleration of the core businesses. You're gonna hear about that today. How do we continue to expand Farnell? That's one of the new ones. We made that a separate pillar. That's so key and critical to this. 25% of our profits and growing. How do we drive the high service? You're gonna hear from Mario and David on our embedded, okay, then our supply chain services. At the foundation is OpEx. We've gotta do this by being more efficient. I talked about digital transformation already. We've gotta drive appropriate returns, return on working capital. How do we continue to drive this? That hits all pillars, okay. We gotta continue to maintain efficiency and productivity. I wanted to share that with all of our shareholders, analysts, the like. This is the ultimate report card, and we measure it every single month, every quarter with the team and with the board. With that, we're gonna give you a bit of a market overview of the market. With that, it's Alex Iuorio, 40-year veteran, who is Senior Vice President of supplier development. Alex, why don't you pop one up? Thank you very much. I'll catch up with you later. Thanks, y'all. I think I'm miked. Well, I have to tell you, I'm a bit exhilarated by the ringing of the bell as well. I feel like we've celebrated, and now we're gonna start the game. Bear with me. Welcome. I wanna add my heartfelt thank you to the attendees along with what Rod and Phil had to say. I'm Alex Iuorio. I've been with the company for 40 years. You know, there comes a point in your career where you don't even wanna say that, right? You say, "I've been with the company for four years," and people go, "Oh, nobody wanted you?" It turns out that 40 years ago, thereabouts when Phil started and I started, we were having a discussion with some of you earlier, you know, what is accomplished today by securing other jobs and building your resume and your competency, we could do internally when we went from essentially a billion-dollar company to the 21.6 you see on a run rate basis. Don't feel bad for me. I've gained a lot of experiences. The company's changed, and we've changed with the market. You know, what I get to present to you today is our view of the marketplace. You know, it's almost obligatory in presentations to say you're excited about it. All right, I'm gonna tell you, I'm excited about it, okay? I'm gonna tell you why. I'm excited about it, we're excited about it, because clearly, you see semiconductors and component electronics in general showing up everywhere, right? It's no longer proliferation. It's no longer increased semiconductor and component content. We're all calling it pervasion. That's really the concept that I'll do my best to deliver to you today. You know, when we think in terms of where we reside, why we're so excited, you know, I think I'd like to present Avnet with these four lenses, if you will. To your left, right, you see the complexion of the business, green box or green slice of the pie, broadline distribution. The black slice, the 8% of our overall revenue, Farnell or high service distribution. I'll say from a vantage point and assessing the marketplace standpoint, we're the only distributor in the world that is able to view the market through those two lenses. When you think in terms of the customer base, and it was mentioned earlier, Farnell, approaching a million customers. You know, a traditional broadline distributor, maybe a tenth of that. But what that allows us to do in today's world is assess the market, address the market, and most importantly, provoke the market so we can continue to position technologies with our suppliers, or excuse me, with our customers via our design chain efforts and our supply chain efforts. You see the next box in from the left, that's our revenue, around the world actually transacted in those regions. You know, it's interesting that 40 years ago, the Americas slice of that pie probably would have been 80%. More than that, it would have been very, very focused on particular segments. You may all remember at the turn of the century, 10BASE-T and the networking explosion. We're positioned this way geographically today. Over 100 acquisitions later, those 10 CEOs, the last three, had the foresight to at least position us where growth was going to occur. You see we've taken advantage of that. From a product standpoint, we are still predominantly a semiconductor distributor, but you can see when we talk about our IP&E, Interconnect Passive Electromechanical products, at approaching $4 billion, you know, arguably, certainly top 1, 2, at worst, 3 in the entire world for those products. Collectively, if you think of the positioning, it really gives us a good view of where the market is migrating. The last pie that you see on your right is revenue today in those segments. You can see industrial is large, consumer is large. But really operating under the heading of pervasiveness, this is happening in every segment. Much so that the idea that the pervasiveness of electronics will create long-term secular growth and having that growth maybe mitigate the cycle. Cycles will likely occur, but the difference today is information flow and the application of semiconductors everywhere may help us there. Our current outlook by verticals, and you'll see this talked about by a variety of the presenters, absolutely transportation is hot. Right. This used to be like the Olympics. Distributors didn't play and designs changed every four years. Today, in our Americas business, there are 300 innovators in that space, you know, dealing well beyond infotainment, right, into harsh environments, into tax blocking, into radio communication. It grows and grows. Industrial, certainly, as you saw, you know, a large piece of our business today, but really more or less a catch-all as to, you know, what's happening with applications. You know, it was called to my attention that we continue to talk about pervasiveness, and then we wonder, what does that mean? Well, certainly industrial applications, factory automation, you can see that. I take it down to, you know, the daily life. The mascara applicator that has an LED, the water bottle that tells you it's time to hydrate, the puck that you drop into your gym bag that uses ultraviolet light to sanitize your clothes, or as simple as robotic delivery, if you've been on any college campus lately. This is big, and this is getting bigger. Semiconductor market dynamics, however, are, let's call them less than stable at this point. Okay. Got lots of investment in leading-edge technologies, and we're not gonna bore you with 7 nanometers and 22 nanometers and 90 nanometers. Look at it this way. You have mature nodes that sit right in the middle, you have trailing edge nodes, and you have high and bleeding edge nodes. Most of the investments that you hear, whether it's TSMC in Arizona, Samsung in Dallas, Intel in the Ohio Valley, these are focusing on the high-end nodes. Not the mature nodes. There is investment there, but it's gonna be a while before we get to stability in those products, and those products can generally be looked at as the products of the industrial base. I would say as the instability continues to occur, that's really where our supply chain capabilities help customers get their products to market, and our design chain capabilities allow customers to take advantage of our expertise and prowess to be able to technically enhance their offerings. Last thing I'll say on the slide here is that customer requirements are absolutely changing. Supply chain is at the forefront. How much so? You may not recall the name, but Lake Superior State University is the organization that banishes words and phrases from the English language on an annual basis. A few years ago, it was paradigm shift. I was very happy that it was extricated. This year, there were eight. The first made me pause. The first was, wait, what? That made me say, "Wait, what?" When you got to number eight, it was staggering. Number eight was supply chain. Now we've come a long way, right? A year ago, two years ago, nobody knew what the supply chain was. I'll tell you today that what Phil said is exactly right. It's not the supply chain, it's the shortages. It's the effect of the supply chain or of the effect of the supply chain that's not working properly. This is the excitement that generates inside as customers take advantage of those services to be able to navigate through a very uncertain world. You know, we talk about COVID, but it really starts with the volcanic cloud, and it moves to tsunami, and it moves to floodplain in Thailand. COVID obviously an accelerant, tariffs an accelerant. Every one of these simply represent a disruption in the supply chain that effective high technology supply chain managers like Avnet have to work programs to mitigate. David Paulson will talk to you about that in great length. I'll finish this slide by saying from a forecast standpoint, overall market 8.3%. That will be the combination of semiconductors at 8.8% and interconnect, passive electromechanical products at 1.7%. I will tell you that that is a bit of a muted growth rate from actuals in 2021, but a solid and robust growth rate by any historical measure in this business. You'll hear a lot from the regional presidents about our tack of the verticals that are producing. Dayna will talk about industrial and automotive as key growth verticals for us, and you can see that in both those cases, they will not only put substantial growth rates on the board over a five-year or three-year period, but also generate substantial associated dollars. We're very excited about this opportunity for us as the market moves forward. I should have brought my water. Excuse me. I'll wrap here by saying that the market will grow substantially for us. You see what the CAGRs represent across the regions. Select component products will continue to be, maybe severely is a bit harsh, but will continue to be significantly constrained, and we think our ability to help customers navigate those uncertainties in the high-tech component market is a real benefit to our value prop. Continued strong demand, but again, sustained inventory availability and mix impacts. This is the instability. This could potentially be trapped inventory or the golden screw, but our scale allows us to deploy programs, work with our overall customer base to the greatest extent possible, solve those problems on a customer by customer basis. Companies continue to invest. You can see the top ones that are listed in bullet two are 70% of that investment, but that's all at leading-edge nodes. The investments at the mature nodes and even bleeding-edge node, or excuse me, trailing-edge nodes are somewhat less, but there are a ton of companies investing in it around the region and around the world. We would expect we'll get to stability soon, but until we do, we'll leverage both our design chain and supply chain capabilities to solve customers' problems. Thank you. With that, I will introduce Dayna Badhorn, colleague for 25 years. Here you are. Thanks so much. Oh, thanks. Thanks. Good morning, everyone. As Alex mentioned, my name is Dayna Badhorn. I am the regional president responsible for Avnet Americas. I'm new to this role. I've been in the role now for five months, but I have been, as you saw on the chart earlier, at Avnet for over 24 years. I'm very familiar with Avnet and our capabilities and our go-to-market strategy. I'll give you a little bit of background about myself. I graduated from the university with my electrical engineering degree, and I got recruited right out of school by a large-scale semiconductor supplier company to do technical sales. I did grow up in the industry, as you've heard some of us mention. Although it sounds sad, it's been an exciting place to be with all the new technologies that's developed over the years, and it's been great working with customers on that technology. From there, I ended up transferring by way of acquisition to Avnet. I came in as a sales manager for Avnet, but being at Avnet for 24 years has afforded me the luxury of being able to try a bunch of different roles. Beyond doing sales, I had the opportunity to start up a technical call center, the first ever in the Americas at its time, and manage the technology specialists. From there, I moved into the global level and I ran global strategy for Avnet for multiple years. I had the opportunity to manage the digital transformation team, where we built out a brand new and designed a brand new website and deployed that globally. Most recently, I've been working when Phil became CEO, I retained strategy again. I added global marketing to my skills, as well as working with both Chris Breslin, who you'll hear later today, and Max Chan on the digital capabilities and what's next for Avnet. Today, I have the opportunity to talk to you about where we're at from an Americas perspective, as well as then discuss where we're going from a strategic perspective for FY 2023. As you can see on the chart, I'm really excited to be back in the Americas again from a global standpoint. We have great momentum here in the Americas, and we're really focused on the fundamentals. Yes, we got a little bit of help from the market, but I will tell you, we have strategically focused on the fundamentals, as you've heard from both Phil and Alex, and those fundamentals being design, taking our suppliers' key technologies and introducing those to our customers, as well as supply. No surprise there. You'll hear it all day long. We are getting more questions about how can we help our customers with supply chain orchestration more than ever before. What's interesting is, typically, in the past, we've started with a customer on the design side, and then we've brought them through to production where we've introduced supply. Now we're seeing the opposite happen. We're seeing new customers come in, asking us to help them orchestrate their supply chain, and then while we're orchestrating their design chain, we'll now be asked to help with design, helping design fill in the gaps for those parts they can't get or working with our customers to bring their products to market faster. So as you can see, the plan is paying off. We've grown our revenue year-over-year by 40%, and the Transportation, Mil-Aero, and Industrial segments that we focus on from a vertical perspective are growing as well. Our design work, we're up 66% in design revenue. Lastly, again, IP&E. Why do we talk about interconnect and passive and electromechanical so much beyond just semiconductors? Every single board that we design has one of those technologies every single time, and 80%-85% of the components that typically go on an average board are in those three technologies. The nice part about those technologies, they tend to garner a higher GP for us. It is a really nice place to focus and a technology that we want to continue to drive with our customers. What's next for Avnet Americas? As I met with the team five months ago, we talked about what are those strategies that are gonna continue now that we have the fundamentals in place to drive growth for the Americas moving forward. Today, I'm gonna talk briefly about the vertical focus, the fundamentals or our growth initiatives, operations, and the most important pillar, our people. From a vertical focus, you saw Alex talk about the company as a whole and where we're driving in the verticals. Military aerospace tends to be a larger vertical in the Americas region, and we're gonna stay focused on that military aerospace vertical because it does require large scale capabilities and knowledge and specialization, and we've worked many years in that space building those skill sets. When you have a contract with the military customer base, it tends to be a longer contract period too. We keep that business for a longer period of time. The industry experts say that the military aerospace for the Americas are gonna grow approximately 3% with a three-year CAGR. It is a place to stay focused on, and we're seeing a lot of growth now in the space level side of the business. A lot of startups in the aerospace side. You know, you have exciting launches going off, I feel like, every day. When you get online, you see another launch going in. There's a lot of opportunity still in space, and that'll allow us to continue to grow out our customer segment, as well as work with our supplier partners on introducing their new technologies into that space. Transportation is a vertical that we really got focused on from fulfillment to design approximately five years ago. When I talk about focus, we've brought in technology specialists that drive certain technologies in those applications like sensors. We continue to add to those capabilities. We've built out block diagrams. We've created a global playbook because this is one particular vertical that hits all three of our regions, and it's nice that we can share best practices across those regions. With the focus over the last five years, we've grown the transportation vertical from FY 2017 to fiscal 2022 by a 170% increase in revenue. Again, the focus on this particular space is important. We started in the electric vehicle side, and now we're gonna take what we learned by building out those blocks and applications and move it into the rest of the e-mobility and continue to expand our customer base this year. That particular vertical, a three-year CAGR, is expected to run about 6%. There's really nice growth for transportation here in the Americas. The last piece that you see Alex talk about is industrial. The industrial segment is typically our key segment for distribution. The question I ask is what about industrial this year is gonna grow faster than the rest of the market? We saw that energy management, and when I talk about energy management, it's particularly around EV charging and solar panel and solar storage technology, and the EV charging is a nice synergy with what we're doing with the electric vehicles, and that had a 5% growth rate. We're going to build out a team similar to what we did with transportation. We're gonna add technology specialists in those areas that are key to those applications to win, such as silicon carbide, which is a hot new technology that you probably hear from a lot of our supplier partners, and we'll continue to build out the blocks that help drive those applications. The second deep dive that we're going to do in industrial this year is around the automation space. By automation, we're going to look into factory automation, building automation, robotics, the little robotics that we see. As Alex said, my daughter's in college now, and they deliver her coffee to her, so she doesn't have to leave her dorm room. There's a lot being done in robotics today. Ooh, I'm echoing. We see a lot around motion control. Now we'll get to the fundamentals, growth initiatives, demand creation. All right, he's telling me to get over here so I don't echo. Sorry. Demand creation or design, again, a critical component to what we do for our suppliers. You saw Phil mention that big curve, and we didn't spend a ton of time on it, but our customers come to us at various points. There's very few times that a customer comes at the very beginning and hits us for every single thing in the cycle. We've built out that cycle to engage with them anywhere they wanna come in. Whether that's at the very beginning, where they're doing their design and they just wanna research what's new, we have two great communities. You'll hear Chris talk about the Element14 community, and we have the Hackster.io community, with over 2 million engineers that go on those daily and research that the next great technology. They are available to answer questions to different engineers in the space, so it's a good place and a starting ground. We also have engineers developing reference platforms, design application, block diagrams. We can work with you at the beginning stages all the way through. We tie in the Americas with Chris's Farnell brand to be able to enable our customers to get prototype quantities. Then lastly, from a production standpoint, we have capabilities and supply chain. From a supply chain perspective, no surprise, we're gonna continue to invest in our supply chain architects this year. We get asked further for more and more capabilities. Traditional capabilities for us in the Americas is doing an in-plant store where we have products on-site at our customer. We do forecast management, where we take feeds from our customer and help manage and iron out the bumps in the cycle for the supply chain. We can do vendor-managed inventory. What's been great is these large-scale tier one companies are now coming to Avnet, and you'll hear Dave talk about that later today. They're asking for what's next in supply chain. Dave's gonna talk to you today about the digital capabilities, the control towers that he's building out, the digital portals where our customers get that, those key things, reliability, visibility, all those things. Then what's nice about what Dave's working on is then we can take the common themes across those large-scale tier one supply chain customers and then build and commoditize out feature sets that we can now offer to our customers that might have been just doing a supply chain in-plant store. Now I can go in using Dave's technology that he's building out and say, "Do you wanna see visibility? Do you wanna know exactly where your parts are in the world? We can show you that now 'cause we have this digital portal that gives you those capabilities." Supply chain will stay important. Interconnect, passive, and electromechanical, I touched on prior, and I'm going to let Puli talk more about that in a moment, but it's a critical piece to our technology success. Lastly, customer growth. I wouldn't be a distributor and doing my job if I wasn't continually looking for new customers and ways to grow and expand out through the tier 3, tier 4. We will continue to invest in account managers, field applications engineers, and inside salespeople that need the support of those customer base. Operations, to me, is all about driving efficiencies and ease of doing business. We need to continually evaluate how we engage with our customers as well as our suppliers and be easy to do business with, how they wanna do business with us. That can be having them go into the digital portal and build that out. It could be working with our sales teams, or it could be seamlessly connecting to them through an API, so they work in the ERP that they work in every day, and they don't have to go off and do other things. We'll continue to work on our efficiencies, our process optimization, and the ultimate goal is to be efficient and drive more profitability that way. The last piece I'm gonna talk about is our people. No surprise, employee retention is key in the top of our list. We wanna keep our people engaged. We do employee-based surveys, so we can understand what's on their mind and address those through employee engagement scores. Talent development, we're gonna continue to do training for our teams. Whether it's a technology training or a management skill level training, it's critical that we keep developing our employees and bring them along on the journey and enhance their skill sets. Lastly, acquisition, where we find skill sets that we need in these new areas as we expand, supply chain being a great example. We'll continue to invest and look for new talent in a variety of applications. As Phil mentioned, nothing gets done, and we can't be held accountable if we don't have the KPIs at the bottom. We do have a very robust list of KPIs that we measure ourselves on to ensure that we're making progress on these. With that, I just want to say thank you for your time today, and I appreciate you taking the time to come listen to our story. With that, I'm gonna bring up my colleague, Puli, to talk about interconnect passive and electromechanical. Thanks. Hello, everybody. First I would like to introduce myself. As Joe said, my name is not an easiest one. This is the reason why we have decided to call me Puli. By the way, Joe, you pronounce it perfectly. Yeah. It doesn't happen so often. I am now 35 years with the company, coming to Avnet through the Abacus acquisition in Europe almost 22 years ago. Education electronic engineer. We love our industry. We still believe the industry has a great perspective, great future. Nothing as we can see today is working without the semiconductors. Everybody's speaking today about these famous chips. A few years ago, speaking to our friends and so on, nobody had a clue what semiconductors are today. Everybody knows how important the entire industry is. I'm not going to speak about semiconductors today. I'm coming from this world and I'm learning very, very fast. The IP&E world, most of the people believe it's much easier, but it is not for several reasons. Just this IP&E, where it comes from, interconnect means everything what you have to connect together, PCB boards in several in all equipments, or the one equipment to the other one. Passives are resistors, capacitors, coils, and so on to populate the entire board. The electromechanical are relays, switches, ventilators, and everything else. How Avnet sells IP&E products. First, we have these two ways of selling our core business to our big customers and on the other hand, small. As a high service company, servicing thousands of smaller customers. Demand creation. Most of the people believe we do not need field application engineers like at the semiconductors for this passive easy-to-do stuff, but this is really not the case. We need people who are specialized on IP&E, and we have them. We are collaborating heavily with our semiconductors colleagues. As soon as they have an opportunity, we talk to each other and try to populate the entire board. What's very important for the distributor is the inventory. We are carrying everywhere, wherever we have our warehouse, our IP&E stuff around the globe, and are able to fulfill the demand from all our customers. Global business support, we offer to all our global customers the same prices, the same service in China, in Europe, in the Americas, and so on. Large supply chain programs, Dana mentioned it, and Dave will speak later on more about this. Growth drivers. No, I'm on the wrong one. Value and... Oh, which one do I have here now? Yeah. We are adding value for IP&E products as well. Oh, yeah. Doesn't work? Yeah. We are adding value to for our also for our IP&E products. Broadline is our core business and high service models. As I have mentioned before, we are offering to our customer demand creation also for connectors and all the stuff mentioned before. We are attaching our passive stuff to our semi products to help customers to populate the entire board. As I mentioned before, we have the inventory to deliver to our customers off the shelf. We have a global business support and as I mentioned, a large supply partnering. Growth drivers, as Dayna has mentioned before, we are focused on or our bread and butter is industrial, but on top of this, transportation and automotive and Mil-Aero. Biggest Mil-Aero business we have here in the U.S. In Europe, we do not have so much and in APAC, not as well. What's next in IP&E? Growth. How are we going to grow? We are going to make organic investments. This means we are investing in people and inventory. In the distribution world, you need people and you'll need inventory. We are looking at this highly fragmented market for opportunities to make some positions. Inventory, again, at Farnell, we call it NPI, New Product Introduction. Smaller quantities, parts offering to our customers samples and pre-production quantities, and then later on from our core business, thousands of part numbers, having them on our shelves. People, we have learned in Europe to have dedicated people for this kind of business. We have companies called Avnet in Europe. They are only selling IP&E. This works quite well, and we are going to do similar investments here in the U.S. as well. Dana is employing people who will be really dedicated to IP&E and not mixing up semiconductors in this. IP&E-focused engineers, as I mentioned before, we have to be specialized on IP&E for our field application engineers, like we have specialized engineers for the semiconductors. Then dedicated field sales people, because it's really not easy to sell resistors, capacitors and so on. We have really to divide the markets and to be specialized on this one. Our purchasing staff to purchase resistors or semiconductors or connectors, these are completely different worlds, so we have to have these dedicated people as well. With this, Alex, I would like to transfer again to you. Okay. Thank you very much. We're going to invite our customer and supplier panelists to the stage, but I think we're going to get some stools brought up here for you to sit down. Just waiting for the stools. No. Gentlemen, thank you so much. Okay. Well, we have screens on the side. We have three distinguished panelists here this morning, and I'd like to thank you for participating. We did a lot of pre-work kind of talking about value proposition and how it applies to the two supplier companies as well as to the customer company. What we'd like to do is just have a discussion about those issues that are driving our market today. Before I start, I would like to introduce the three panelists. We'll start with Heath Neuhauser, who is the Vice President of Global Electronic Sourcing at TTI, parent of brands Ryobi, Milwaukee Tool, but in the power tool business. Well, actually, all three of our panelists are 20-year veterans, all three of our panelists have lived in multiple regions of the world, and all three of our panelists are extremely opinionated, so I have a very difficult job here. That's Heath. If we move on to Chris, you know, also a 20-year veteran. Today, the Vice President of Worldwide Sales and Marketing for Renesas. He has lived in EMEA, Asia Pacific, and the Americas, and I think that pretty much covers it from a market standpoint. Another double E here. Chris, thank you very much. Certainly last but not least, our panelist in the middle is Paul Saik. Paul is the Executive Vice President of Sales and Marketing for the Americas with ST. Paul started his career with Hewlett-Packard when I was already 20 years in the saddle. Okay, from there, after 5 years with HP, moved to ST in 1999, and has had a successive run of promotions, running Asia, Europe, and now the Americas for ST. Paul, welcome. Yeah. Haven't been in Asia. You haven't been in Asia. EMEA and Americas. It looks like I mixed up the notes, Paul. Okay. I'd like to get right into the questions if I may, and I'm gonna start with Chris. I'm going to start with our highest level question. Chris, what are the advantages of using distribution for design chain services? For example, demand creation, opportunity identification, post-sale support, the entire gamut. Chris? I think I'll start with the value that the distributors and Avnet in particular are bringing to the suppliers, right? We talked about IP&E. We talked about feet on the ground. I think Dayna covered that. We talked about Farnell. In my opinion, with that, they have the highest touchpoints to every customer design, and they provide us visibility and identification and demand creation to make sure that we can touch more customers. But the best value they bring, in my opinion, is to the customers, because they bring more value to the customers, they bring more value to us as a supplier. The customers need help. They need help on the technology side. They don't have enough expertise to know how to design the system the most efficient way. They don't have the best expertise to know how to optimize their design from a supply chain standpoint. Avnet got that right, and the distributors got that right. You might have heard a few years ago, some suppliers thinking, you know, the distribution model is obsolete. I think one thing that we've seen over the last few years, it's actually going the opposite direction. Mm-hmm. The customers need more and more the help of those aggregators that basically touch every technology from capacitors, to connectors, to semiconductor. No supplier today has enough to cover the board. As such, it's actually going to the reinforcement of the distribution and the global distribution in particular. Great, great answer. If you can't provide solutions, then you're providing something less. Paul, anything that you'd like to add to that from Avnet, a design chain? Yeah. I think, you know, we have over 200,000 customers, and we would like that to continue to grow. Obviously, as an organization to cover that many customers is a big challenge, and you need partners and distributors that can contribute to developing those customers, servicing those customers. We probably would only, you know, have a direct relationship with a very small percentage of those companies. Having partnerships with companies like Avnet enable us to cover those 200,000 plus customers and build upon that. I really appreciate that. Heath, I don't wanna leave you out. Even though we have the questions separated by supplier and customer, I'm gonna jump you right into the supplier stuff. Obviously, we've had protracted supply and demand imbalances. Relatively new customer at scale for us. Can you give us some commentary as to what the decision process was for selection and what problems we're solving for you in today's imbalanced world? Yeah, absolutely. First of all, just thanks to the Avnet team for the opportunity to be here, very very privileged. I will admit, I don't quite yet have 20 years of experience in the industry. That would be artificially inflating my age quite a bit. Thanks. Thanks for that. To answer your question here, just a little bit of context about TTI. We are over $13 billion global company, as was mentioned, operating in the power tool, hand tool, accessories, outdoor power equipment, and floor care spaces. When I walked into this role in November, December of 2020, the looming semiconductor shortage crisis was just on the horizon. We were maybe managing half a dozen, a dozen discrete shortage issues. What was really immediately apparent was the complete lack of transparency in our supply chain at that time. We utilized maybe 15- 20 different what we would call contract manufacturing or EMS partners around the world, and each of those individual businesses were, at the time, free to select their upstream distribution partners. It became pretty apparent that to manage through this increasing complexity with semiconductor shortages, we were going to need consolidation and transparency. We initiated, at that time, a request for proposals to a number of businesses around the world and ultimately selected Avnet to really collapse and consolidate that supply chain to, as mentioned, really drive transparency. We'll talk about it a little bit here, particularly around the digital tools and the systems that allow us to make real-time accurate decisions. Really enjoyed the answer. David will do a supply chain section later, and he'll always talk in terms of visibility and resilience, meaning if you don't have the visibility, right, how could you possibly architect the resilience. Correct. of the supply chain? Yep. Good answer. As long as you brought up the digital piece, you know, how important is it to you and to your company that distributors are capable within the digital space for all the optimization and that it can create? Yeah. Again, for some context, TTI buys between $400 million-$500 million annually of critical electronics, semiconductors, sensors and so forth. Again, having something north of 20 different EMS partners around the world, what the digital systems integration allows us to do is to take what was previously a manual, error-prone, time-consuming process, so literally a team of maybe 15-20 analysts that were literally within PRC, Southeast Asia, making calls, trying to understand where inventory placement was, supply, demand fluctuations, throw all of that out the window. What Avnet allows us to do is have a control tower, we'll call it, or a digital portal, whereby we can see in real time inventory around the world. We can make decisions based on that information. If we need to reposition inventory, let's say, from Avnet's Hong Kong hub into maybe Mexico to support one of my EMS or CM partners there. It really can't be understated how critical the digital piece is to us. It allows real-time accurate information and therefore, obviously, significantly better decision-making. Thanks very much. Chris, anything you would add on the digital piece? Yeah. I think one, what Heath's saying is critical. We have never seen so many global customers coming to us and asking us to work with one single distributor. I think Paul will talk about it, right? I won't drop names, but there are very large customers today that don't even know the backlogs they have in place through their multiple EMS, their multiple sites around the world. I think what partners like Avnet provide is this transparency and aggregation, okay, and capacity to manage the supply chain. When you think about the crisis that we are going through and have gone through for the last two years, that's become very critical. On the flip side, the small customers as well don't have the expertise. They don't know besides the lead time that we provide. They don't know how to optimize their design from a supply chain standpoint. This is where distributors and the digital presence and the digital tools that you have is also helping customers. I think also you hit it on the head. You know, most of our customers have a very fragmented supply chain. When you have a very fragmented supply chain, you have inventory that builds up throughout the whole value chain. We have a lot of customers coming to us saying, "Look, we have, you know, 20 EMSs, 15 different distributors. We're very exposed to China. We need to find a way to maybe balance and reduce and simplify to try to get that line of sight of the true demand that's needed in the industry." Who better to bring that expertise and to teach our customers supply chain, but you know, companies like Avnet. I really appreciate that. If I can add. Please. You know, of course, nobody was immune to the supply challenges that we've seen over the last 2.5 years starting in semiconductor. I would say the ones that had before this globalized supply chain, in my opinion, were the ones that resisted the most to a crisis. Mm-hmm. Because we've seen many customers coming and being left behind somewhere in the world without even knowing it, okay? Because they didn't have the right inventory, they didn't have the right orders. This crisis will reinforce what I think Paul and the team are doing, and every customer is realizing the importance of supply chain. As you said, we take for granted. It's actually not granted, okay? I think this will reinforce the distribution model moving forward. Well, this whole idea of the fragmented supply chain really hasn't come to the forefront because material has been readily available. David and I have had situations where customers come in on an emergency basis in that tier you're talking about, right? The top 100, the brand names. We actually had a meeting start with, "Hey, I know you guys can help, but I don't know what I buy, who I buy it from, or where." Our response in situations like that has to be, "Well, we're gonna need to tighten that up just a little bit, and then we can help." That's the phenomenon that we're in. The fragment, it wasn't like we weren't thinking about it. There was no need to think about it. That's why supply chain has come to the forefront. I really appreciate that. You know, we talk about the supply and demand imbalance. You know, we think about the specific programs we have between all three companies. I'll go to you, Paul. Can you cite a specific example, you know, where Avnet's extensive and unique capabilities were able to solve a business problem? Yeah. Well, I'll mention it in kind of a broader context because, you know, earlier when you were talking about the markets, you know, the potential and opportunity the market is providing today, we hit the global semiconductor market in 2020 hit about $500 billion. It took. You have to go back to 1959, 1960, when mainframe computing started and the semiconductor market was really born. It took us 60 years to get to $500 billion. 60 years. If you look back in the history, there's usually just one application driving semiconductors forward. There was mainframe computing, there was office computing, gaming, personal computing, smartphone. There was one application that was driving the investments forward. Now fast-forward to today and looking at the future, you have electric vehicles, you have autonomous drive, you have 5G infrastructure, 5G handsets, you have low earth orbit satellites. You have, you know, companies moving from mechanical to digital to electrification everywhere. Everything is connected. You have 10, 12 applications driving, I think you said, pervasion of semiconductor forward. We need, you know, partners to try to help manage that demand, and it will take just 12-15 years to get to the next $500 billion. If it's $60 billion now, it'll take 12. Talk about pervasion. I mean, you look at a car today, $300 semiconductor content in a combustion engine car today. A level three autonomous electric vehicle has between $1,200 and $1,500. A home today, $300 semiconductor content in your home. A connected home of tomorrow, $1,500. You know, forget what the market's doing. What about the content and the pervasion of the silicon content in every application? It's becoming even more part of what's defining the application, what's defining the project is the semiconductor. You have now, you know, this great market opportunity and potential, and how do we serve it? I mean, we can't serve it by ourselves. There's so many examples, to answer your question, Alex, of partnerships where the market is moving in different directions, and those distributors and value-added services providers that are able to enable and adapt to the new models and having, you know, car makers and people come and ask for, you know, strategic supply chain help. This is really. We have many examples of that together. This is the future. I appreciate that. That statistic that it took us 60 years to get to $500 million, and will only take us 14 to get to $1 billion, you know, I guess really does support the view that, you know, secular usage could help us over time to mitigate cycles just because it's so, I hate to use the word, but pervasive. In all that, you never mentioned the LED mascara applicator. So that's plus. We have a customer that has tools that you don't need a cord anymore. You can have a jackhammer that's running off a battery, providing the power and the torque. It really is amazing. Heath, I'll move to you for a second. You know, you think about where we are today, where we're going, and in the case of the relationship between the two companies, really at pace, right? I hate to use the tagline, but what's next? Where do you see it going from here? Well, TTI, we're gonna continue dominating our industries. In those respective industries we play in, whether that's power tools or floor care, we are by far and away the fastest growing company. We've had 13 years of a 13% compound annual growth rate. To kind of tie this into what Paul said, the majority of that growth rate has been driven by this transition into cordless lithium brushless technology, the pervasiveness aspect again. We're gonna continue to really focus our teams on driving not just corded to cordless transitions, but as was mentioned, taking gas conversions, pneumatic conversions, hydraulic conversions. Tools that previously a jackhammer had to be pneumatic with a pneumatic hose tube, another generator running, all of that goes away. Framing nailers, same thing, where you used to have a compressor, 20, 30 ft of hose, all of that goes away, and the tools transition into cordless, which takes, again, massive penetration in critical electronics. MCUs, MOSFETs, Hall sensors, gate drivers, all of these component counts are gonna continue to go up. As we have this increasing complexity and added to the underlying growth of the business, the types of partnerships and programs we've put in place here with Avnet are gonna be absolutely critically strategic for us. You get into the sustainability aspect of that. If you digitalize and electrify all these products, you're now coming into the sustainability world that, you know, everybody's very, very much interested in. Chris, I know you've got input here. Yeah. I want to talk about what I mentioned earlier, which is this design consultancy, right? Okay. As Paul said, in the old days, we could master on our own the main application, okay? We had FAE teams in our suppliers, and we could manage most of it. The applications are so broad now. Semiconductors, as you mentioned, prevalence goes to any application. In IoT, bunch of guys somewhere are designing stuff. There's no way we could have enough expertise to offer them the full solution that they're looking for. As much as we invest in those full solutions, I'm spending a lot of money on building our capability in full solutions. I think one thing we should mention, I believe you guys will talk about it, is the mindset of Avnet, which is around AVAIL, which is kind of going to the customer and say, "I'm not gonna try to tell you what to design as a product, but how you serve your needs as a solution." There is no distributor I know of today that does that. Okay. So kudos to Phil and the team to have viewed that early on, including the acquisition of Farnell, which gives you a touch point that nobody else has. There's no customer today as big as they are, as small as they are, that are interested in suppliers coming with one product. They want full solutions. They want design services. They want design consultancy. I think this is where it's going. Paul is investing, I'm investing. All semiconductor suppliers today are talking about solutions. What they don't talk about is the fact that they never have enough products to serve the board. Mm-hmm. As such, okay, I think Avnet brings the gap to the customers, okay? I think this AVAIL investment that you're making, the partnership you're having with us, will get to the next level, in terms of system selling. I'd like to add on to that. Of the dollars that TTI buys, a not insignificant portion flows to these two gentlemen's teams. That's a coincidence. It's just a coincidence, right? You know, despite maybe the coffee and donuts budgets, a great point that was made there is really the agnostic technology viewpoint that Avnet brings. While both of these gentlemen and their companies absolutely unquestionably are leaders in their respective fields of certain product technologies, what Avnet can do for us is come in and meet with my engineers at point of decision-making and bring an agnostic viewpoint. They're going to help guide a component selection that is the best, most optimal component for that particular application rather than being necessarily tied, obviously, to maybe trying to drive a sales number. That's an enormous advantage for us. Can I add one point on this? Of course you can, Chris. As you said, we have a strong opinion. The last few years, customers have realized that we compete, okay? When I go to customer, I say my products are the best, and he says his products are the best. That's what we all do, right? Customers have realized that to be resilient, both from a design standpoint, from a supply chain, they need that neutrality. Mm-hmm. Switzerland, the Switzerland of semiconductors, okay? I think this has more value today than ever before. Because at the end of the day, customers need to get their designs done and get the supply. They've realized that one screw missing, the board doesn't get produced, right? Having one aggregator holds the accountability and the heart to one player instead of multiple players. I think we'll see that even more importantly going forward. We still have the best product, by the way. Yeah. Did you wanna add something there? You know. What's that? Did you wanna add something? No. No, I think it was very well said. Yeah. Chris. You know, it's interesting, we focus quite a bit here on questions associated with the supply chain. I think it's very, very important, right? Because the supply chain today is broken. You know, supply and demand are out of balance, and I think we're working very, very hard. That's the supply chain side. On the design chain side, I find this, you know, the three very interesting here as well. I hope I don't go too far when I say Heath's company is working on compound semiconductor designs and specifically wide bandgap. In their case, silicon carbide. These are one of the materials that are going to allow us to sustain Moore's Law as we go forward, right? You've all heard that Moore's Law is starting to slow down, but it's starting to slow down because silicon is the base material. As we expand into other compounds, we can do even greater things with semiconductor technology and keep such companies at the forefront of that. Of course, Paul is a gigantic provider. Mm-hmm. Chris provides alternative products. With that as a backdrop and thinking about distribution's play, the agnostic play, the support of demand creation and innovative technology, tell me about utilizing distributors in that regard. Yeah, it's a follow-on to what was mentioned previously. TTI likely isn't going to invest full development teams to have full expertise in a particular technology. We'd like to do that, but obviously everyone has, you know, certain SG&A budgets and constraints. Instead, we can rely on Avnet to come to us and, you know, sort of deliver what is a state of the industry or state of the technology overview. Wide bandgap is a great example. It's simplistically stated in our applications, whether they be power tools or floor care. We'll get longer runtime, we get overall better efficiency, but what we might not yet understand is where is the inflection point at which it makes sense to start the design-in of that type of technology. It's from both a pricing constraint aspect right now and frankly, a capacity and supply constraint. As Avnet has considerably more touch points with not just a Renesas or not just an ST, but the dozens and dozens of other device manufacturers and technology companies working in that space, they bring us a much more comprehensive set of opinions, we'll say, and feedback so that we can start to drive the right, again, component selection decisions that make sense for our business at that point in time. Very good. Paul, could you expand for me on the utilization of distribution in a demand creation standpoint? Yeah. For us, I mean, the two big value propositions is customer expansion. We can't be everywhere at the same time, so having partners that help find the next, you know, the next big customer and having, you know, the ear to the ground and finding those new customers is fundamental, but demand creation is the other. I mean, demand creation at existing customers, we want more BOMs share. It's again, being able to come in and create the demand, not having, you know, STMicroelectronics driving the design win, but, you know, trusting our partnership with distributors and value adds like Avnet to go in there and actually do the design work. To have the FAE master the bill of materials, to do the block diagramming. These types of things are fundamental and to master the application. We can't do it. We would like to, but the physics don't allow for it. It's a scale and reach game. Really. We need good partners that understand our technology, understand our strategy, and put boots in the field that do the actual demand creation. Fantastic. Chris, can you give me a Renesas perspective? Yeah. Just to piggyback on what Paul said, if you look at our top 50 customers, a good portion of them were not even existing 15, 20 years ago, right? And actually some of them were designed in the first time by a distributor, okay? This is important not only to broaden the customer base, which is good for revenue generation, margin expansion, but to find the next big ones. But the one thing I would add is this concept of simplifying the technology. If you look at a couple of years ago, question we were getting as suppliers is, "Hey, technology becomes so complex. How can a distributor be competent enough to support the customers? Are you not guys supposed to send your own engineers to go there?" It was true. Now what's happening is, because customers are going to solutions, we are actually removing the complexity of the technology. We just released with Avnet, that's a very specific example. We just released with Avnet a system solution with one of our most complex MPU. This is things like a few guys in our company can design on. Mm-hmm. We're working with Avnet. We've removed all the complexity away for the customers and made it much more simple. This way, you can actually broaden, okay, the division of technology. I think this is what has changed from five-10 years ago. This will continue. As he said, nobody wants to spend more R&D to do things that others can do, okay? I think this is where this user experience, easiness of use of technology will help the better use of distributors move. In the embedded system works you guys are doing that maybe Mario will talk about later, you know, the artificial intelligence and the software. Mm-hmm. On top of the hardware, you know, being able to specialize and customize for a customer a solution, you know, they're gonna need to get that from somebody who can provide it. One thing that I think, you know, Phil mentioned this morning, I don't think there's any distributors that has both the e-commerce as well as the mainstream distributors. What we see is a lot of new customers are coming through this side. Mm-hmm. I think, you know, as Renesas, we've made the decision to concentrate more and more on Avnet. We've made the decision to reduce our distribution network. We believe, you know, fewer strong relationships are better than many small relationships. One of the criteria was just the commitment to demand creation, which is obvious. This Farnell acquisition for me means a lot because it means that they're gonna have the highest number of touchpoints for the future that will make a huge difference. That really makes a lot of sense. You know, later in the program, you'll hear from my colleague, Peggy Carrieres, about our demand creation and the science that we apply to it. You know, Paul, you made a very interesting comment, relative to, you know, the physics that you just can't get there, right? Therefore, the debate about is it demand creation, is it demand identification, whatever it might be, you know, really should go away in favor of exposure and reach. Now, I'll pause there and tell you that I'll put our engineers up against anybody in the world. But on a very specific basis beyond that, identifying and getting out to the customers to position your technology to drive pervasion. I really appreciate those comments. Okay. Is there anything else on your mind that you'd like to share with the listening audience? I think one thing that Gina said, in the old days, find the customer, identify the opportunity, get the design, go to production. Over the last few years, especially the last two, what we've seen is the starting point is anywhere. Mm. If I look at some of our biggest new MCU customers over the last few years are coming through distribution, through customers not getting always the part they need and wanting to diversify. Engineers tend to copy. If they've used the partner for a long time, they tend to use as long as the partner is good, right? This has kind of changed the game. Mm-hmm. In my opinion, for both Paul, ourselves, and many other suppliers, this has changed the game because it kind of remixed a bit, the touch points. I think, you know, we enter into customer engagement through multiple aspects of the design, which is a complete different way to operate than it was five years ago. I think this is critical. That's why for me, this concept of distribution is kind of the old model is actually a very short-sighted view, okay? I think the future will show that customers will, including big ones like TTI, want to have more support from people that are aggregating the whole supply and design expertise. The last three years have fundamentally changed at least the semiconductor market. I think those who are able to adapt to the new models, I know, David, you know this as part of your organization, but the new models of customer engagement and bringing services that are different than it was in the past, this is the future. We have to be adaptive to this pervasion that we're talking about and the great opportunity in terms of demand that's, you know, everyone's investing in. Being able to adapt to what the customer needs, being the experts in how to optimize their supply chains, this can provide tremendous value. In some respects, the design game itself changes, right? Mm-hmm. We tend to, maybe me more so than you guys, tend to think of the historical chip down, build a solution around it. You know, Mario Orlandi will talk to you this afternoon about Avnet Embedded. Avnet Embedded really addresses that, buy versus make. The implication there is make is you take the chip down, you populate the board, all those great products, we do that all day, every day. However, right, higher levels of integration of products are now taking more customers, particularly startups, into the board as a starting point as opposed to the chip. We have solutions to be able to, you know, optimize that market dynamic as well. I really appreciate everybody jumping in. Heath, you're the customer, you always get the last word. Thanks for that. Yeah, I think to just add a little bit more, not only is Avnet bringing the technology expertise that we talked about, but at the point of decision-making, we are getting so much more intelligence around the supply chain friendliness of a particular component selection. Because no longer is it just what is necessarily the best chip or component for an application, but can I get that chip when I need it? TTI, we launch in excess of about 500 new products per year. These are, again, largely cordless. And in some of those cases, we launch them on timelines that might be as short as six months. Concept to on your shelf at your Walmart or Home Depot in six months. How do you do that when lead time is 45, 50, 52 weeks right now? Partnerships with Avnet allow us to again make good technology-based decisions, but supply chain friendliness-based decisions as well. Keep in mind, I have responsibility for the suppliers, and when you said you were getting a lot of intelligence from Avnet, they had some very strange looks on their faces. I want them to know that that comes from David Paulson's supply chain. Okay. Anything, Paul, that you'd like to close with? Thank you. It was a great panel discussion. Appreciate it, Phil. It was a great event this morning, bringing it in, so thank you. Likewise. Chris? Of course, I'd extend my thanks as well to the Avnet team and Phil in particular to be here. I think it goes back to what you said this morning, right? We feel as a partner. Today we are here as suppliers, but mostly as a partner, okay? I think the old model of the supplier, the distributor, and the customer is kind of changed, okay, with Avnet in particular, where we work together. Challenging each other. Okay. Whether for the good and the bad, but I think it's a good testimony of your triangle with the suppliers and the customers being both pillars on top of your employees. That speaks to culture and vision. Yeah. most importantly, leadership. With that, I'll thank all three of you. Thank you. It's really exciting, and we're finishing up a little early. What we'll do is we're just setting up for our grab-and-go lunch. We're going to stick to our schedule, and we'll be back here at 1:05 Eastern Time for those listening in online, and we will take it from there to go through what's next in the afternoon segment. Thank you. We're all going to get started in just one minute. Welcome back to Avnet Investor Day 2022. I think we had a great morning, and I hope you're all as excited as I am after this morning's events. With that, before I call up Ken Jacobson and David Paulson to talk about supply chain opportunities, please take a few minutes to watch this two-minute video. Let's start at the beginning. For Avnet, it all began in New York City back in 1921 on Radio Row, where Charles Avnet sold, you guessed it, radio components, which quickly evolved to connectors to integrated circuits to circuit boards. Our components were in everything from color TVs to commercial aircraft. As Avnet grew and grew, its components and instruments went from the depths of the oceans all the way to the moon and beyond. Avnet has always worked on the cutting edge of technology, and that continues today. A lot of people think we're just about shipping and logistics, and for over a century, we've more than mastered those capabilities. We're proud to say we're next-level distribution experts. We also tackle complicated design and supply chain challenges while supporting all your online needs with Farnell. Still, we do so much more. Here's a list. These aren't shallow capabilities. It's more like, yeah, that crazy depth. We have whole divisions, offices, and teams that make this happen. There's one. It's not just what we do, it's how we do it. Just ask John. Actually, don't. He's busy. We could ask this team, but they're untangling a supply chain. Here's Troy and Jesse. They've been at Avnet for a few years and have seen a thing or two. What makes Avnet so special? Well, we take on all our clients' challenges, and we put them on our shoulders. We kind of become an extension of their team. You could say that. Great. At Avnet, we work to deliver a true partnership. It's not just a range of services and deep expertise, it's enhancing your team with ours. You can get from point A to point B faster, easier, and more efficiently. You've got exciting new projects that will surely come with some big challenges and bigger questions. At Avnet, we love that. That's what Avnet is about, delivering for you, so you can deliver what's next for all of us. With that, David Paulson and Ken Jacobson on what's next in supply chain opportunities. All right. Thanks, Joe, and thanks everybody for attending today. I couldn't be more excited to talk about our supply chain opportunities. First I just wanna take a minute and introduce myself. I'm David Paulson. You may have heard my name a couple times this morning. I'm not really sure. Seemed like there was a couple hot topics talked about. I've been at Avnet 28 years, and in my career, I've done several different jobs, but it's really broken into three kind of major categories. The first part of my career was exclusively customer-facing, spending time with the customer, understanding their needs, both from a design perspective as well as the supply chain. I had the opportunity to take a job within the corporation working for Alex Iuorio in the supplier organization. I did that for another eight years, focusing exclusively on the needs and wants of our suppliers and bringing that to our team, ultimately bringing those needs to our customer base. After that, I did make a jump from the supplier side into 10 years in our global supply chain innovation team, which is really the team I'll talk a little bit about today, that's out doing these interesting and unique programs that you heard a lot about this morning. In the last couple of years, I've taken all three of those kind of disciplines within Avnet and run a team of global customer-facing individuals. We have a global strategic account team that calls on the largest customers in the world, and then they are backed up by our global supply chain innovation team, which then ultimately builds customized supply chain, personalized supply chain, tailored supply chain models on behalf of our suppliers and customers. That's what I'm doing today. Just a couple of quick things from this morning. I'm not really sure, you know, there was a lot of discussion about supply chain, but I wanna just call one thing out that I'm pretty sure Heath called Alex old. Did anybody else catch that? Oh, was it the other way around? It felt like maybe you called him out, Heath. All kidding aside, you know, the outpouring of this morning's discussion in regards to the importance of supply chain, I changed my script. It is truly an ecosystem play. The excitement you heard many times, excitement, challenge, opportunity. You heard it from our ecosystem directly today. I did tweak my script a little bit 'cause I was gonna describe it to you, but really you've heard it, right? There is a tremendous opportunity before us as Avnet to harness our capabilities to really evolve and change where the market is going. I'm gonna walk you through a little bit of that today. One quick housekeeping note. Ken Jacobson is gonna come up in the middle of the presentation, and I'll have him speak to a couple of elements within the supply chain, model. When we look at our customer stratification from a supply chain lens, right? Just the supply chain portion of it. You know, we have a continuum that is unique and special to the industry. You heard a little bit about that this morning, and Chris will expand on that when we get to, the speed and convenience section. In our space, we're the only ones in our supply chain continuum that are able to ship one of something, whether that's a part, a development kit, a piece of test equipment, and do so rapidly overnight, really feeding the mass market. That's one stratification of the supply chain. The next layer then is the broad market, as I call it, from a supply chain perspective, where, you know, we're taking our hundreds of thousands of customers and bridging them to our supplier so that they can service them with efficiency and scale. You heard a lot about that this morning from the supplier participants around demand creation, but the same is true of supply chain. The opposite occurs. You know, from a customer perspective, we're also providing them an aggregated supply access to our thousands of suppliers. It's very mutual, very bi-directional in terms of our services that we put towards supply chain from our customers and suppliers, aggregating back and forth. The top of the pyramid is actually where I spend most of my time, which is, you know, you get into this customer base with our global OEMs, the contract manufacturers that support them, and ultimately the component suppliers where we're really building supply chain models around the needs of the supply chain, right? Very specific problem statements that we drive toward, and that's really where the innovation comes. You know, the supply chain at the top of the pyramid drives innovation. You just saw, and if you haven't, it just was announced, Gartner announced their top 25 high-tech companies in supply chain. Or excuse me, top ten. Or sorry, top 25 supply chain companies, and Cisco was number 1 over Johnson & Johnson, right? All of these large juggernauts. When they look at the complexity of the supply chain Cisco runs and ultimately how they run it is truly a complex supply chain. Those are the kinds of engagements that we're seeing develop inside of that. Even inside of the complexity of that, there's been a shift, and you heard a little bit about that this morning, where there's even more emphasis than historic tier ones have put towards assurance of supply and resiliency. When I talk through the shift, I'll spend a lot of time focusing on how we're positioning for that shift, what it means to Avnet, and then ultimately bring it all together in terms of the ecosystem. Okay? Really our role inside of that shift is all about simplifying the complexities that are associated with the dynamic that was all described this morning. You know, it really starts first with our strategically placed infrastructure. Our global supply chain ability to orchestrate and harness our physical infrastructure, tap into our systemic system, synchronizing them, ultimately leading to a global execution. Along with that then comes the customer service. There are still people in this business. We still aren't pushing buttons and things just happening, so we strategically place those resources in the best locations possible. This is really the foundation by which we build these supply chain models. You know, the layer on top of that then, and this is where you heard a lot of discussions about, well, how do we tailor this in a supply chain environment is, you know, as I mentioned, we're very problem statement-based, but we've developed a methodology to tailoring these over time. We've been at this tailoring of supply chain models for 13 years at this point, and we've learned a lot along the way, not the least of which is our workshopping practice. Ultimately, what we do is we really get all of the parties together and really talk about what these supply chain models need to do. Right? We build around that. We built a practice around that that compresses that time, helps our customers and the suppliers define what those problem statements are, and then we build around them. Okay? The people that do that on our supply chain team don't come from distribution. They're actually practitioners. We hire them from academia. We hire them from the Navy. We've got a gentleman who worked in point of sale hardware terminals. Like, we really pull from this practitioner pool who have real-world experience and understand how to do these things and then take that knowledge and bring it to our customers and suppliers. Tightly coupled with our supply chain architects is our agile, nimble enablement team. Today's world, and again, you heard it a lot today, the visibility, the transparency, all of the data that needs to be harmonized and brought together to have our suppliers be able to make decisions, have our customers be able to make decisions, is paramount, and that is where supply chain is going, especially in these large global engagements. We have a dedicated team then that personalizes that digital experience for our customers on a global basis, tying together and harmonizing all of the data in the model, our data, our suppliers' data, and customer data, ultimately turning it into something that the parties can make decisions on. Okay? This team, as they're building that out, and with the complexities of the model I'll talk through in just a little bit, you know, ultimately they're doing things outside of the box. Those of you who are familiar with IT, you know, this is loosely known as a mode two IT team. You have your mode one, which is taking care of the core of the business and the enterprise, and then you have an agile, nimble team that sits next to it and they collaborate. Your agile, nimble team gets things done fast. They're very tailored, very specific, very custom, very personalized, where the enterprise team then runs the business, and they correlate between the two of them. Max Chan over here to our right, our seats, or your left, our CIO and I work very closely to make sure our teams are tightly aligned in that. You heard reference to some of the output from Heath of the power of that. Agile, nimble. I don't mean to get too specific on Heath's case, but Heath came to us with a unique scenario of what he wanted to see out of his supply chain, and we built it. In two weeks, we had a prototype running. Then inside of that, not only do we meet the customer's need, but then we also take that back internally. In the initial phase one of our application, you know, we had some people touching things. What the agile team did was say, "Okay, now that we've got this up and running, how do we improve it? How do we make that a better experience so that, you know, Heath and his team can look at this at a daily basis and see brand-new data as opposed to a weekly basis?" That's really the power of digital, and that's the power of harnessing that data and turning it into usable information in order to make decisions. With that, the shifting of these priorities inside of our customer base has created an enormous opportunity because now we've got this team, this agile, nimble supply chain team, coupled with a digital team, and then the change in the market of looking toward assurance of supply and global visibility has led to a really robust funnel. Just, you know, run you through some fast facts, you know, from a customer expansion perspective in the supply chain as a service area, we grew 32% year-on-year. You know, excuse me, our customer base grew 32% year-on-year. Our services GP dollars on like quarters was up 35%. You know, and we'll talk about this in Ken's section, these programs take a while to develop, to architect, and then ultimately to implement. Now we are seeing the benefits of these programs that we were working on a year ago or 18 months ago are now just starting to ramp and including all of the things that we've been working on as things really started to escalate. The business is growing. In calendar year 2021, we shipped 31 billion units through this organization. It was a really good year, and it's gonna continue to go that way. The reason I'm confident about that, one was a lot of the discussion this morning in terms of the trajectory of supply chain. If I can go back to just shifting of the supply chain, you know, it's challenged. The high-tech supply chain is extremely complex. That's driven, and there's continued pressure on, you know, labor capacity, on supply and demand, material imbalances, the logistics capacity and constraints that it takes to service this production, not the least of which elements are nationalistic policies changing and also our commitment to ESG. All of these things are changing the way our customers are orchestrating their supply chain. That change is making even a complex model that exists today even more complex. Out of this, they're having these assessment discussions that say, "Okay, now I have to build a resilient supply chain, and I need to do an assessment that says how much resiliency do I need versus how much cost it's gonna get me." Out of that comes a list of, you know, enablers. Every time that a OEM is going down this path and doing the enablement, they do this assessment, obviously looking for, okay, well, what does the business environment look like? You know, can I, what's the culture, the legal, the tax, the regulatory issues that I need to look out for? Is there enough infrastructure for transportation? Is there enough energy grid to run a factory there? Is the market consideration safe enough? Ultimately coming down to that supply chain ecosystem and that cost trade-off. The example I'll give you is this is not an uncommon thing, where a few years ago, we would have a customer who would build 100% of their product in China, right? They've gone through this assessment. They've looked at the enablers and ultimately have shifted their designs to, you know, their supply chain architecture design to really look a little bit more like China for China and then maybe for cost in Southeast Asia, it ends up to be Vietnam or Thailand. Then out of that comes another leg that says, "Well, for North America, I need low cost, but I also need proximity." I say all of that, and it camps on top of the discussion from this morning because that scenario triples the complexity of the supply chain that needs to be administered by the OEMs and by the suppliers that need to attach to it. That on top of this graphic on the right, which really shows the complexity of the model as it sits today. This model times three is really where we're going, and this represents the opportunity in front of Avnet today, and that's why we're so excited about it. I think we heard this morning excited attached to supply chain at least seven times. This is why. This is our core business, and this is what we do. We've taken a little bit of time to size the market. We took the overall sort of TAM, you know, minus DRAM, flash, and MPU, and we estimate that to be about $490 billion. If you take the distribution total available market, you end up with something we're defining as serviceable available market, and that number is around $250 billion that today suppliers are servicing a supply chain that's gonna become increasingly more complex over time. We've taken another stab at the number and said, "Okay, well, let's really focus in on the suppliers that we are partnered with." Out of that, we've already defined of that $250 billion, $110 billion of revenue that potentially we could engage our supplier community or the customers that they're servicing to make that a better, more efficient model. If we conservatively put 5% on that equates to about $5.5 billion of flow-through that we may be able to attach a services revenue to, okay? Now, from the excitement around this morning's discussion, I think Phil will be looking for 10% or maybe 15%. With that, I wanna turn it over to Ken Jacobson to talk a little bit more about what that impact has on the corporation, okay? Ken. Thanks, Dave. You got it. As Dave mentioned, my name is Ken Jacobson. I've been with Avnet about 20 years, and I'm a corporate controller, so within the finance organization. One of the most exciting things about my responsibilities is getting to partner with Dave and his talented team working on these supply chain models, including the financial model. When I think about the services, this isn't really our traditional fulfillment type service, right? This is a service revenue, comes with a higher gross profit percentage and tends to grow as our customers grow. It's not the sale of inventory. We are not taking on inventory risk when we're taking on these engagements, right? We're providing a service, so therefore, the inventory risk doesn't reside with Avnet. As part of the solution package, because everything's customizable, we can hold product for an additional fee, so it all depends on what the customer's needs are. From a overall perspective, the cycle could take many months, as Dave said, but once these get implemented, they tend to be very integrated into our customer supply chains, and that creates a recurring revenue stream that we see over and over again. The last point Dayna raised a little earlier, I would just highlight, is that we believe once we get into these supply chain engagements, our customers are more willing to hear what Avnet can do on the design services, Farnell, IP&E. It really is an enabler to expand the solutions we provide within this customer base, which is typically a very large customer base with a lot of spend, as Heath mentioned earlier. Dave, I'll pass it back to you. All right. Thanks, Ken. Yeah, just to expand on that, you know, I strive, and I say this tongue in cheek, but I really mean it. I strive to be Chris Breslin's best sales guy, and I say that very publicly because ultimately that's the package that we're bringing, as Ken mentioned. It's broader than just supply chain. It's bringing forward the design tools that you'll see from Peggy. It's bringing in our capabilities with Chris. There is an appetite at the largest customers in the world to engage both of those models in conjunction with what we're doing today, and you heard a little bit of that from Heath this morning. In terms of bringing it all home, you know, really what we're doing is bridging the supply chain gap, okay? On a customer side, in terms of their priorities, business continuity and electronic components inside of their boardroom, inside of their C-suite, has risen to the highest priority, and they're building now their models around risk mitigation, right? Those are equations. Those aren't feelings. You know, risk mitigation is a math equation to assurance of supply, and how many days can I run my supply chain when something breaks inside of it, when a disruption happens, when a ice storm happens? How long can I run my supply chain? That's an equation. If I have unforecasted upside and need assurance of supply, those are equations that are real life being driven from the highest levels of the corporations. Hitting critical time to market and revenue targets have become increasingly important, as well as this idea that says, especially in the OEM community, I can no longer not be associated with my key suppliers, and so we're seeing an outreach there. Obviously, inventory and payment terms and flexibility inside of that is all kind of baked in. On the supplier side of it, you heard it loud and clear from both Chris and Paul, clear long-term global demand visibility. They don't know what to build if they can't see it. In the case of the large top of the pyramid, largest companies in the world, you heard a little bit about how that demand can get washed out through 20 contract manufacturers who place business with different providers. That is a high priority, so they know what to load in the fab. They know what raw materials to acquire in order to load that fab appropriately. Ultimately, they need that single version of the truth, and you heard that a little bit this morning too, and that the suppliers are seeking that. They're seeking the version of the truth in a world that's becoming more and more complex, okay? Obviously, ability to define their own revenue, and another thing I'll hit on here in a place to the demand creation side is in a lot of cases, you know, the supply chain team and, or excuse me, the sales team of the suppliers are getting caught up in the supply chain expediting parts when, you know, really their charter is to be off design, winning new designs. That kind of goes twofold. One, we'll help them with the design part, but also on the supply chain side, relieve them of that. Ultimately, they need to have trust in their partner, okay? Trust that the products are gonna get to where they need to go. The gap that we fill is exactly that, the resilience piece, the agility to move those products all over the globe, the visibility to have both parties see what their supply chain looks like, the global orchestration, bringing that all together, assurance of supply, and the flexibility that allows them to move that product around to their priorities as opposed to someone else's. With that, I'll turn it over to Peggy Carrieres to talk about technical enablement, and I look forward to Q&A a little bit later. Thank you. Thanks, Dave. Thanks, Ken. It's time to go after lunch. Hopefully, everyone is still awake. I'm Peggy Carrieres. I'm not a supply chain bridge. There I am. I've been with Avnet only seven years, so I'm kinda looking like I'm new compared to the rest of my colleagues, but I've been in the industry for over 25 years. I come from a supplier. I've been in multiple positions at the supplier and also at Avnet. When I came to Avnet, I initially started running the analytics around the voice of the customer and voice of the supplier, which really played into our technical acceleration and enablement. Another function I led at Avnet was I led the integration of Farnell from day one for the first year, and that was a great experience getting to know Chris. He's not. Oh, he left. Getting to know Chris and team, and then I was also Phil's strategy partner when he was the global president. A lot of these KPIs that you're seeing, our balanced scorecard, started with that core team that we've now pulled forward to the next level. I'm really fortunate to be able to have identified those, working with the team, in developing those KPIs and now being responsible for a few of them. I'm gonna talk to you today about technical enablement, technical acceleration. I could just say ditto because so many have said, Dayna, you said so many things about demand creation. Alex has said a few words, even Dave. This is the pictorial representation of how we've converged. We've the electronic pervasion, but we're really seeing a convergence across the end-to-end design to supply chain. Traditionally, they've been pretty bifurcated. You had engineers working on designs. They had a full toolbox. They developed their products, and they threw it over the wall to procurement, and then they had to go figure out how to build it. The last 2.5, three years have given rise to much more complexities that are not cycle-driven. We've seen a permanent shift in our supply chain. For instance, on our suppliers, they don't own the end-to-end, so what I call from sand to hand in the semiconductor industry, they don't own everything. Like, there's so many different players. Our customer base, you know, a lot of them use contract manufacturers. Some build direct. They move from one region to another. That flexibility. We've had to move that up the design chain to almost the first sketch to consider availability, where you're going to build your product, and sustainability of the life cycle as well. Demand creation, you heard demand identification, design chain. Demand creation is really an industry term. Like our customers, we don't talk to them about demand creation. We talk to them about design capability and enablement. Demand creation in a nutshell, and this is really the process, the benefits are twofold. First, it's like a triangle. We have our suppliers. Their great products, and if a product's registerable, that's determined by the supplier. We have Avnet in the center, and then we also have our customers trying to get their products to market. The process starts with us identifying an opportunity. The supplier tells us what's registerable, we identify the opportunity, but we're also focused on maximizing the effectiveness of that touch point. On a given board, you may have five, six, seven products that are registerable in that process. You're looking holistically at the design rather than a simple chip down. Through that process, the engineers identify, they design, and then they go back to the supplier and they say, "We've done this work. Here's this design with this customer. Do you acknowledge that design?" The supplier comes back and says, "Yes, we acknowledge that design." The second benefit is in sourcing. Once we have that design identified and locked in, it's extremely sticky business. It stays with Avnet regardless if it's in region, if it moves to another region, if it goes indirect through what we call a contract manufacturer, or if it moves anytime in the life cycle of that product. That secured sourcing is anywhere from two years to five years. Even as the markets rise and fall, this business stays very stable and is extremely sticky. There is a technical aspect to this, but also sourcing. Avnet, our demand creation at Avnet, from a tax standpoint, we have over 2,000 engineers worldwide. I think we've said that several times. Our people are our most valuable asset. We are in the relationship business, and they collaborate across the regions. We drive the uplifts in the verticals and the applications. You heard Dayna talking about the industrial focus, transportation focus. Just a tidbit on transportation, we shifted that strategy about 3.5-four years ago from tier one, tier two fulfillment to tier two, tier three, and non-traditional startups. We've literally 2.5x more revenue in that vertical in that four-year timeframe. The capabilities from a technical acceleration, we have technical specialists as well, and it's really a differentiator for suppliers and customers. You can see the stats. Year-over-year, we're up 35%. Our design win funnel. Demand creation is a bookend strategy. Because it's a long time to value, we have to work on that front end of the funnel, making that as healthy as possible, because that's a predictor of future revenue. To see that going up at the same time that our revenue is going up, it's a very healthy model. Demand creation, the profitability is about 100 basis points up year-over-year, and it runs about 400. That's higher than our fulfillment business, so it is differentiated. There are five pillars. Some of this is very simple fundamentals. Again, our people, the applications, digital, our supplier products and technologies, and then design services, the IoT software. The solutions are becoming much more complex than they've been in the past. It's not the traditional chip down design. We still sell components, but we solve customers' problems. I'm gonna focus a little bit on digital. We've talked a little bit about, you know, the digital enablement, digital acceleration of the engineer. Avnet has something that's very differentiated. It's called AVAIL. You heard Chris talk about it during the panel. It's Avnet's Visual and Integrated Library. It's a repository of over 140,000 block diagrams aligned by vertical markets, aligned by applications. We get input from our engineers, from our suppliers. It comes in from all different areas. We standardize those, and we move that to a cloud-based solution. The goal is more registrations per project, and we now are moving that to a cloud-based solution. It was a Visio-based solution. It was internally generated. It was designed in-house. It's been in place for about five years now. We're moving that to the cloud, and in the summer, it's going to be customer self-serve. That's a huge differentiator. It's a tool for our engineers, but now our customers will be able to have control and choice when and how they want to design. Engineers can get up at midnight, log on, design, and have that capability and route from an offline to online to offline interaction. AVAIL is part of a larger suite of our digital enablement. We have what's called our design hub or my Avnet Design Hub. It's a personalized experience that's robust, enables a design canvas through AVAIL, but also my Avnet, the tools and signals, that's the associative selling. That's maximizing the value of that whole project and getting the product to market more effectively and efficiently and holistically. You heard earlier, during the panel, the word agnostic. Avnet is in the business of solving our customers' challenges and their problems, and we do that either through digital, but also routing into those offline interactions. Overall, demand creation is extremely healthy at Avnet. Our highest revenue that we've had in history, we reported that last quarter, and our front end from a digital perspective is very healthy as well. With that, we're gonna talk through, you know, we've talked through demand creation has been around for a long time. Chip down design has been in play as one of our foundational value propositions, but now we're moving up the chain. Our customers need more support. Our supplier products are much more complex. They need software enablement, IoT, embedded capabilities. Mario, I'm gonna call you up, and you can talk through the embedded and IoT capabilities. Mario. Thank you, Peggy. Good afternoon. My name is Mario Orlandi. I'm responsible for the EMEA business and as well for the global IoT initiative, global Avnet Embedded and Avnet Integrated. What I'm going to do today, I'd like to give you today is a quick overview about Avnet Embedded, or, as I like to call it, Avnet in-house embedded solution now. That's what we have today. As Peggy was just mentioning, we see a transformation in our customers, in our OEMs, where thanks also to the complexity. Chris was referring earlier on about the complexity of their device. More customers are looking for to buy products rather than design due to the complexity of these items. Now, what is Avnet Embedded? Very simple, it's not a new business to us. This is just a result of realignment and rebranding we did one year ago. Basically, the reason is very simple. We are addressing the same customer base, the same suppliers, and as well, in other words, the same as the core business does. We are basically playing the same, exactly the same field. We are not going for new customer or new initiative. It's just exactly mirroring or leveraging what we are already doing in our, from our core, what we call core customer organization. Therefore, instead of running a parallel organ- sales organization, we are now leveraging the 1,000+ salespeople. That is really where we are very strong. In other words, today this is a business of $600 million, selling more than 2 million of systems and boards on a yearly basis. We have 15 design centers, six production plants around the world, and we are employing 750 software engineers and 130 hardware engineers. Last and not least, as I was mentioning before, we are leveraging the 1,000+ sales team we have in the field. Now, where we focus on. We do support key technology from edge to cloud for our core customer base. We are now, as I said before, we are really focusing on our strength, on our value proposition, so we're leveraging on our customer base. That is very important. In compute, we hold partnership with the most key global manufacturer in the embedded computing system, where we can supply those solutions to customers, either off-the-shelf solutions or with various levels of customization, depending, of course, on the application. Not only that. We do as well our own design capability in-house. Where we basically design our own modules for, you know, the global market. We design and manufacture this in our campus in Germany, primarily, and in India, and we are positioning to expand furthermore these solution centers. Those modules, as mentioned earlier on, they are becoming extremely popular right now as more and more OEMs are moving away from their own chip-down design to buy rather than to make, as I said before. That is very simple. The reason is to speed up the development, to reduce the risk, and as well to reduce time to market. In display, we are world-leading supplier on the both display and touch screen solution on the industrial market. We are partnering with the major vendors in the display manufacturers, and we also have our own team of innovation team, which are developing, helping our customer to design their solution based on their application. That's where we are. Last one, the third one, the third pillar, very important, is what is the embedded system. It's just a combination of compute, display, and software. When you put all three things together, then we are providing an embedded system, what we call a full solution system. Now, with regards of IoT solution, this was mentioned earlier on, that is becoming now more as we see in our industry, almost every application has a kind of IoT solution in it. We are uniquely capable today to offer secure IoT connectivity into any of our hardware. As well, we can also support the software from the edge to the cloud and to provide all the elements in it. In other words, this closed loop is very valuable to our suppliers, to our customers, when they are looking for high level of security and as well data analytics. In other words, we are one of the few capable today of offering this closed loop. Connected with this, and that was mentioned before by Paul, we are also offering artificial intelligence solution at the edge, where we are partnering with our main suppliers, just to name some, AMD, Intel, NXP, Renesas, and so on and so on, where we are providing and we are optimizing their chipset and processor for edge-based data consumption and processing. Last but not least, underpinning all of this, we have our software offering, and that is coming from the acquisition of Witekio and Softweb, which we did two, three years ago. This allow us to provide full support, software support to all of our customers. Peggy just mentioned this. That is part of our demand creation. As a distributor, we always help our customer, our suppliers as well, to bring their products, their technology to the market. Again, I refer into Chris, it was mentioned before, the complexity of these new devices which are coming on the market is really becoming more and more difficult for many companies to design by themselves. Therefore, they are looking for even more support in the hardware and as well on the software side. That is also, as we said, a shift from the make to buy, and we, Avnet Embedded, is the go-to source for those customer who are looking to source those complex technology from, you know, in the marketplace. Our customer benefit from faster time to market, the time to market is key, risk reduction, and cost reduction. Suppliers are working with us as we help them to bring their complex solution to the broader market more efficiently and faster. Avnet, for Avnet, what is the benefit? Higher margin, strong customer relation, as we are able to retain those customers which are moving from chip down design to a module buy. Last but not least, allow us also to find or to expand our customer base as we are engaging on a new touchpoint, as was mentioned earlier on from other people. That is an additional opportunity for us to expand our customer base. As explained before, that is key for our industry. Okay. Which market we serve? Avnet Embedded plays in almost all the key industry and the key verticals. Not very different from what you have seen before. Again, that's which is good, otherwise I would have said something not right. Therefore, the market are very similar. We talk about transportation, mainly commercial and agricultural vehicle. Industrial automation was mentioned before by Dayna. Factory automation, Factory 4.0, robotics, EV charging. Energy efficiency, so smart buildings, smart home, smart city. Medical, that is also another important field for us and is another growth market for our business. Last but not least, of course, professional consumer appliances, smart vending machine, and so on. That's what we are playing and where do we want to go? Today, as I said before, this is a $600 million business in terms of revenue, 6% ROI. Our expectation in the next three years is to almost double this business to reach $1 billion and to go in excess of the 10% ROI. How we are going to grow? We are going to grow with the expansion of the design capabilities, of course, mainly on the software side. The expansion of our global footprint, leveraging again our sales core team organization, and also providing more support, doesn't matter where the customer are, making sure they're going to get the right support everywhere as this is in the nature of our traditional business nowadays. At the same time, we will be expanding our product with our technology and our technology partners, of course, and as well providing software-as-a-service solution to grow our margin on one side, on the other side, as well to increase our hardware sales. The software is not only enabling to provide additional higher margin, but it's also an opportunity for us to expand our overall hardware sales. With this, I'd like to call Chris Breslin, President of Farnell. Thanks. All righty. Good afternoon. It's a pleasure to be here. I'm not sure if I start the video or someone starts the video, but start the video. [inaudible] At Farnell, we are unique in the high service distribution space, supporting engineers and manufacturers throughout their entire product development lifecycle. We provide next day delivery of the industry's broadest product offerings for labs, production lines, product builds, final testing, and maintenance and repair operations. Farnell has all the lab components, tools, and equipment engineers need to build and test their prototypes. Farnell supports all labs, ranging from startups to Fortune 500 companies and to the most advanced government research facilities in the world. Farnell supplies the latest industrial Internet of Things and system components from all the top brands in the industry, supporting the construction, expansion, and maintenance of our customers' manufacturing processes. Farnell's product build is our strongest offering, comprised of electronic and off-board industrial components, supporting our customers' electronic PC board builds and full assembly of their products and machines. Farnell's test and measurement equipment are key to ensuring our customers' rapid testing requirements for components, assemblies, and finished products testing. Farnell not only supplies our customers with the industrial replacement parts to maintaining their manufacturing lines, but we also help them identify alternatives and upgrades with our live technical support and experienced salespeople. Farnell supports our customers' entire product development and manufacturing lifecycle with the industry's broadest product component offerings. Let's explore a few key market drivers that highlight the opportunity ahead. The electronic automotive evolution began with the transition from electromechanical to electronic assemblies. Today's generation of automotive OEMs and third-party manufacturers are developing the next generation of high-tech automobile electronics. With autonomous driving just around the corner, automotive electronics will reach 50% of the total cost of an automobile by 2030. Siri and Alexa introduced us to voice recognition through artificial intelligence. This same technology will continue to rapidly expand into all areas of our lives. To remain competitive, manufacturers must upgrade their facilities and embrace digitization. Farnell offers customers bolt-on systems for upgrading existing machinery, as well as the components that industrial machine manufacturers need to build their Industry 4.0 systems and devices. From prototypes to production, electronics to industrial, the uniqueness of Farnell in the high service distribution space, combined with the strength and values of Avnet, together provide a product and service offering unrivaled in the industry today. Thank you very much. My name is Chris Breslin. I look after Farnell's global businesses. It's a pleasure to be back at the Nasdaq. I'm gonna touch on the reason I showed the video, obviously, if I didn't know what a good job that Chris and Paul and Heath were gonna do, otherwise, you know, I could have saved the last part 'cause the opportunities are everywhere, right? I think everyone's kinda picked that theme up. The other reason I showed this was the difference in product offering that we have, right? Clearly, we play in the industrial and the component space, but we also have a much broader footprint, and I'll touch on that in a minute. Again, my name is Chris Breslin. I've been with Farnell for eight years, so about three years before the acquisition. I've been in the industry for 22 years. Let me just jump into the. Can everyone see? I look at the, you know, what do people know about Farnell? I mean, I think people are obviously aware that we play in the electronic component space similar to Avnet, and that's accounts for about 50%-55% of our sales, right? This is an area where we've gotten tremendously stronger since the acquisition by Avnet. In the last five years, we've onboarded over 40 new supplier franchises, right? When you're in a business like we are, Phil showed some numbers, our average order size is now $380. No one customer makes up more than 1% of our sales. It's all about suppliers, right? The breadth of offering you can bring. Forty new supplier franchises is huge for us. We play in that same space. You saw that four hundred and ninety billion dollar number that Avnet plays in. If you remember back to the slide that Alex showed earlier, where he showed the split of business, he showed 75% of Avnet's business is semiconductors, and then there was IP&E and made up the other products. Ours is a little bit different. We're 20% semiconductors, right? 50% IP&E, and then a bunch of other products like test and measurement equipment, tools and production supplies. When you saw that engineer's desk on the video, we make everything from the, you know, anti-static mat the engineer's sitting on, to the test and measurement equipment. We sell the soldering paste, soldering irons, all those kind of things. We also play heavy in the MRO space, right? That's some of it's obviously a little bit more stable of a market. It doesn't have the same highs and lows. It might not be as sexy, but it is a market that continually grows, usually with GDP of the nations that it's driving. When I think of this conversation that Mario just had with you, we'll continue to invest heavily, and we've talked about it all the earnings calls. You hear Phil and Tom talk about investing in our inventory. We'll continue to invest heavily in the electronic component space, but we see tremendous value in expanding our existing MRO footprint in further into customers' operations. By that, I mean, we help customers keep their factory floors running, right? Mario just talked about IoT and IIoT, which is the Industrial internet of Things. To make that really simple, in my opinion, it's for this context, it's basically marrying the factory floor to your IT department to big data. That's what it is. When is your machine gonna go down? Predictive maintenance. The conversations that we're having with the MRO organizations of our customers are becoming much more sophisticated, saying, "Hey, as this Industry 4.0," which is basically, you know, a connected factory. Small and mid-sized customers, they can't get there on their own. Similar to the conversation that the panel had, you know, they need someone to help them get there. That is sophisticated IoT solutions, as well as a very broad breadth of products. That's the place we play in. Lots of opportunities in our business. Had I known what a good job the panel was gonna do, I probably wouldn't have had to show this slide. When I think of, you know, customers face a lot of challenges. As I think it was Chris was talking about, you want a partner that has a broad breadth of products. You want a partner that is well-financed, they're quality, and they're experts in their field, right? You also want someone that knows the products and can stand by them. They're a franchise, they're not buying on gray market or any of those kind of things. When you look at other things customers need, is the ability to help them scale. Kind of the examples I just gave about a smart factory, right? They don't just want someone selling parts. As Chris talked about in the panel, you want someone selling solutions or helping them find solutions to their problems, right? These are the challenges that our customers have, as well as service. I'm not just talking about where's my order and will it be on time, but service in general of an engineer or a technician talking to another engineer or technician, right? We also have, you know, I'll talk about our footprint, but we have 70 engineers in our organization, in the marketing and in the customer service organizations. We fill that need. When I think of what does Farnell do, how do we fill that need? One is both on the electronic component side and the industrial product side, we give customers one place to buy those products, right? You can buy them online. Some of the challenges that exist for customers when they're, you know, really narrowly focused partners in industrial supply, they don't have that breadth of knowledge, and they can't really support those areas. A single e-commerce platform globally around the world, 27 different languages. We provide that service, and we maintain those products. We're also the only high service provider in the industry that has both inside sales, telesales, and field sales in every region of the world, right? When you think of our competitors, you know, they mostly transact only online. We also have field sales organizations, inside support, and technical support everywhere in the world, right? We help close that gap. When you think of warehouses, if you're only selling computer, you know, onboard PCB electronic components, you can probably do that centrally, right? From one major warehouse. When you're selling other products like we sell, like enclosures and fans and power supplies and big, bulky products that are used as the guts of products that people build and to help maintain the factories in which they build it, you also need local warehousing. We have warehouses in every region of the world as well. We like that model. We've invested very heavily in the e-commerce side. When you look at part of the reason for the acquisition, and you heard a lot of my coworkers talk about, you know, the digital space in terms of digital demand creation, in terms of digital tools. The calculators that we've had on our website for years, we now work with Avnet to make sure that they can go up on the avnet.com site to make sure the customers get that consistent experience, right? That's a really pretty slick offering that we have besides just selling components and supplying in-demand components. We really like the place that we fill right now. This is just a quick look at our numbers. I won't go through all of this. I think Phil and Tom showed some of it. When I look at the business of where we are now, you know, and again, I was with this organization prior to the acquisition. I'll talk a little bit about the synergies in the next slide. The growth that we've seen has been really solid even before the market uptick, right? We've really started adding to our inventory breadth. We built new warehouses, new systems. Our ERP is on track now, but also our e-commerce platform. We went from worst to first, right? We had a 5-second download time for our e-commerce platform. Now we're at 2 seconds, right? We really invested in partnering with Avnet to make this a much better user experience. That's driven the $1.8 billion in sales and a much more efficient model, right? Thirteen point two percent is year to date. We closed last quarter at 14.9%. I think that was on a prior slide. We do have 900,000 active customers, right? We cast a very wide net, and I'll show you on the next slide, we can help shepherd those customers from the very early stages of design and prototype right on through mass production. We'll get into that in a minute. The other thing I wanted to touch base on was, and I think Dana mentioned it before, was the Element14 community. We have 850,000 members. This is a very active community, so it provides a service to our supplier partners as well as to our customers, right? Suppliers can put their products on there, and engineers will tell them what they think of those products, right? They'll give them complete summaries of how that's working. What should they add to the products or the technologies inside the offering that they're bringing to market, right? That in addition to the Hackster.io, you have this huge net cast to bring in that early demand creation, 'cause at the early stages, the ideation stages of building a product, people want information before they even start buying products. We play in that space, and it's been a good business for us so far. When I look at you know, supporting the technology and the community at every stage, right? When we look at the synergies with Avnet and with Farnell, a lot of people have talked about it. I think there's a few things to me that jump to mind, right? Mario and Puli talked about IP&E, right? These are thousands and thousands and thousands of different SKUs that, when Phil was talking about the narrow width of Avnet's inventory, you don't wanna buy every new product 'cause not everything's gonna make it to mass volume production, right? You only have a couple of thousand customers. When you're Farnell, and you have 900,000 customers, you can put more parts on the shelf, and you can help merchandise and market them to become successful. What we've done with Dayna and Puli and Mario, their teams, is we do the NPI. When the product is introduced to market, we do that initial buy, and then as it starts getting traction, you get a first-time buy report or multiple-time buy report. We push that out to Dayna and Mario and Puli saying, "Hey, you guys should start stocking this." The reason that becomes real important, think about the conversation you just heard around demand creation, right? If you have a high paid engineer at Avnet going out, designing you a product, right? You don't know quite when it's gonna hit production. When it does, you darn well better have some inventory there, right? That's where, you know, the model becomes really sophisticated, that the handoff and the close working relationship between the two businesses. No one else has this in the industry. This is a business connected by I mean, all the business presidents, we all work for the same leader. We all have the same KPIs. We're connected by systems, processes, and an aligned management team. Those handoffs are not physical handoffs anymore. They're actually systemic handoffs. I can mine my data. We use Microsoft Azure. We look at that. We find out what technologies might be interesting to Dayna or to Mario or Puli and say, okay, or Prince, and say, "I wanna know about sensing technology." We'll push those leads into Marketo, which is our marketing scoring tool. They'll look at that and say, "Yep, I'm interested in this. It has the potential to get really big and really successful." Then we push that into Salesforce.com. It hits the salesperson's desk, and now they have a hot qualified lead because someone bought a product. Really sophisticated, really unique. It doesn't exist anywhere else in the industry. Okay. When I think of the value chain at Farnell, it again starts with the community. You're casting a wide net. The reason why we have maybe only 8% of sales and, you know, 20%-25% of the profit of the company is because we play in spaces that are a little less price sensitive, and we're, of course, we like to think we add quite a bit of value as well. When you're looking at the ends of the life cycle, when a customer is doing a design and they're only gonna buy, you know, a couple of different flavors of a microcontroller, a couple different sizes of memory and say, "What do I need?" It's not a price negotiation, right? It's more of a, "Can you get me the product the next day?" The same reality exists at the end when it's MRO. They're saying, "My line is down, something's broken. I need some products tomorrow, and can you get it there tomorrow?" Again, it's not a price negotiation. That becomes part of it. Customers. I break the customer's activity into three main areas. I'm gonna say design, prototype, and NPI. I'm gonna add those all together, right? That's the early stages. At that point, we're selling customers a product. We're selling them a component. We're selling them something they're gonna put inside, something they're gonna build. That's, you know, again, usually at lower volume there, right? We're also. If you think back to the video, it showed an engineer's desk. Every engineering lab in the world has, you know, usually between $10,000 and $100,000 worth of test and measurement equipment, soldering equipment, and then, you know, consumables, you know, other, you know, production supply material. We sell all of that, right? It's not just the component side of it. That becomes really important. The production space, I think, is sometimes a little confusing 'cause we will support customers that are huge. We support some of the biggest customers in the world, but usually when they just have shortages. Our main production is customers that are high mix, low volume, right? These are customers that would never hit the radar screen of the big volume distributors, right? They might be making very sophisticated marine radar systems, but there's only gonna be 30 of them made in the world, right? They might be making test equipment. They're certainly not making iPhones and other consumer products, where there's gonna be millions of them made. Some of those customers stay with us forever. As Dan and the team said, sometimes things get handed off, and the customer can join that life cycle anywhere through. Some customers stay forever, and some that go into mass production, we can move those onto Avnet. On the service side, again, the MRO space, this is an area we've done very well, and this is a market that we think has tremendous opportunity as you start looking at smart factories. If I leave you with, you know, where we're going, it's a really exciting time to be at Farnell. We are a dramatically better business than we were when we were acquired five years ago, right? If you look at, you know, the amount of inventory, the amount of SKUs that we have on hand, if you look at the system speed, the web user experience, if you look at the number of supplier franchises we carry, you look at where new warehouses, new systems, this is a business where, you know, in the last three or four years, it has completely turned around to when the market was hot, you know, we would struggle to keep up. Now in the hot market, we're actually taking share from our competitors, right? Which is really a sign that, you know, we've done some really good things and none of that would've been possible without the investment and the close working relationship with Avnet that we've put together. We have, you know, we look at this as, you know, we say three-four years. I look at this as, you know, we think we've built a business that should have a double-digit CAGR, you know, whether it's 13% or 15% compounded annual growth rate. We feel that that is very achievable. We presented at our board a few weeks ago. I won't give you all the details 'cause I'm sure some of my competitors are listening. We have a very good line of sight to a business that looks at that shape. We have invested in pricing tools. We've invested in other technologies to make sure that we can retain and grow the profits that we have. We do see an opportunity, as I said, in the industrial space to expand further into some of the industrial products, right? As the Internet of Things and the, you know, smart factory takes off, we do see that as an opportunity to start, you know, pushing some of our inventory breadth and depth, beyond the components and products that we currently sell, and we think that opens up great opportunities. We're excited about the future. We're thrilled to be here, and thank you for your time. With that, I'm thrilled to introduce you to our CFO, Tom Liguori. Thank you, Chris. Well done. Chris is an excellent leader. He leads a great team, and it's a very important business to all of us at Avnet. We are going to end today with the financials, and I promise to be efficient as we go through this. I'm gonna concentrate on really three themes. One is our revenue growth and our margin expansion, both from what have we delivered so far and what is yet to come. The second is really this portfolio of our businesses. You know, it's really exciting. We are high volume, core distribution. You need thousands of parts anywhere in the world, but we're also, as Chris said, you need 30 of them, and you need them tomorrow with Farnell. Now a software business with Embedded. It's just very exciting. The ones we're investing in are the higher margins. I think as an investor, it's very important to understand our portfolio of businesses. Lastly, free cash flow generation. You know, we know the audience, and this is very important to us. It's very important to the board. I think that was one of the three things that Rod talked about this morning, is providing shareholder returns. Since our last Investor Day, we've made investments in growth and margin expansion, as well as improved the efficiency of our business. We're gonna end this year, FY 2022, at about $24 billion of revenue and a 4% operating margin. That's 4% for the entire year. Let's talk about how did we deliver that. Well, first, we invested in demand creation. As Peggy said, this is about the FAEs, about putting their tools online. Now the FAEs are much more productive than they have been in the past, and it's just a better customer experience. Not only have our revenues grown, but the percentage of revenues from demand creation has gone from 25%- 29%. It's a very large number, and it's at a much higher gross margin for us. The second, and it's great to follow Chris, is investing in Farnell. Think of it from a customer perspective. If I'm a customer, I go on the Farnell website, I now have 900,000 SKUs that I can choose from. That's more than double what it was four years ago. The online buying experience is much, much better. The response time is now best in class. Guess what? I'm gonna get the parts tomorrow. It's gonna ship today, arrive tomorrow. If I can find what I need, have a good buying experience, get it tomorrow, I'm gonna keep coming back to the Farnell website, which is right now, we're at 1.5 million visits a week to Farnell. All of which have enabled Farnell, Chris and his team, to reach an operating margin close to 15%, 14.9%. I know everybody here, or many of you here, you know, you're concerned about, hey, this is a great market, hey, this is great pricing. I think it's really important to understand that for 4 years, that team has worked on improvement after improvement with adding inventory, improving the system, putting data analytics behind this. Like, remember, 71% of all orders are being done online. It's more efficient, but we have data analytics behind that to understand who the customer is, what they're buying and what the pricing is. Online payments, one of my favorites 'cause we collect cash faster. But really a lot of good things. Now, as far as the pricing, we try to be very transparent. If we take out the year-over-year pricing, the 14.9% is still a very healthy 12.5%-12.7%. The reason I say that, it's very important in going forward. When we build our plan for the next three-four years, we're working off, you know, the 12.5% type margin range and building on that. That is important to know as we go through this. Oh, that's a bummer. I don't know what happened. Okay, look at the sides. Thank you. You know, the other thing that's important to know is, you know, we serve the high-growth market. Semi itself is a high-growth market. This is showing our revenue pie. Today, about 28% of our revenue is from industrial. The reason that's important, when you go over to the far side, you'll see that that's one of the higher growth. That's a 7% growth going forward. Now, we've always been strong in industrial. If you come down here to transportation, that's a 10% piece of the revenue pie for us. If you look at the growth rate, automotive is the fastest growing piece of semi. We're well-positioned in the high-growth markets. What's important to know is, if you did a weighted average of all of these, going forward for each of the next three years, the markets we serve are gonna grow about 5% a year. Then on top of that, we can add market share gains and the investments we're making in Farnell and Embedded to do better than 5%. Okay. Next. While we've been busy expanding margins and growing revenues, you know, we've also been working on the inside of the company, right? The first is OpEx. We spoke to all of you for three years every quarter talking about reducing our OpEx by $245 million. That was taking more efficiencies in the back office so we can invest in the front office. The reason that's important is as we grew, well, we lowered our cost base, so when we had more revenues and we needed more people in distribution, more overtime, more sales commission, our OpEx really didn't change that much. Last earnings call, we talked about, you know, compared to four years ago, our March quarter was $1.7 billion higher revenue, but only $30 million more OpEx. When you look at the financials and you see that drop through, well, that's really a primary reason for the drop through. The same with our net working capital. We talked to you about three years every quarter, reporting on our progress with that as well. That was very important for us 'cause we wanted to take some cash off the balance sheet, invest it in the business and return it to shareholders. That's what we did. If we go over the last four years, we generated $1.8 billion of cash. Yes, we reinvested in the business, but we also increased the dividend by 35%. This was a lot of time spent with our board, but specifically our finance committee. We spent meeting after meeting determining what was the right measure of how much should our dividend be, with the objective of making it reliable and something you could count on. The way to think of our dividend is we'll probably have one more increase this coming quarter, and then we'll be going to an annual cadence of increases every Q1. This is through the cycle. It's very, very important. We worked with the finance committee so that we could do this through the cycle. Likewise, we also spent a lot of money, a lot of time on our buybacks, and we reduced the outstanding shares from $120 million- $100 million. That's a 17% reduction. Everybody in the room here knows if you reduce your share count by 17%, you're gonna get an approximate 17% increase in your earnings per share. The reason for saying that, all of what I just talked about is why our EPS has gone from $3.57- $6.80. Yes, it is a very good market. Yes, pricing is very good. There's been a lot of sustainable, durable changes made inside Avnet over the last four years. Demand creation is now 30% of revenues. Farnell is a quarter of our profits. Americas is growing. We have a better cost structure. That $245 million is about $2 per share, and we have a lower share count. I'm also going to share with you something we looked at over the weekend, which was, what did we tell you four years ago? There's a reason for bringing this up to you. Four years ago, when we were all in this building, we had revenues of $19 billion and $3.57 earnings per share. We said, "This is what we were gonna work on over the next four years. We were gonna improve our mix, more Farnell, more demand creation, more IoT." By the way, IoT is really what is repackaged into Embedded. We were gonna optimize our OpEx. We were gonna accelerate Americas, lower our tax rate. I didn't talk about that, but we did lower our tax rate, reduce net working capital, and buy back shares. By doing that, we could get to a $7 EPS, okay? We ended at $6.80. We got pretty far along the road, and kudos to the team here. That's not why I'm bringing it up to you. The reason I'm bringing it up to you, if you think about four years ago, we all sat here. We had no idea a pandemic was gonna come. We didn't know what a pandemic was gonna look like. We had no idea that four years later, we'd have this great imbalance of supply and demand or that we'd have tariffs. There was a lot of uncertainty you couldn't predict. One thing we knew as a team was if, hey, we focus on mix, Farnell, OpEx, buybacks, Americas, that we could get to $7, and we're pretty close. I say that because now we're gonna go look at the next three or four years, and the spirit of it is, you know, we cannot predict what this December looks like. We cannot predict what a year from March will look like. But we can tell you that this is what we're gonna focus on for the next three or four years, and by executing fairly well to those, what the financials will look like in three to four years, okay? All right. Going forward, continue to invest in accelerating our higher-margin businesses, which is Farnell, Embedded, IP&E, supply chain engagements, Gabe, which is fairly new. We've done it a while, but the opportunity is new and bigger, and demand creation. We're gonna continue the operational improvements. We're not gonna have a formal program where we give you a number, and every quarter we track to it. It's important to know, as of today, in operating expenses, we have about $70 million of projects going on today that will help our OpEx structure. It's things like our Farnell logistics center, the EMEA logistics, moving more tasks to Serbia, Guadalajara, India, and things of that nature, okay. Just know that. Whether that reduces it or allows us to grow without raising our costs, both benefit us. The same thing with our working capital. We're not gonna have a formal program where we talk to you every quarter, but we believe there's another $300 million-$400 million that we can take off the balance sheet and use to reinvest in the business and to do shareholder returns. Inorganic growth opportunities, there will be some smaller tuck-in acquisitions through three-four years, and the purpose is to make Farnell a stronger business, to make Embedded a stronger business. We got a great opportunity in IP&E, especially in Europe, under Puli, and expect it. It's not gonna be large transformational. It's going to be smaller to build a better business. Finally, we're gonna generate cash, I'm gonna spend a little time on this in a slide or two, and increase our dividend continually as well as do more share repurchases. Let's talk about growing the higher-margin businesses. I think enough said on Chris, right? You've heard from Chris. We talk about this every quarter. It's very exciting. We can get this, we think, to $3 billion in three-four years. The timeframe for all of this is three-four years, and grow it to a 10%-15% operating margin through the cycle. Very important, through the cycle. Embedded, Mario. I'm gonna add a few things about Embedded that just to reinforce what Mario said. I'm gonna tell you from the CFO what I really like about Embedded. You know, when that team gets into a program, well, we have backlog, right? That program is gonna go on for one year. We have a forecast, go multiple years, and it's very important to us as Avnet, the distributor, that that is a backlog business. It is primarily in Americas and EMEA. Those are both higher-margin regions. It has a software piece. We all know what software gross margins can be. Mario's building on acquisitions we did two or three years ago with Softweb and with Witekio, both IoT related. Another thing that gives at least me personally, and I think all of us, a high degree of comfort and excitement is the leadership team. You should all know that we've always said to you that our EMEA distribution business is our highest profit distribution business. It's been that way for years, and it's been that way for probably a couple of decades. That is run by Mario and by Puli. Having Mario and a man of his capability supporting this is very, very promising. Lastly, IP&E. You may not know this, but we are a leader in IP&E in Europe. We do very well. We're gonna take the best practices of Europe, spread it around the world. That is under Puli, who also has run one of our highest margin businesses for the last couple of decades. A lot of good opportunity. The reason we are focused on these, if we can grow them, that is how we get to a 5% total Avnet operating margin. This is a pie depicting our revenue. Remember, semis are growing, so our revenue pie is getting bigger and bigger. What we wanna do is, in that revenue pie, have at least half of our gross profits come from these businesses. Farnell, IP&E, and Embedded. We think that we have a pretty good plan to do that, and that will get us to the 5%. Now, we feel very good about our plan, and we wanted to give you some insight into where we think we can be in three-four years. Now, I am gonna repeat what I said earlier, right? We can't predict December or March, but by executing, this is where we can be in three-four years. Also, it's really important, what are our two key assumptions? One is that supply and demand come back into a normal balance, and therefore, pricing comes back into a normalized level. Okay, so these are not, you know, stressed peak market targets. These are through-the-cycle targets we think we can achieve. Revenue growth. Our markets that we serve are growing 5% a year with some market share gains and focus on Embedded and Farnell, 5%-8%. Our adjusted operating margin, greater than 5%. Net working capital, we told you we have a couple hundred million on the balance sheet. Now, I will say this, we need more inventory. I know sometimes on an earnings call, not everybody appreciates that, but we want more inventory. These are financing receivable programs as well as supplier payable programs that we're gonna execute on to take $300 million off the balance sheet. Our CapEx, it's gonna go back to the normal level of about $100 million a year. It's distribution center systems. You know, we've been a little light the last year or two because we had our Farnell Leeds distribution center complete, and we're just in the planning phases for some future. Plan on $100 million a year. Gross leverage, this is all about being investment grade. Investment grade is very important to us as far as our customers and suppliers. To be investment grade, gross leverage less than 2.5x. Think of this as a through-the-cycle kind of maximum leverage the way we think about it. All right, cash. Executing to these plans, we intend to generate about $1.5 billion-$2 billion in cash flow from operations. The usage for the cash will be investing in growth, which is our distribution centers and our systems and our e-commerce abilities. M&A, the smaller tuck-in acquisitions, and our shareholder returns. Again, the dividend, making it reliable and increasing every year, and buybacks. A little perspective on today. You know, today when we look at M&A, well, most targets are, a nice term might be fully valued, and it's a little expensive. When we look at our share price today, you know, we have an earnings per share of $7, $49 share price. We trade at about a 7x multiple. Normally, we sell 9x-12x multiple. We do consider it undervalued. In the near term, we're gonna be taking the cash and focusing more on the buybacks, and hopefully, over time, our multiple will improve. Perhaps M&A will get less expensive and that may change. Either way, it's gonna be accretive to our EPS. Because of that, you did see in the announcement today we're gonna increase our share repurchase authorization to $600 million. We had about $300 million left on the old one. We're topping it up to $600 million total. Why $600 million? At our current market cap, it's about 13% of our market cap. We do think it's meaningful. Our intent is to execute it over three years. Okay, about 3%-4% a year. What's very important to know is there's two pieces of it. One is a systematic piece, meaning most quarters, we are going to be buying back shares. By doing that for 12 quarters in a row, we will use up the $600 million. There's a second piece which is more opportunistic. You know, when the share price we consider undervalued, we'll be buying more and the reverse at higher prices. The commitment is $600 million, 13% of our outstanding shares over three years or sooner. If we do it sooner, you'll probably see another share repurchase authorization. Today we talked about revenue, margins, costs, working capital, buybacks. What does it mean to everybody in the room as far as being an investor? Well, first of all, it's very hard for us to predict a stock price, right? We're not gonna try to predict the stock price. What we can do is we can tell you how we view it as a return to shareholder by looking at our net income or EPS or dividend in our buybacks. On a 5% market growth, a 5%-8% Avnet revenue growth, what we believe will grow our net income dollars 12%-14%, right? That seems like a reasonable ratio, and that's what our plan is. From an EPS perspective, though, we'll also be buying back shares, and that $600 million is 13% of our total shares over three years. A 3%, 4%, 5% benefit from our buyback program. When you look at EPS, we should be able to grow it, you know, 15% to high teens. On top of that, we provide a dividend. Again, it's hard to predict a yield, but, you know, we've been averaging 2%-3%. As a shareholder, assume that on top of the EPS growth per year, you'll be getting a 2%-3% dividend yield. Not to lose sight of acquisitions. Okay, they will be smaller, they will be tuck-ins, they will be to make our business better, but they will be accretive, so there could be another 1%-3%. The key is, while we can't predict a share price, we can tell you that our expectation and our desire for you is to be able to have a 20%+ annual return for the next three years, which is from growth, margin expansion, buybacks, tuck-in M&A. Now that is totally. Just don't look here. All right. Oh, there it goes. Okay. Let's just kinda wrap this whole thing up. Why would you invest in Avnet? Or why do we think you should invest in Avnet? Well, first of all, we're a leader in a very high growth market, right? We're doing electronic components, semiconductors. Semiconductors are everywhere, they're in your home, your office, your car, and the usage keeps on getting larger and larger. Second, Avnet's very important today in the supply chain. You know, in the last three years, we've seen pandemic, lockdown, tariffs, shortages. If I'm a standalone company, it's very hard for me to manage our supply chain. If I come to Avnet, I have supply chain architects like Dave, I have distribution centers around the world, we have a lot of inventory, not enough, and we can help you manage through your supply chain problems. We have a really well-formed, we think, well-thought-out business portfolio, both for the market to our customer, in that we can do high volume core distribution everywhere, but we also have our Farnell business. We think, as an investor, that's important because Farnell is higher margin, embedded is higher margin. That portfolio will help lift our margins over the next two- three years. Lastly, for those that are concerned about the economy, we do provide some downside protection because of our cash flows. We often talk about a countercyclical balance sheet, meaning when the economy slows, what happens? We collect our receivables, but we have lower inventory purchases going forward, so we generate cash. Two or three years ago in the pandemic, we generated over $1 billion of cash flow in five quarters. Lastly, to use a sports term, and anybody see the hockey game? We're sorry, the Rangers, since we're in New York, lost last night. We have many shots on goal, meaning our core distribution, Americas, EMEA, Asia, our Farnell business is a shot on goal, embedded, efficiency improvements with OpEx, with our working capital, and our return with dividend and buybacks. Overall, we think these are the reasons that Avnet is a good investment. I wanna end with thanking you for coming today. Many of you are investors. Many of you are potential investors, but I think most people have invested in Avnet over the years, so we really appreciate your time. We know your time is critical. Wanna thank our analysts because without you help us get in touch with our investor base. You share our message. You ask us tough questions, but we always think that they're constructive and productive. I wanna thank Jamie Di Piazza. She's our investor relations program manager. Jamie, are you in the room? Jamie's not in the room. Okay. She's probably out still working. There is Jamie. Yes. So to many of you, right, Jamie is the face of Avnet, and we couldn't have done this without you. We also have our Abernathy team, Sheila, Eliza, and Deidre in the back. Somebody that's not here, Nicole Freeman, who did all of our videos. The last is Joe Burke, and Joe is gonna lead us through Q&A and you know, I will say Joe wears many hats within Avnet. You know, while he was preparing for this Investor Day, he also just recently completed a $300 million note refinancing. I'm gonna thank the bankers in the room for letting Joe come back in one piece, still healthy, still happy, 'cause you may know it's been a very turbulent market. Another hat that Joe wears is insurance. Tomorrow, we're meeting with our directors and underwriter of our D&O policy. Joe, I hope I didn't say anything inappropriate, and we'll still get a good rate tomorrow. Why don't you come on up and lead us through the Q&A session now? Okay, we're gonna take a few minutes to set up for our Q&A. We're gonna bring a couple of chairs up here for Tom and Phil. As we move into Q&A. Just a few- You look like you're taking notes. Go ahead, Joe. As we move into Q&A, just a couple of ground rules. For those in the audience who would like to ask a question, please raise your hand and or wait for one of our team to hand you a microphone. Before asking a question, please state your name and organization, and please limit your question to one question and one follow-up, and if we have time, we'll come back to you. For those participating on our webcast, please enter your question in the chat box, and one of our team members will read it out here. Same rules apply. Please state your name and organization for your question to be fielded. Then at this time, I'd just like to say that we will not be taking any questions regarding our current quarter progress or results. We provided guidance at our last quarterly earnings, and we stand by it, but we look forward to seeing you in August with our FY results. With that, we will start fielding questions. Yes, Jim? Oh. Wait. We'll go back to Will. We'll come to Jim. Go ahead, Will. That's how the microphone wins. It's Will Stein from Truist. Thanks so much for hosting this very informative analyst day, and thanks for taking my question as well. I wanted to ask about the current dynamic of overearning that you've highlighted in Farnell. It occurs to me that when you're accounting for inventory on a FIFO basis and when prices are rising, you're likely to be overearning in the core business as well. Can you address that? Either correct me or maybe quantify how much you might be overearning in the core business, and then I have a follow-up. Sure. I think we you know wanna be very transparent about that, and I think we did it in the earnings call. In Farnell, if you look at year-over-year pricing, it's about 220 basis points, which would be about, without it, 12.5%. I don't want everybody to immediately go to 12.5% because we haven't seen any change in pricing, okay? I think it's really important to know, especially when you look at our targets, that we're gonna assume more or less a mid-cycle starting point of 12.5%. I think the core. Oh, go ahead. No, I was just going to ask. The ASP. Yeah. Sorry. Yeah. I think we said it was it from. 7%, 8% 4.4%- 4.1% if you take out the pricing. Again, on all of these, we haven't seen a change in pricing, but we want everybody to understand that because when we built the targets going forward for three or four years, we assumed a more normal pricing environment. Will, to build on that. What we talked about at last earnings call, I'll get this within a point, 'cause we all get this ASP inflation. How much is the growth inflation at ASPs versus not? And firstly, I remember not everything's going up in price, okay? There's a lot of commodities that are still commodities that are flat. There's another segment that are still competitive. There was a percentage, and when we amortized it was more the high-end stuff. Yeah. Okay, higher MCUs, FPGAs, things along those lines. When we average that out across the balance, it was roughly 7% ASP inflation in total. Okay? Great. Thanks. You got it. The follow-up, if I may, relates to the buyback. You sound quite confident in the you know the pace of demand and certainly your own execution as well, and it's great to see the topping off of the buyback. I wonder if you had considered an ASR, considering you know the profitability of the company today and the consensus estimates for next year. Yeah. No. When favoring that. No offense to any banker in the room before I answer this. No, we did look at an ASR, and we just thought that Zeke is laughing. We actually thought we could do it quicker doing it ourselves. That's why we didn't do an ASR. The only reason. Thanks, Will. Okay. Let me take a question here. Hi, it's Jim Suva from Citigroup. Hi, Jim. Hey, Jim. My question for Phil is, at the beginning of your presentation, you talked about the first thing you really wanted to do was to improve your relationships with your suppliers. From those of us on the outside, give some examples of what exactly does that mean, 'cause that just seems like every day putting on your shoes, you do it. For Phil, the question I have about the revenue growth outlook, I think you said the revenue growth of 5%-8% outlook. Aren't we in a world right now where ASPs being announced today, yesterday, and tomorrow are all going up? At least that amount anyway, so are you building in a deflationary environment or why wouldn't 5%-8% just simply be without doing anything, that's what's gonna go through in every part of society? Want me to go first? You go first. You can think about that second one. Jim, yeah, I know it sounds really. It does sound like it's tying your shoes, but you know, when you go to Kmart, you buy a pair of shoes, and they're kind of stuck together, and you could trip over yourself. I think we found ourselves, without being negative, we were. We took our focus off the core. We took our focus off 95% of the profits of the company, and as I said earlier on my first slide, relationships matter. We are still in the people business, okay. If people lose trust or confidence in us, if they lose trust or confidence in our ability to perform, and you heard from two suppliers today, what do they care about? They of course, they love us to do well, and it was very nice of them to say that, but at the end of the day, they care about customer expansion, demand creation, and growth. Now, that's basically what they're after. How we get there, they care, but that's the end result. Well, we had a couple hits. We're not gonna go back and redo those. As a matter of fact, you won't hear us talk about it because we've outgrown those losses. There is a real sense from some suppliers that, "Hey, are you out of this distribution business? Are you still committed to demand creation?" Chris subtly touched on it. We had Remember, I've also deliberately said, "Structure follows strategy." People need to understand what's the strategy and who owns it, okay? We were very fragmented in our approach to the marketplace, and we had, you know, and Mario touched on it indirectly. You know, we had IoT is a thing. There is no doubt about it. That is a great business for us, but it's already within the core. Now, I'm not being critical of any previous at all, but what we had is sitting outside the core. So we weren't leveraging this $20 billion machine to go help us go get IoT solutions inside of our industrial customer base, our automation customer base, our defense and aero kind, wherever it might be. I did share with you that we had a very good turnout within the first three months of me taking over. We had a supplier VIP. We had 400+, 450 suppliers on it. What they wanted to hear is, "Hey, what are you gonna do for us? Are you committed to us, and we're committed to you." Okay, we'll go downstream. We'll make sure we're servicing the customers. Again, that first slide is. It's kind of a heart and brain debate. You know, what's more important, our suppliers or customers? Well, they both are. You know, we can't serve Heath without the best supplier relationships in the world, okay? We can't help Chris and Paul and the rest of the suppliers grow if we don't have good customer relationships. It feeds, you know, upstream and downstream. That's. There wasn't any magic about it. It was a personal commitment from us that we're gonna continue to dedicate resources in the areas that they really cared about. Okay? Thank you. On the price, that's a very good question. Mm-hmm. When we look at the five percent of market growth, we use a lot of outside studies for that. We do that so that it's more objective. Keep in mind, you know, one of the assumptions in our number is a more normalized pricing, okay? If the price accelerations continue, we'll get to a 5% operating margin quicker, right? We'll get to these numbers quicker. What we wanted to convey is, you know, at a normal supply-demand balance, a more normalized pricing environment where we thought we'd be in three years by doing these things. With that. Thanks, Jim. Okay. Thanks, Jim. Okay. Okay. Thanks. Nick Todorov, Longbow Research. Thanks for the great analyst day. Just to follow up on Jim's question and Tom, to your answer. What exactly do you assume is normalized pricing? Because some suppliers in the market are talking about there's gonna be a new normal where prices are not gonna come down any on an annual basis going forward. So I just wanna make sure what are you assuming is a new normal from a pricing standpoint. No, that's really good because internally we kind of believe that. You know, the suppliers said it was a market reset. They have, you know, these are more proprietary designs. If the market slows, you know, many of them, at least on the proprietary, they may not have to change their pricing at all. You know, I kind of look at it from the opposite. We didn't want to come in here, you know, assuming price increases, and that was gonna be the basis for our margin improvement and hitting those goals. What are we assuming? We're assuming most of the 5% is a volume increase. As a follow-up question on supply chain services, you talked about it's a new initiative. It has a lot of potential. Just we didn't hear much about targets outside of potentially 5% attach rate, roughly about 5%, $5 billion opportunity. But when you think about the 50% pie share coming up from high-touch businesses, does that include supply chain services? And also, can you share at this point how big this business is as a percent of the business and what is kind of the margins? First of all, the 50% does not include supply chain services, okay? Supply chain services today is we report two segments: electronic components and Farnell, and it's in the electronic components. It'll be a driver for the electronic components growth and margin expansion. Yeah. Do you want- Let, let- Go ahead. Let me add on that. Do you wanna jump on that train a second? Supply chain service, really quick. Always been in supply chain service. The complexity of it has increased. We've been doing, Dana touched on it. We've been doing forecast management for years. We take in APIs, EDI. We still fax because our customers. About 50% of our business, so close to in the core is some type of supply chain service, VMI, consignment, in-plant store, kitting, et cetera. What we're doing, what Dave talked about, that's going to another level of supply chain services, almost as a service, okay? When Dave developed some of these really high-end programs he talked about, we can take some of those now and take them into our core. It almost becomes an R&D, if you will, for us back in the core. Frankly, that's kind of what happened with Heath, right? We had developed something. Hey, that might be portable to this application, which is why he was able to turn it around in two weeks. It's kind of semi-custom, if you will. They're all gonna have a little bit of a custom flair, but there's a foundation that is similar that we can build on. It's really exciting. It's not new. It's just going to a new level. Did you want to comment on anything else here? Yeah. I'll just say that, you know, Dave talked about it being a longer ramp process, right? These are, you know, critical to our customer supply chain. They want to make sure, you know, they can go slow, that it's working well, all those things. It is accretive to gross profit percentage, and it'll help our overall mix. Okay. At this point, I'm gonna check in the back to see if there's any webcast questions that are coming in. Yes, we have a few. So there's two from Ruplu Bhattacharya with Bank of America. The first one is for Bill. Bill, some investors are concerned about the possibility of a downturn. If we have a recession in the U.S. or slowdown in Europe, how would your playbook change? What assumptions are embedded in your 5%-8% revenue growth guidance? Going forward, if the core market is expected to grow at 5% year-over-year and you are guiding Avnet to grow faster at 5%-8% year-over-year, do you need to hire more FAEs, make any changes in your go-to-market strategy to capture the value from higher growth areas? How is Salesforce compensation aligned with your growth targets? Okay, that's an easy one. Okay. Thanks, Ruplu. We appreciate it. Oh, yeah. Tom, you can help me on some of the others, make sure I get this right. Thanks, Eliza. First off, our sales team. Our entire sales organization is paid on some type of gross profit dollar incentive. Okay. There's no one in our organization paid on the revenue growth. The executive team that's with us today is paid on either operating income with a combination of gross margin, ROWC. The executive team, myself and well, it's gonna be everybody in here now. They're paid on ESG as well. We have a component of the executive team on the environment. As far as capturing growth in the marketplace where we see there's growth in verticals, we have been hiring people on team. We have not stopped investing in sales, field application engineers, account managers. Complementing that with investments in digital that Peggy talked about at demand creation. That is not. We're not going digital and saying, "Well, let these other folks go." No, no, no. That just becomes a higher touch value for the FAEs when the customer can do some of the self-serve, what's called level one, level two. Bang, it's really complex, and they might need what Chris and Paul talked about. They might need some additional technology or technical support to help develop and build out the solution. We're investing, and you saw that's why it was not by accident every presentation has something around industrial, transportation. I mean, defense area is there. Consumer is continuing to grow, but we see the big opportunity and where our supplier partners see us adding a lot of value is that industrial. And beyond the industrial, it has medical as well, so some of that gets a little gray. But industrial, transportation. Keep in mind, we don't call it automotive because it's much broader than automotive. I mean, Dave talks about a large dump truck manufacturer that's had a $500 million dump truck. $500 million? Yeah. $500 million dump truck they couldn't build because they couldn't get a $0.50 part. Okay, so it's golf carts, it's e-bikes, it's you name it. Stuff that he called the battery. It's about battery management, power. It's just proliferating the marketplace. How would we react? Well, Tom touched on some of this. The good news is we have a variable model, Ruplu. Yeah, of course, we're concerned about market. We do. I mean, we're not magicians up here, so we're concerned in the same way everyone else is of what's going on. The key is how fast can we react, okay? We have built out what-if models already internally, okay, for that. But a big percentage of our costs, we're dealing with inflation, some of that might go away. Logistics, freight, we have variable comp plans with our team, so they kinda, you know, take the market's offsets. Sometimes compensation might go down. We've got a lot of things built into that. We're getting. Tom talked about the 70, right? $70 million in work already being done. Well, the market goes up, we're covered. We're gonna work on that $70 million. We gotta continue to drive more productivity and efficiency. I think I got it, Ruplu. Tom, you wanna add to that? Yeah. No, I think, right. In a slower market, it's easier to accelerate the cost reductions. More importantly, we would be generating a lot of cash. You know, our debt is quite low today, so, you know, we're pretty comfortable with where our debt is. If we generated a lot of cash, it allows us to be more opportunistic, depending on what the valuations are with maybe M&A or the buybacks, right? I mean, we can use this to our, I don't want to say, use it to our advantage. Right. We can just be more opportunistic with our cash flow. Go ahead, Matt. Next question. Yeah. Hi, thanks. It's Matt. We'll come back to you, Eliza. I see you down here in the back here. Matthew Sheerin from Stifel. Thanks again for the presentations. I actually wanted to follow up on Ruplu's question because I think it's an important one. If you know, in a downturn environment, if you look at in 2018 to mid-2019, your gross margins were down, you know, 200+ basis points, right? Just on a down market. You talked about why the mix will help you. You know, but what keeps you from, you know, from that kind of- Yeah. margin compression Yeah. If we're in, let's say, a down 10%-15% market inventory correction, or demand correction? Yeah. We start from a different point, and this is really important. You know, compared to three years ago. Well, we have done the cost streamlining, right? We have done lowering our OpEx as a percentage of revenue. We have gotten our inventories and everything more in line. Sorry, I mean, we would definitely see margin compression. I think the last time we went down to 1%, you know, we think we'd be more 2.5%-3%, because we're just starting from a different place, Matt. Okay. Fair enough. Then on the Farnell business, we appreciate that presentation and the growth opportunities there. Is most of that, you know, that long term, that double-digit growth, coming from improving the mix, expanding the MRO business and IP&E, versus the semiconductor business, which is only 20%? You know, that's a huge market. Every semiconductor supplier- Yes. -utilizes- Mm-hmm. -the, the, you know, the- Yep. engineering distributors, and you've got two big competitors that are. Yes. much larger Yes. than you in semiconductors. What's the opportunity to grow that business? Yeah. Is this on? Yep. A couple of things driving. Some of it is franchises, right? There's a couple of new franchises that we've onboarded that are already top five franchises for us in the test equipment space. Slightly different margin profile. Quite a bit of it is product inventory depth and breadth. If you look at the NPIs that we bring in over, you know, history, they'll generate, you know, we're gonna bring in 350,000 SKUs over the period that we were showing. They generate $970 a SKU on average. So that's, you know, $400 million. There's a bunch of things that we've actually built out. I'd say SKUs and supplier expansion are a good portion of that. Some of it is our e-commerce business. I didn't really touch on some of the foundational and transformative changes that we've done, right? We've become a much more agile environment where we used to do a web release every two months. Now we do one every two weeks, right? That's driving web speed. All those things drive growth. That's a portion of it as well. I'm trying to think of which other ones I can mention without giving too much of the strategy. Those are probably the main drivers of it. What was the rest of the question, Matt? The opportunity in semi. Expand with the semiconductor supply. Yep. Semiconductors for us is, again, it's usually around 18% or 19% of our business. This year, I think it's 21%. That's growing, particularly in the Americas, where we trade under the Newark brand. Semiconductors has historically been less than 10%. That business grew over 100% this past year. You know, there's market ways to try to retain that. Some of it is marketing and merchandising. Some of it is, you know, pricing and, you know, do you have to be more aggressive to keep that business. Right now, we are not playing the pricing lever yet. The market is still strong. We've done a really good job, we believe, in merchandising. We like our where we stand. We know we have to have some catch-up to play with our competitors in terms of breadth of inventory in semis. When you look at how we merchandise and how we market suppliers' products, they like it a lot, right? I mean, we've maintained some suppliers in the semi space. You know, we do have Maxim. And we have a couple of other lines that are interested in our business. I think semis will continue to be an attractive area for. I don't know that I see it growing beyond, you know, its 22%. I think it'll, as the rest of the business grows, it'll probably stay in that range. Matt, we definitely see semis as an opportunity. If you look at his SKU count expansion in semis and interconnect, passive, and electromechanical, it's been a lot. It just takes some time. You gotta brand it, you gotta market it, you gotta. Yeah. Well, by all means, we have two very good competitors out there. It's great. They make us better, and we'll continue to push ourselves to get more share there too. Okay. More questions in the audience? Steve. Go ahead, Steve. Okay. Oh, sorry. Yeah. Here you go. Okay. There's been a few developments that seem to suggest there's more intersection between you and EMS providers across, you know, the Avnet Integrated business and also in terms of how you're managing supply chain from, you know, sort of cradle to grave. Do you envision the company competing head to head in portions more often with EMS providers? Could that be a trend in the future, if not today? No. I mean, I guess I'm only sure if we know, Steve. I appreciate you being here and appreciate the question. EMS, we just wanted that thing. What we did is we took the EMS portion, which we usually have on a pie chart, broke that out because EMS is just a makeup of industrial, medical, and defense. That's why Alex didn't have it on his chart. EMS has been roughly 33% of our business. It is today, and it was 20 years ago. If you go back way back when, which you and I have been around for a while, we were kind of, "Who's gonna bang heads? Are we gonna bang heads? Are we gonna work together? If one gonna buy each other?" I think we settled into a great place. They're a great customer base for us. We do very well with them. There could always be a little bit of conflict here and there. The key is transparency and communication up front. Say, "Hey, we're being asked to go do this. We're gonna step on your toes," things along those lines. At the end of the day, you gotta do what the customers want, right? And their suppliers. We'll do that with transparency. Right now, I don't wanna get into mentioning names. We're doing really well with EMS providers. By the way, you always think of the top 6 or 7. There's thousands of them. I mean, just in the U.S., we have well over 1,000 EMS providers. They become the smaller ones that are more regional, local. They're like little mini aggregators for us of OEMs in that regional marketplace. That it's a good customer set. I don't see any kind of major conflict. Just on one of the other growth areas, the IP&E business. I mean, connector and passive guys are generally have not shied about adding another distributor that have more stocking available. Is that trend reversing? Is there a reason why you're a little bit more bullish on IP than maybe a few years ago, versus competition, versus how you're dealing with those suppliers or the customers? Yeah, it's a good question. Honestly, I don't think they've added a lot, Steve, organically. I think when they've done a lot, a few of the big guys did a lot of acquisitions, and they just never rationalized their channel, right, where the semi guys tend to do that. Mm-hmm. We just see the IP&E one, where it's about a $4+ billion business for us. We don't market it enough. That's why we're gonna start. We're a player out there. We're one of the top, as Al said, one, two, three, depending on the region. It's a higher margin business, and it is much more fragmented. When we talk about M&A, it is much more fragmented. We look at our share, let's talk about in the West, that we have in semiconductor. Then we look at the share we have in IP&E, and it's a really good opportunity with, you know, at higher margins. We're just putting more focus on it. Puli mentioned Abacus in Europe. Great model. We're not necessarily doing that exactly here in the U.S. because it's a different market, but we can put a lot more dedication and focus on it though. Yeah. Yeah, thank you. I think what we'll do is we'll check in. Oh, we have a question in the back here. Is it Nick again? Then we'll check in the back after this with the online question. Hi, Nick Todorov, Longbow Research again. So Tom, first question on OpEx. You spoke about $70 million of potential levers so you can pull. Just wanna make sure, do you intend to keep OpEx flat and use that $70 million in other areas, investing in demand creation or supply chain services? Or should we think about there's further room for downside for OpEx? All of this is reinvesting in the front end. With the revenue growth, we would help to moderate any increases in OpEx by these. In a flat market, no, you should expect some reduction in OpEx. Okay. The second question, broader view. You guys obviously sit in the center of the supply chain, and you have great visibility, and you talked about how you provide that service to even a new OEM customer. Obviously you have a pretty good sense of how inventory is currently sitting in the supply chain. As you look forward, clearly you have two trends working against each other. On one hand, you have localization, which is gonna require potentially additional inventory in the supply chain. You're providing these services to the OEMs, even big guys, where you're providing visibility, and that typically should lead to lower inventory in the supply chain if they have better visibility. Net-net, as you look forward, clearly right now there is an unusual situation. The disruptions, everybody has built up inventory. What do you see in terms of normalized levels of inventory going forward? Do you see any type of return to, you know, the lean just in time? Where is it gonna be the middle ground in your normal? Well, maybe Dave could touch on this a little bit, and get Dave a mic. He's in the middle of it. I would say, I think what's caused a lot of the issue we're in today is that JIT and lean got a little taken a little too far, particularly with the cost of money and holding up major products because you don't have a very small dollar chip is kind of, you know, we all know it is, you know, and not smart. I think what we'll see is I don't know if it's more inventory, Nick, more strategically placed inventory and some of the aggregation we're doing to give someone like Heath, who explained really well, the visibility, so he doesn't have to have inventories in 15 different places. Doesn't mean he has more inventory, but if he can leverage what he has, 'cause he may, I'm not speaking for him, but he may have more inventory in one location. He has no inventory over here, so we can help aggregate this. I wouldn't say it's gonna be a massive or any kind of major increase in inventory. Might be. The cost of money is good. Why would you not hold a little bit more buffers? Maybe it's a JIT light or something along those lines. Dave, what's your sense? No, Phil, I think you hit it very well, and I think there will be some normalization that'll happen and maybe even some, you know, rationalization around what products I'm going to hold inventory on in the future. You know, right now, the entire industry is pretty constrained. There may be a future state that says, "Well, I've got a couple different segmentations of part numbers that I can't live without or are very customized to me, and I need to build a robust supply chain in order to harness that." Then that stacks onto Phil's comment then as well. You know, I've got a strategic inventory position that I'm aggregating and feeding multiples as opposed to having, you know, multiple pools out in the field that's completely inflexible and lacks any kind of agility. Just to follow up quickly. Do you see that inventory? Hold on one second. Hang on one second. Yeah. Sorry, just a quick follow-up. Do you see that inventory sitting at customers' warehouses, or do you see yourself holding that inventory as a buffer for your customer? Well, I think at times it'll be a mixture of both, you know, depending on. You know, we run several programs even today where we're centralizing inventory in a hub and spoke kind of manner. You kind of get the benefit of both in that scenario where you have a pool of inventory in a centralized location, and you're feeding that out into a remote location, whether that's customer-owned inventory or Avnet-owned inventory is really model by model. You know, we've got customers, we're building supply chain models for that actually have three inventory pools that we're holding in our facility. Customer-owned inventory, supplier-owned inventory, and ultimately Avnet-owned inventory, and we rationalize that whole inventory profile on their behalf on a global basis. You know, I think a lot of it will depend on the architecture, the actual supply chain and what their, you know, as the OEM, and their manufacturers are striving for. Does that make sense? Thanks for your question, Nick. We're gonna check in with the table to see what questions webcast participants may have. Eliza? Yep. We have one from Joe Quatrochi with Wells Fargo. How do we think about your expectations of cycle risk relative to what Avnet noted earlier? Strong but muted growth expectations for 2023, and your server TAM forecast growing each year-over-year from 2022- 2025. How does the company think about incremental EBIT margin as part of your greater than 5% EBIT target and revenue CAGR target? Want that, Tom? Yeah. That's right. I understood all of it. You know, the reason we gave three-four years as a target, if the economy stays good, we should hit this in three years. If there's a, you know, a correction of some time, we'll do it in four years. The way we think about it is just like we thought about it four years ago. You know, you can't predict a quarter, but you know if you execute to these, you'll get to the 5%. That's how we think about it. You know, we don't. It's very, very. We started answering scenarios of probably 100 different scenarios, right? The important thing is three-four years, we execute to this plan, we should be at 5%. more. greater. Plus. Yeah. Plus. Is there any follow-up on that, Eliza, or should we move on? We good? I do have a follow-up question from Ruplu from earlier. Okay. We'll take that. One second. This one is for Tom. You're guiding a strong 5%-8% revenue growth over the next three-four years, so it makes sense that you also need to invest for that growth. Your target CapEx per year is doubling from $50 million to $100 million at the midpoint. How much of annual CapEx is maintenance CapEx versus growth CapEx? You talked about investing in distribution center efficiency and expansion. What utilization are your distribution centers running at now, and what goes into the decision to add a new facility? Sure. You know, when you look at our. It's a combination of maintenance and growth. Here's how we look at it, just in basic words. Three years ago, we opened a new Hong Kong distribution center. A year ago, we opened a new Leeds distribution center. These are investments to both do efficiency and to meet growth. We're due for EMEA. We've announced at least internally to our teams that we're adding a distribution center in Leipzig, right? That's right. In Leipzig, which is, it's both lower cost, but it's also a distribution hub. Okay? We will then probably go back to Asia and do more in Asia. This is with keeping up with growth. The other piece of internal CapEx is systems, and this is like a business by business at a time. I think the last region we updated was EMEA, which when was that? Two years ago. You know, again, these two gentlemen, thank you. It went very well. You know, we'll be taking that model and really going region by region in the future. I'd call that, I guess, maintenance. Also with Chris, with e-commerce. Mm-hmm. You know, I would encourage all of you, go on the Farnell website, go on the Element14. I love Element14. You go in there, you wanna find out about the Xilinx Spartan-6, and you see all types of specs. You find all of the engineers commenting about usage and what they've done. You know, that's just continual investment in Farnell systems. The reason it's going up, I mean, you're right. Like, this year it's about $50 million. Well, we just hit a temporary pause. If you went over the last 10 years, it's probably averaged $90 million-$100 million. You know, the pause was, well, we had upgraded distribution centers in two of the regions. We had implemented an upgrade in EMEA, and this is a, you know, beneficial pause. It'll go back to the $100 million. We don't view that as abnormal. We kind of view that as really more historical CapEx. Yeah, Tom, just on those distribution centers, we're constantly analyzing our footprint. Yeah. We have to. We just talked about the globalization, the regional to local. We got a study going on in APAC right now that's actually our logistics team with Dave Paulson's supply chain team. Hey, where do we need strategic hubs of inventory? Some of that is also risk mitigation, right? We go, you know, we've gotta make sure that we can service our customers anywhere they go in the world. We get that question a lot. Does it bother you that there might be a movement out of China or movement out? We can go anywhere our customers want us to go. Yeah. We ship to 140 countries, so that's no problem with us. Might have to make some investments to do it. Okay. More questions. Go ahead. Hi. I'm Daniel Nestadt from Trian Investments. Sorry to bring us back to the inventory question, but Nick got me on the line of thinking that, I thought, was very interesting. You had mentioned that some of the key growth areas would be in transportation, in industrial, in aerospace and defense. In inventories, in terms of what you can do with chips, those are certainly industries where you can hold a lot more inventory. There's a German defense company, Rheinmetall, who had, I don't know if it was an investor day, but they announced they had five years now of semiconductor inventory. I'm just kinda curious what you see as the post-COVID inventory, especially when you're talking about long product life cycles, where they actually need to have those older chips, 'cause that's kind of an interesting space going forward. Thank you. Well, it's a good question. I think you're definitely gonna have companies that you mentioned, like the ones you mentioned are large industrial, large medical, large, you know, defense. That the component is also a smaller cost of the total system. So if it's a smaller cost of the total system, they can afford. They got higher margin, they can afford to carry more inventory to something you're wearing on your wrist, you know, a lower margin may not be able to do that. So I think it's gonna be sector by sector, vertical by vertical, where you see maybe more inventory or less. Alex touched on earlier, maybe you caught it, maybe not. Older technologies gonna become a bigger issue. So you're also, if that's what you're alluding to, you're right on that. A lot of the fab investments are going into the higher tech stuff, where some of the lower that is in the same core industrial, defense, medical. There are gonna be inventory programs, and we are working with customers on that already. Okay, how can we help you? Because they don't wanna have to do a redesign every six months. They can't. They want something guaranteed for five years. Yeah, and we have special programs we'll work with those customers on, and there are different ways to finance that. Okay? You're right on. You're absolutely right. Thanks for the question. Are there any more questions in the house here? Any more online, Eliza? Well, there being no more questions, then I think we'll turn it over to Phil for- Okay. Closing comments. Thanks, Joe. Thanks, Tom. Okay. Thanks for questions. By the way, we know there's more questions, and we got a break in a social area. That's why I just need to get to the restroom first, okay? Okay, please not to put you on the spot, but I already talked to some of the guys about your question and make sure we get that answered for you, too, from this technology standpoint that we had at break, as well as Chris. Let me bring it home. We wanna make sure we touch on ESG. This is key and critical. There's a lot more information on our website, as noted. It is about governance, environment, and people. As I mentioned earlier, this is a component. Yeah. I did mention people. Okay. Don't worry about the middle one if it's not operating. This is a component of the executive team's compensation as well from the board of directors, which is key and critical to us. This is important because it's important to the environment, it's important to our customers, it's important to our suppliers. These guys all know that they come in, we get audits constantly in this area, and it's important to our employees, and it's important to recruitment and retention. We're absolutely committed. Again, more on the website, but wanted to make sure to at least touch on that with you here today. Well, the Avnet value prop, we think is as relevant as ever. The pervasiveness you've heard about with electronics, secular long-term growth. We're really thrilled about the Avnet, and Chris did a great job. The Avnet and Farnell opportunity really in its relative infancy as we're really leveraging the connectivity between the two. Tom did a great job of talking about the acceleration of the higher margin businesses while still driving all the other growth in the company just at a greater rate of growth. The countercyclical balancing. Ruplu, to your question and one of the others, yeah, we know that could happen. Well, then we spin off more cash, and we do other things, right? We're not gonna be immune. None of us are. If there's any kind of correction, we're not gonna be immune to that. I mean, it's just. We're just not. It's how we react to it, okay, and operate and execute in it. And that'll, you know, the cash flow will give us more opportunity for growth, buybacks, dividends, things along those lines that Tom touched on. These are just a couple nice slides I wanted to throw in before I close out. By the way, in the video, same thing. They're all our employees. We are at the center of technology, are partners with our suppliers and customers. These are all different shots. This one particularly is kind of special. That was for our logistics centers around the world. We did a recognition. You know, I was talking to someone at the break, you know. They got the CEO award, all logistics centers around the world, because they never had a chance to go home. Okay? We never shut down one day of operation around the world in servicing our suppliers and our customers. That one, particularly in the bottom left, but really neat stuff. In closing, this should be it. There you go. It's been talked about, we accelerate our customers' success. We wanna be a trusted partner with our suppliers to go do that, and these are, again, just some of the end products that we service. Wanted to close out with something that was relatively light, pleasing to the eye. It was pleasing to our employees, our customers, our suppliers. We don't have a business without all three, as I kicked off today. We are. Can you just go to the. There you go. We're in the people business. Okay? That is, that's what we do. We're in the relationship business over long periods of time, and it's times like now that you really even further accelerate that opportunity to help. It's easy when business is easy. Okay? You test partnerships. Any relationship are tested in more difficult times than they are easy times. I'm really proud of the team across Avnet. Before I close, let me just four key messages, then Tom, I'm gonna add a few thank yous as well, if that's okay, at the end. The past few years, Avnet's prioritized the back to basics approach, the right size, and focus the organization on where we need to deliver results. The increasing complexity and crisis in supply chains has further heightened the appreciation for Avnet's value proposition. We've always known it's there. It's just even further accelerated and recognized. Tom talked about the durable changes that we've made. The strong team we have positioned within Avnet in a diversified portfolio of verticals with no one vertical being that sizable. Okay? We can further withstand adjustments in the marketplace. We're well positioned. Thanks for the last question that came across to hit mid- to long-term goal greater than 5% in operating income and continue to increase the shareholder value. Let me just, in closing, thank you all for coming. Thank all those that are online. We really appreciate the opportunity to tell our story and a lot of what we put together was, "Hey, what's next?" Hopefully we've helped answer, "Hey, here's where we were." As I started, here's where we are and here's where we're going. You know, the team did a great job, I think, of articulating that. It's. Somebody told me a long time ago, distribution's an easy business, but it's really, really hard. You know, right? We're managing and balancing so many different priorities, and we love it. Frankly, the more complex, the better, okay? 'Cause that's how we build out longer term solutions and partnerships. Let me just thank a few people as well. Thank all of you again. I wanna thank Nasdaq. They did a really great job. This morning was exciting as heck, I'll tell you. It really, really was. I wanna thank the Abernathy team, Sheila, Liza, and DW. Appreciate your help and guidance. Rose around here somewhere too. Rose gave a little assist there. Oh, there she is, right behind me. And Heather standing next to her. I'm gonna mention a couple. Tom mentioned Nicole Freeman, but there's all these folks are listening, I can assure you. There's Karen Pawlikowski and Rosemarie Gorell that you know are listening that are behind the scenes that really helped us. This is a very complex thing to put together. Of course, wanna thank Chris, Paul, and Heath. They're also here, by the way. They'll love to talk to anyone in here about what they discussed today or anything else. Last but not least, of course, we should already recognize, but thank you. Where's Jamie? There she is, in the back corner. A special thanks, Jamie. A really great job. Joe Burke, really appreciate it, okay? Super job. Thank you. I think that's a close. We'll catch you on the social hour.