I'm Joe Quatrochi, the components distribution analyst here at Wells Fargo. Excited to have the Avnet team here, Phil Gallagher, CEO, and Ken Jacobson, CFO. Thanks for joining us. Thanks for having us, Joe. Appreciate it. Maybe to start, you know, I think it might be helpful just to kind of give us your view or, you know, how do you think about, when you talk to investors, you just did a full day of meetings, you know, what do you think is the most misunderstood or maybe not underappreciated by investors for the Avnet story? L ike, as you look out in the next, you know, three to five years, what is the biggest opportunity that you see? Yeah, it's a great question. Yeah, we just met with a bunch of investors. A gain, thanks for having us. It's been a good conference. You know, misunderstood, misperceptions, we just came off two years of double-digit revenue growth, high double digits. We just closed our fiscal 2023, runs July to June. We closed at record earnings per share. We are global. We're diversified company from the standpoint of there's not one supplier or customer that's greater than 10% of our revenues. The verticals we serve, and definitely, you know, transportation, automotive, industrial, medical, defense, aerospace, consumer, you know, heavily diverse, which is, which is, again, great. I think the part that they're just maybe not appreciating, I don't know if it's undervalued, is just what we do is we're in the center of the technology supply chain. Now, I call it upstream. You know, we're between our suppliers, some of the largest, highest tech companies in the world, and 1 million-plus customers that are some of the highest tech companies in the world. W e're connecting those from demand creation to supply chain, anywhere they want to go. So we just need to continue, you know, explain that story. We're proud of it, and I should note, we've been around for 102 years, so resilience, we've seen all kinds of different markets, ups and downs. Yeah. We managed through it well, and we will again. Okay. Ken, anything you want to add? I just think the last few years, you know, clearly there's been tailwinds with the market and the market growth components, but, you know, we've proven that the distribution model works, and we can—as we get scale, we can create operating leverage. And so you see that in the operating results and the margins. W e think there's more secular tailwinds to come, right? Even though we're going through a correction period right now, we see lots of opportunities- Yeah ... in all those markets Phil talked about, you know, high single-digit growth type opportunities, and we're playing all those higher growth markets. Yeah, Joe, you mentioned, and what do we see in the next three-five years, right? Yeah. Well, again, I've been with Avnet for 42 years. You know, next three-five years is exciting, it's. I think it's gonna be in my career here. I mean, just look in the last five years or 10 years to what the next 2-5 is gonna bring from a technology standpoint. You know, your home, your auto, your bike, e-bike, trucks, tractors, it's just gone electronics, okay? And just the pervasiveness is just phenomenal. W e're right, again, in the middle of that. And then, in a way, this past 2-3 years of COVID and supply chain breakdowns have really positioned us. It's kind of almost been a silver lining, you know, for us, 'cause when these supply chains break down, they're calling us. Yeah. We're having to hire more supply chain architects to help rebuild out the supply chain. I think the industry in general, on supply chains, kind of took that for granted, you know? Now that people realize you got a 25-cent chip holding up a $500,000 dump truck or- Yeah ... they, they can't let that happen again, right? T hey're calling us in, and we're dealing with companies that we've frankly weren't dealing with before. Large, major, large, OEM manufacturers. So it's the next 3-5 years are exciting. It's helpful. You know, you had an analyst day 18 months ago, something like that. You outlined some, some medium-term targets, and, and we can go into that a little bit, you know, later on. But, like, I guess, you know, a lot's happened since then in terms of the cycle and the shape of the cycle and everything. You know, what, what's maybe been the surprise to the positive? What's been the surprise to the negative? You know, I guess, what's gone better than expected, what's, you know, not? Maybe just kind of touch on that, and we'll dive into- Yeah The segments a little bit. I mean, our time frame for our last investor day was June of 2022 or so. And what I would say is, you know, the positive surprise have been, hey, the market and demand held up pretty well. We always kind of knew there was a potential correction coming, but, you know, we feel the demand's held up pretty well. We've been able to exceed those growth targets we had there. You know, really across the board, across all three of our regions, really, really strong growth and been able to leverage the OpEx model, and get efficiencies there to be able to, you know, drive that operating leverage and actually achieve earlier than expected, our kind of medium-term targets in terms of operating margin. You know, clearly, the disappointment, I would say, would be, you know, a combination of the working capital days growth and the drag that had on cash flow. You know, clearly, there's opportunity there to create more free cash flow for the future, as well as our Farnell business. You know, our Farnell business really, really peaked, and now it's kind of come back down for various reasons. I would say those are the two things that, you know, clearly we still believe in hitting those targets, but it's maybe more disappointing a year in, a year into it. And the last thing I'd say is, you know, the capital allocation priorities, even though we've been in and out of buying back shares, we're still ahead of those targets in terms of we've- ... reduced over the last fiscal year, 7%-8% of our share count, which is, you know, on track for what we were thinking about in terms of capital allocation. We've projected, to Ken's point, you know, a 5%-8%, something like that, growth rate, based on all the prognosticators out there, to putting our own little formula to it. And so in some Some analysts said, "Hey, why, why would you go out that, that aggressive?" You know, we're like, "Well, that's what we see, and that's what we've seen. Yeah. You know, so we're actually taking and we're hitting those numbers and growing share. We've got some things we need to go work on, Ken just pointed out, which we are maniacally going to go work on, okay? In the cash inventory- Yeah For now, but the other metrics, as I said earlier, we're pretty pleased with what we projected out to do and the execution. Okay, that's helpful. You know, maybe in that segue, right, let's talk about the cycle, right? In terms of demand environment, you're saying, you know, no two cycles are alike. But I guess, talk about, you know, your current views of the cycle. You know, how do you think about this down cycle relative to past and what's maybe different? Let's just start there. Yeah. So you're right, no two cycles are alike, and, like I said, we've been around for 100 years. I've been through, you know, in my 40 plus, quite a few cycles, and none of them are the same. Look, we've had a great upcycle, right? There's been fraught with shortages and what happened, 'cause demand just went through the roof. Now, we just got a little bit of a flip-flop of that. I believe in what I said to the, our last earnings call, Joe, is that, I believe that we have inventory correction has to happen, end markets, EMS, ourselves, and some of our suppliers. I think we're 2-3 quarters, you know, maybe mid-2024, as we start to, you know, burn through that. If that's the cycle, you know, compared to other cycles I've been through in the past, it's—we can manage that, okay? The difference, I think, I always call out the great Y2K, you know, two thousand cycle. That was, for those who have been around, that was certainly the most painful. I was running the Americas at the time, and the business almost went in half, right? I mean, you had all the telecom guys, you know who I'm talking about. I won't mention any names, but all projecting 50% growth, you know, and 50% share, and the whole industry kind of toppled, and it was pretty painful. Well, that business is all still there, right? Now you got mobile, PC, and then the pervasiveness of the applications of technology and the semiconductors and interconnect, connect, capacitors. It's just everywhere, you know? I think that's the difference in this cycle versus previous ones, where I think, dare I say, a soft landing, 'cause, I mean, we've never seen one in our industry. But it does feel that the underlying demand is still, there's still underlying demand. Yep, book-to-bills are falling below parity. I'm fine with that. It was too overheated, okay, before. As lead times come in, it's a very natural thing for book-to-bills to go below parity, but our backlog is holding up okay still. It's really a... It's a very interesting cycle, to say the least. But I'm not bullish, I'm not bearish. I'm like: Hey, we can, we can, we can manage through this one. I mean, the backlog build, right? I mean, you've never seen, no one... You could pretty much throw a dart. No company has seen backlog build like they've ever seen in this past, call it, two years, right? Do you, do you see that as, like, sustaining, like, at higher levels, like, through cycle, and that's kind of maybe what part of this, you know, smoothing things out? I don't know. Yeah, the backlog, I mean, it well, let me just say, it wasn't real. I mean, you can't have, you know, book to bills- Yeah ... of 1.8- to 2-to-1 for over years. You know, not sustainable. Yeah. That's why I get on the call, I'm like: Hey, I'm fine with the adjustments in backlog. I think a lot of it has to do with the published lead times versus delivered lead times, okay, and how customers then adjust their MRPs, okay? And we, for the audience, we take in thousands of customer MRPs on a daily, weekly, monthly basis, so we get a pretty good aggregated view of it and put our own analytics around it. I don't think there's gonna be a huge shift in philosophy around backlog. I think there's gonna be a bigger shift in the JITs and the leans and things along those lines, where now, of course, interest rates going up might change that a little bit, but when money was free, effectively, why were all these companies running so lean? Okay, no inventory. And now they get the shortages, can't build out their trucks, cars, whatever it might have been. I think you'll see a difference there, as much as anything in the backlog. I think just the demand across our diverse customer base has held up pretty good, and you know, where we're not seeing inventory replenishment is, gets back into the inventory situation with our customers, that they have maybe too much of certain products, so they're not replenishing it, but there's still good demand for their end customers. It's just a matter of they don't need replenishment from us. I t's you know, creating more inventory in the overall ecosystem than we care for. But other than that, you know, the diversification is holding up across the end markets, and we're seeing some weakness there, but there's also some recovery in other markets. I think that's the good thing here is, you know, some of these markets that have been down for several quarters now, at some point, they're gonna start to recover, which gives us a little bit of a lift if some of the markets that have been steady for us start to decline a little bit in demand. Yeah, some of these markets Ken just touched on, but, you know, without mentioning names, you know, they start to bounce back. Yeah. Okay, and we could be right back into some longer lead times again. Yeah. I think the last thing, I just want to make a comment on, tied to backlog. You know, our job is we're that shock absorber for the industry. Yeah. We've been there from day one. We inventory. We're basically a bank in our own right, okay? And we're really proud of the team that we thought going into COVID and all the challenges going on supply chains, and we thought there'd be a lot more companies that didn't make it, you know, smaller companies. We service that long tail of companies, and, you know, really pleased to say that we're not seeing that. Yeah. Okay, that's us helping them manage their inventory, helping them manage their cash flow, you know, not forcing things down their throat they don't need, because we're in it for, in it for the long haul, and that's a real credit to the finance and asset teams. I mean, it's fair to say if that is different than past cycles and the way that just the industry in general has behaved. Is that fair? Fair. Yeah. Yep. Yeah. Yeah. Okay. Maybe kind of, you know, regionally, there's definitely probably different demand signals out there that you're tracking. I mean, talk about, you know, weakness in Asia has been definitely persistent. Yeah. Maybe there's starting to be some indicators around the rest of the western regions. I mean, what's the correlation there in terms of, like, is it kind of a first in, first out, you know, last in, last out? How do you- You mean regional kind of thing? Yeah. Like, how do you think about, like- Yep Asia as being a leading indicator of the West? Typically, again, I don't know what's typical anymore, but typically in the past, you know, Asia's, you know, let it out and, or let us in, right? And Asia. And I should know too, Joe, we're also not overly weighted to China, okay? We're doing business in China, of course, but we're not overly. It's not like 50% of our business, not even, not even close to that. It's roughly 25% of our Asia business, let alone our enterprise. So we're not getting hit as hard there when China slowed down. We are feeling more optimistic, okay, about Asia starting to, or maybe they hit bottom in this June, September time frame. We'll start to see them come out a little bit. That's what our leadership there believes, which would be a positive sign. T hat's still with, you know, China relatively slow, right? So a gain, that's some of these things pop, you know, it could be, you know, Katie bar the door. Europe has been really strong for us. It's our strongest region, our most diversified region from a customer set. Heavy industrial. So is the U.S., but heavy long tail of industrial customers. And they've had three record quarters in a row, and we're finally gonna see that correct seasonally. Okay? So we're gonna have a... Where the typical seasonality in the past several years has not been so typical 'cause of COVID and what not. We're gonna see that, which we called out, a slowing down a bit in Europe. But it's been extremely resilient, and Europe's been terrific. And the Americas, it's kind of holding on. I mean, it's down slightly, but the Americas business is pretty steady, down just a few percentage points sequentially, right? And which is, again, typical for this, you know, for the seasonality. And so, yeah, if Asia flattens out, starts to come up a little bit, usually does go around the horn. Yeah. Okay. When you think about, you know, one of the dynamics of the cycle, it's definitely been different in terms of inflation and the cost and pricing. Help us kinda understand the pricing dynamic that you're seeing. Maybe just actually first give us kind of a, an overview, like where your role is in terms of, you know, your supplier gives you pricing increases, and then passing that on to the customer, and then how do you think about pricing going forward? Yeah. You want me to take that? Sure, and I can add some color. Yes, when we had all this inflationary pricing over the last several years, and every supplier, and we had, like, 50 different suppliers raise prices 10 different times, and they all do it differently. So you can imagine the amount of SKUs and the system issues that we had in getting that done process-wise. If we have a contract with you, Joe, for XYZ price, and a supplier raises that price 10%, we go to work with that customer to... And a lot of times, suppliers help us, "Hey, we need to raise the price." We don't raise it 15, we don't gouge, we don't, we don't have a gray market business, so we don't- we're not out, you know, taking that product that Joe Quatrochi and selling it for 2x the price out there in the marketplace, which we could do, but it's not what we do. W e don't get, and we got a lot of these questions on the earnings call, well, had the actual lift in margin. We get, we get some scale, right, and some volume and GP dollars, but not necessarily margin percent. Yeah. Okay? Same thing on the other side. And we're not seeing... Today, we're seeing some pricing pressure. You always see pricing pressures, but we're not seeing the deflation area that we've seen in the past, Joe. Yeah. Standard products, yeah, I mean, they're always, you know, kind of like book values go up and down. But in the higher end, with the input costs, labor costs, you know, precious metals costs, et cetera, we're not seeing that typical, okay, price deflation. Ken? Yeah, I think, Joe, you mentioned earlier about, you know, behavior being different this time around at this cycle, and I think the pricing increases were an example of that, where no one liked it, and the customers clearly have pricing fatigue. Yeah. But they understood it, you know, because the suppliers were the ones that having to pay more, and it all kind of goes upstream. We saw it in our own everyday lives. You had a home improvement project, right? Your lumber's up, everything else, and so- Yeah ... you know, the semiconductors kind of moved like that. And so, you know, there's a lot of execution there, you know, although it did, let's say, over that timeframe, maybe 25% of our growth, give or take, you know, came from pricing. You know, there was a lot of execution by our teams to be able to pass that through and not get stuck holding the bag, if you will. And, you know, we do feel there's a lot of work to get those pricing increases passed on. The price increases are still there, but we still feel pretty good about a stable pricing environment. You know, there's still some places where you see price increases, you see some competitive pressures for ASP, you know, erosion a little bit, but I think in general, pricing is holding up pretty well. You know, suppliers are really trying to manage the inventory in the broader market to help make sure they can maintain that pricing. Y ou're seeing a lot of that with their growth and inventory and their, you know, guidances, because they're trying to make sure they manage the inventory that's out there to make sure they can keep that pricing where it's at, 'cause it's needed because of the true input costs. Right. You know, on that, one of the questions I get a lot of times from investors is, you know, can you remind us of the protections that you have in place for your inventory with your suppliers, and just how that process works, and, and- ... Yeah, I think in general, especially for, you know, proprietary type products, if we have the inventory on hand, then our contracts typically provide us price protection. You know, one way or the other, even in increasing price markets, right? Then we, then we still have to pass those on, but if the prices go down, then we'd get, you know, the inventory on hand corrected. You know, typically there's a period of time that happens when a price change happens for those protections to be exercised. And so again, there's good communication when it's happening. Sometimes we'd like more, you know, advance notice, but, you know, what we've been dealing with lately has been increases rather than decreases, but we feel we're sufficiently protected on the downturn in terms of, you know, broader market declines in pricing. That's helpful. As you think about, you know, and I think I've asked you this, like, I ask you this every quarter, but, you know, as you look at the, you know, the, the breadcrumbs or the derivatives of what you're trying to understand for, you know, pricing changes coming down the pipeline, what is it that you kind of look at? Is it foundry, foundry wafer prices or, you know, we see, you know, of late, like some kind of news articles and things saying that, you know, pricing for some of the second-tier, third-tier foundries are starting to maybe see some kind of loosening of pricing there. Is that kind of the, the derivative that you look at, or is it even down to just like the raw materials? Not really. I mean, we look at it, Joe, but we don't. I mean, we're not out there hedging, we're not out there- Yeah -spot buying. We're not opportunistic. Most of what we buy is gonna be, you know, ABC-coded products that are for the general market and general awareness of the market. Then we have a lot of our business today is contracts. I mean, we have customer contracts for, which is why we don't price gouge. They have a contract or long-term partnership. So we don't really speculate much on that at all, really. We have pricing tools. Now, we have, we use a couple third-party tools. We have our own in-house analytics- Yeah -that we look at for pricing, optimization, quick term pricing, things along those lines. But not as much looking at the fabs and trying to figure out what that pricing point is gonna be. Okay. Okay. Maybe shifting gears a little bit, you know, you've talked about some of the demand creation and things, but maybe double-click and, like, help us kind of understand, like, the value proposition that you, you know, add, that you can attract new suppliers, you can attract new customers. Talk about some of those kind of design, you know, activities and engineering that you guys are doing. Yeah, there's two pillars we talk about all the time. And, you know, you got Demand Creation on one side, and, and for those that aren't aware of it, it's where we're influencing design. We don't create demand necessarily, but we, we're influencing design with our top suppliers. We have proprietary products. We have thousands of field application engineers around the world that are EE engineers, and we-- we don't just help design it in the chip, if you will. More and more customers are looking for solutions, okay? And then they... We, We, we help them do that. Suppliers give us, award us, I should say, a re-registration, and then when it starts to ship, it's called Design Win. T hat's the number we talk about on the earnings call, Demand Creation revenues. Has to have a supplier registered registration tied to it, and then we that enables us to track that anywhere around the world. We think about we're doing all the designs here in California, and everything ends up in Asia. We have no protection. We have a lot of investment in FAEs, digitals, design tools, et cetera. So that's a big part of our business, over 30% of our business that's tied to a design. And you got to keep feeding that funnel because there's generation. Yeah. You know, this product might be around for two, three years. You got to be make sure you capture that next design and the chips inside. And then we have a embedded business, that's what we do full turnkey designs. It's based in Germany. Ken, I was just there, new facility, but we're doing turnkey designs for customers in the typically in the industrial space, where we actually do the design, we manufacture it, we put it in an enclosure, we ship that product to the end customer. So that's a big piece for our business as well moving forward. M ore and more customers and suppliers, frankly, are leaning on the channel, leaning on Avnet, okay? Because there's not enough resources out there. Yep. So they're leaning on us to use more of our design services. Maybe just kind of on that, talk about some of the investments you guys have made. I know that's been a big focus since you took over as CEO, with the- Yeah ... really leaning into that. Yeah. So, you know, very candidly, just always transparent. We kind of got off kilter a little bit with some things, as you know, Joe, and we said, "Hey, we're back to the... Not going backwards, but back to the fundamentals." We know the value we bring to marketplace. We've continued to invest in field application engineers. They're not going away. I mean, I know some of you, "Oh, you could digitally go online and..." It's an and, not an or. Okay? We want to make them more efficient, more productive, higher value sales calls, where you could, you know, level one, level two might be able to be done online, okay? But the FAE is still gonna play a key role for us. One of the big tools that we... Two, two things we've rolled out, and we talked about it before. One is called Avail, and Avail's tools is a block diagram, a tool that's a digital online tool. So it used to be just where our FAEs had access, and we had to share it with the customer. Well, we found a way to be able to port that directly to the customer with security around it, because we don't want them taking all our designs and going somewhere down the street. And so they can self-serve now and pull, actually pull down the parts they want for a flow meter control, industrial application, lighting shades, whatever. There's app block diagrams in there, and then our teams can see that. Okay, then our teams can go to that customer and add further value to help them with that design. And then recently just rolled out what we call FSP, Full Service Portal. You know, I think it's really important that no different than us as a consumer, customers we want customers to do business with us any way that they want to. Believe it or not, in this day and age of 2023, they still love to call their inside salesperson. They've had inside salespeople cover them for years. That person knows as much about their account and their products as the buyer or procurement folks or engineer. Fine, we want them to keep calling. If they want to go in and self-serve, we have a full service portal. They can go in and, you know, adjust their backlog, book orders, contracts, et cetera. They could do it all themselves, or e-commerce, as well. K ind of, you know, the Full Service Portals are something we rolled out in Europe, rolled out in the Americas, and will be in Asia as well. So just some of the things we're doing. It is about digital. I mean, you know, we've got to make ourselves more productive, more efficient, higher levels of service and accuracy and quality. You know, a lot of that's going to be done through digital. That's perfect. Maybe shifting gears a little bit, let's talk about the Farnell business. You know, obviously, you talked about it a little bit earlier, that it's been maybe something that's been disappointing since the analyst day, of just kind of how things have shaken out there. Talk about, you know, the demand kind of from a demand perspective, you know, the revenue drivers or contributions, and then just kind of think about, you know, what, what's happened there. You want to take that? Yeah, I think, you know, a couple of things. I think, you know, when the shortages were there, you know, our Farnell business, which is really a high service business, you know, long tail. A lot of SKUs, you know, not very deep but wide inventory. You know, customers were going to Farnell to get some of their, you know, component shortages. So they did see a premium in terms of their gross margin, which led to, you know, premiums in their operating margin. But really, what's happened as of late is that premium is unwound as products become more available. But really, it's been kind of a double whammy because now their mix of semiconductor or on-the-board components have kind of gone down, which is generally a higher gross margin product mix for them than some of their other, you know, maintenance and repairs and test and measurement industrial applications. Y ou know, kind of a twofold, where you had a gross margin declines from the premiums unwinding, but then also a negative mix in terms of their overall component mix. T he sales levels have held up reasonably well, but it's a negative mix on the gross margin. Those are probably the two primary factors and, you know, what happened. As we grew that business, as we did add costs, we were making certain investments, and I think there's some optimization of the cost model we have going on there as kind of the immediate steps to kind of get the business back on track. You know, they have, you know, gross margin, let's call it 3x of Avnet's overall gross margin, so very healthy gross margin. So, you know, at their current sales levels, they should be much more profitable in terms of operating or EBITDA margin. So we're kind of back on track to fix that. And longer term than our medium term, there's lots of gross opportunities. They've expanded their line card, they've got, you know, some tailwinds coming from availability of single-board computers. And so there are some very exciting growth opportunities, not to mention the synergy opportunities between Avnet and introducing the Farnell proposition into our broad customer base. So there's more opportunity to kind of cross-sell some of what Farnell provides, especially in the MRO test and measurement space, into our broad industrial customer base. L ots of exciting opportunities. We're not pleased with the- current performance, but we have a kind of a pulse on where we need to fix it and where we need to go short term, as well as, you know, medium to long term, and still have a lot of, you know, optimism on that business in terms of what they can provide. And we've proven we can, you know, operate at high double-digit operating margins, and we think we've got a path back there. I think you said a lot. I mean, we're not pleased. You, Yeah ... you recap, recapped that. We've got the actions in place. That should be a tailwind and a lift to the Inc. numbers right now. Our last quarter wasn't, and so we got to, we got to fix that. Okay. Maybe just kind of duck down into the broader kind of discussion of EBIT margins. Like, one of the questions that I get a lot from investors is what, what happened in Farnell in terms of... I think there's some pricing dynamics in there as well. Like, and we kind of talked about pricing, but, like, why should we not think about, like, Farnell as being kind of a leading indicator of what might happen in the EC business or, or, you know, pressure on margins spreading to the broader business? Like, what, what decouples that, I guess? You know, it's a totally different business model. You know, we, you asked earlier, Joe, you know, from an investor standpoint, concern about, you know, pricing deflation, right? Well, we've on the core side of the business, the side, you know, the $24 billion of this, you know, we got the price protection there and the Ship and Debit, right? Yeah. Get very complex, as you know. Farnell doesn't have that as much. So I think that's one of the bigger differences. They're buying more off of a more—not everything, but more of a bulk price. T he other thing is, to Ken's point, they just have a mix shift issue. Their margins on the components are still pretty good. It's just that the revenue's down, margin's down a little bit, and their other businesses picked up, which again, is in our world, pretty healthy margins, but for them— Yeah ... not, not so much. So that's why on the, on the surface, you look at it and say, "Hey, their revenues are, they're not down that much. Right. But they're getting negative drop through based on the cost model. Yeah. I think the engagements are so different. I mean, we're, we're... They're dealing, like, with SKUs this wide, you know, broad, millions of SKUs, inventory this deep. You know, we got hundreds of thousands of SKUs, but deep inventory, we're dealing with more production world. So I think the way the contracts are set up, the way the business model is set up, it just, it is, it really is a different business. If it wasn't, we would've merged them in. Yeah. But there's a distinct brand with Farnell and Newark that they have that draws a certain customer set to them. Yeah, and that's my only comment on the electronic component business, is there's always been pricing pressure in terms of the, you know, we have, we have stiff competition out there, not only, you know, global competition, but also, you know, competition specific to Asia. W e've always had challenges competing on price. I would say the cost of capital is changing some of those behaviors, right? Because it's, you know, give you a better margin, still give you terms, it becomes upside down pretty quick now with interest rates where they're at. But, you know, we talked about demand creation. We haven't talked about IP&E. Yeah. Supply chain as a service, you know, some of our embedded opportunities that Phil just mentioned, those are all higher margin opportunities within the EC business that allows us to, let's say, have some normal competition, some maybe normal margin erosion for the kinda base business, but still be able to kinda maintain margins. W e feel pretty good about those. Yeah. Higher margin opportunities coming into our electronic components mix that help us kinda balance it out, where, you know, we can still absorb some pressures and still kinda hold up and even expand margins over time. With some of those opportunities, we think we can expand gross margins moderately. Good, good point, Ken. I wanna reemphasize just two points. Ken, Ken mentioned demand creation. You know, we get why is that important to us? Well, one, it's stickiness around the board. We get protected. We also get on average, 400 basis points higher margin, okay? IP&E, we didn't talk about IP&E today. That's the connectors, capacitors, electromechanical. That's a $3 billion-$4 billion business for us. That also gets about 400-500 basis points higher gross margins. E xcuse me. T hen supply chain as a service, as you know, we've been starting to introduce that model more and more. W e think there's offsets, okay, that can help us protect our margin on the downside and increase it on the upside. Yeah, and I think you guys have also done... I know you talked about the sustainability, with, like, structural things underneath—that that maybe, you know, provide you better gross margin or better just operating margins than the company in the past. And so I guess maybe when you think about those structural things, you know, talk about those in terms of you being able to sustain higher through cycle margins. Yeah, I mean, Phil talked about some of the digital tools and capabilities, right? H ow do we make ourselves more efficient? That's, you know, a core tenet of that. You know, there's some long-term investments in terms of warehousing capabilities and things like that, that we've been investing in, that really gives us a platform to be able to grow and scale without adding much of cost. And really, just when we're talking about an investment, we wanna say: Does the business need it? Is it gonna help the business grow? Versus, "That's nice to have," or, "I need this tool and that tool." It's really more of is, you know, being business-led with our decisions on where to make investments, right? What does the customer need? What does the supplier want? You know, how do we be easier to do business with? That's really the fundamental. Getting back to the fundamentals is we're a value-added distributor. We're gonna invest in tools that make us a better value-added distributor, and get away from some of the things that are nice to have, higher margin opportunities, but they're really not in our wheelhouse, right? We know supply chain, we know, you know, distribution business, and, you know, that's okay. We can make a lot of money doing that, and there's higher margin opportunities like supply chain as a service, that can really show the value we provide. We don't need to go too far outside of our wheelhouse to be able to grow profitably and to, you know, make a nice return and we think longer term, you know, provide a lot of return to shareholders. Yeah, I think a good strategy is defined as, as much of what you stop doing, as much what you do do. Yeah. We stopped some things, so that was part of the shows. We just... We can't afford to do that. It's too far outside the wheelhouse, to Ken's point. W e just structurally, just about 3.5 years ago, just stopped investing in some areas that weren't getting us a return. Perfect. One of the things curious about, you know, this year we're seeing China domestically, you know, invest a lot in just adding semiconductor production capacity. You know, we're obviously seeing a big inflection in terms of just their ability to try and develop their own semiconductor industry. Obviously, a big driver of that being EVs. How do you think about, you know, offering Chinese supplier components, as well as just kind of if there are some Chinese distributors, your, your value prop relative to them, and just... I guess, how do you think about that aspect of the semiconductor market that's maybe somewhat... It, it's becoming much larger very quickly? Yeah. That's a three-beer conversation there. Yeah, carefully. I mean, obviously, we're watching. We're in China. As I said, we have a sizable business there, but not overweighted to China. We're just really watching that landscape. We have to make sure, you know... And we have our commitments to our current suppliers, right? Yeah. That we've had for some 60, 70 years, that we've had them. You know, so we, we take it- we, we don't take it lightly, just adding a line for the sake of adding a line. That's not what you're saying, I know that. But we, we look at what we call gaps and overlaps. Yeah. You know, what technologies do we have? How many technologies do we need to have to cover this gap in a, in a board, let's say, a board design? Do we need to go bring in another line? We have those conversations transparently with our suppliers. Obviously, the Western suppliers are gonna be a lot more sensitive- Yeah ... you know, to bring on Chinese suppliers, particularly the U.S. Western suppliers, even more so than the Europeans. T here'll be more China for China. Yeah. Right? Yeah. We're gonna be very, very slow to move outside of there. Perfect. Maybe just we'll sneak in one last one. Yeah. Just working capital, free cash flow, Ken. Just kinda talk capital allocations. Give us a quick- Yeah. I think, you know, we need to get back to generating consistent cash flow. You know, the inventory has been a challenge there, you know, the working capital investments. But we do see line of sight, over the next few quarters to kind of getting that to soften a little bit, so we can generate the cash that already exists on the balance sheet. W hen that cash flow occurs, you know, we're gonna stay committed to, you know, not only investing in ourselves and some of those investments we talked about, but also, you know, return to shareholders in form of buyback and our consistent dividend. You know, we will take some of that cash flow and pay down debt. We wanna make sure we've got appropriate leverage level. There's opportunity to, you know, lower our interest expense, but we wanna kinda balance that with buybacks, and we still, you know, still trading below book value. You know, I think the stock is very attractive right now, and it has been, so, so we wanna kinda get back to that buyback trajectory and make that more consistent part of our capital allocation priorities. Perfect. I think we'll end it there. Thanks, guys. Okay. Thank you, Joe. Thanks. Everybody, for listening. Thanks, Joe. Thanks, guys. Appreciate it. Thanks. Yep. Thanks a lot.