Avnet, Inc. (AVT) Earnings Call Transcript & Summary

Analyst for tech distributor coverage at Citi. We're happy to have Avnet with us today. Avnet is one of the largest semiconductor distributors in the world. Representing the company is Tom Liguori, CFO of the company. Tom, thanks for joining us today. I will start with several of my questions and then I will open up for Q&A. Before that, I guess, Tom has some slides to share?

I was just going to make a few opening remarks. And first of all, I'll talk about our -- what is the company today? What is Avnet? What is our ecosystem? I can see that chart. It's a little hard to read. Think of this as an electronic distributor. We are -- our customers are the middle market, right? A supplier will go direct to Tier 1s. We're at the middle market. So what's going on in the middle market today? Well, they're still designing new products. There's still time to market pressures. But really, they're trying to do connected devices. And anybody that's been walking the floors sees that, sensors, connectivity, cloud storage, software. So we, over the last 2 or 3 years, have really been adding to our ecosystem to be able to accommodate that. Two or 3 years ago, we added Farnell. Farnell is a specialty distributor that really serves the entrepreneur and engineering market, so totally different value proposition. An engineer wants to be able to buy all of their parts and get them tomorrow to put in a prototype, so less price-sensitive. Gross margins in that will be in the 35% range versus 12% range. And when you look at Farnell, they have engineering communities. So our engineering communities has over 1 million members and that's where they share design ideas, experiences, and we use that as a way to bring them into our ecosystem. We continue to have the high-volume distribution of our core business, which is once those products get into high-volume production, but we've also added things like software and a partnership with Microsoft Azure. So again, those middle market clients, they don't necessarily have all of the capabilities in-house to do a connected device. So we think what we've put together is a little bit unique and will bode us well for the next 3 to 5 years. Some of the companies we've acquired to be able to fill out our services to our customers are software companies and people that make apps. And those are the types of things that we're showcasing here. Macro slow down, and I'm sure Tim will get into that. We're feeling a little bit better than we did 4 or 5 months ago. Our book-to-bill are improving, but really during the downturn, we're using this as an opportunity to manage our costs, reduce our cost, have a better cost structure when we come out of this, focus on cash generation. And I think we've -- the people at Avnet have executed well on that. Over the last 9 months, we generated $800 million of cash. During that period, our earnings per share were maybe in the mid $2 range, $2.50. Our cash generation was $7.60 per share. So I say that not that to focus on the cash flow itself, but I think it's a good testament to the people at Avnet that run the business day in, day out, that during this slowdown, they've really done a, I would say, an excellent job of managing inventories, managing receivables and helping us to be able to generate cash. So really the initiatives for the next 12 months are to get our Farnell business back to a double-digit operating margin, to continue to expand the operating margins in our Electronic Components business and to continue to focus on cash and generate cash. TI is transitioning, and that will be a 12-month process from here on out. And I think we're in pretty good shape as far as having a plan and executing to it. Tim, what would you like to talk about?

Yes. I guess, you just mentioned the ecosystem and design ideas for new technologies. For CES this year, what are the technologies that make you feel excited? And do you think it could be the potential driver for Avnet in the future?

Yes. Well, if you go over to The Venetian at some point, we're showcasing our IoTConnect product. And what IoTConnect is, is a product that you can buy on our website, and it's going to be an IoT store. So an example that's over there is a fleet management company that wants to manage, let's say, the forklifts that they have around the country. IoTConnect comes with connectivity, which is recurring revenue to us; comes with cloud storage, recurring revenue to us. But really, what they need is a software app, right? That's where our acquisition of Softweb comes in play. So today, what we are selling is an IoTConnect product that -- a one-stop shop where you can get all of your needs. So if you want to do a fleet management product to track all of your forklifts around the country, you're able to do that from one source. Very important to us, especially the -- probably middle market customers.

Can you just talk about the overall demand picture you are seeing by end demand and region -- by region?

Yes. We're not seeing much of a change from December in that, first of all, we do feel better about the outlook today than we did 4 or 5 months ago. Our book-to-bills are improving in all of our businesses. The book-to-bills are not 1, but they're improving, and that's a change from where we were 6 months ago. Asia has been stable now for 4 to 5 months. EMEA, the economy is still soft. So we're not declining. We're not increasing. EMEA business is hanging in there. Americas, we had expected a decline this quarter similar to what we saw in EMEA and Asia when they went through the macro slowdown. And it's kind of down less than we expected, so we're feeling much better about Americas. Think we need to go around the world with the inventory correction, meaning inventory in the supply chain at customers, predominantly over in Asia, EMEA toward the end of that inventory correction cycle and Americas will really depend on where Americas goes with demand. Overall, we're hoping that by March or April, and this is what we're hearing from customers, that demand will be improving. I'm not trying to predict it, right? I mean December quarter, clearly, slow. I know you had the Microchip announcement December quarter. Clearly, slow was what the guidance was. March, with a book-to-bill below 1, March will be very similar to December.

Got it. Asia demand, you mentioned that it's improving. One of your competitors, World Peace Group, there's -- they have seen year-over-year growth these past 2 months. Are you seeing similar trend in that region in terms of year-over-year -- positive year-over-year growth? And then do you compete head-to-head with WPG?

Well, I think the latter is really the key in many products as we compete head-to-head. They do more memory and processing units than we do, so that comparison may be a little skewed. I would say our Asia business we see as stable. I wouldn't say that we see a lot of growth in it yet.

Got it. Okay. And I guess you just mentioned Microchip and many other semi vendors are caught out -- have caught out demand recovery in the first half of this year. Do you agree or disagree in terms of timing? And what are you seeing in the semi cycle?

Yes. First of all, Microchip is a very important supplier to us. So we took that as very good news, right, and we hope that that's a sign of things to come. There's always a question of are we a leading indicator or a lagging indicator? I think what we've come to the conclusion over, at least the last few months, is a supplier who is going, right -- their direct customers are the Tier 1 OEMs. So they may get the first indication of changes in demand. So hopefully, what we're seeing is that the Tier 1s are coming to Microchip with more orders. And as that Tier 1 flows that down to their supply chain, which is really who we're distributing to, we'll see the same benefit. So I think it's a thing in the right direction. Did we see in December an improvement in demand? No. We're pretty much what we talked about, I don't know, in the last earnings call.

In the past, during the cycle, what's the time frame that you are seeing, the lagging, compared to the semi vendors in terms of seeing the demand pick up?

It's pretty much varied. But if you follow that concept, it's probably 3 to 4 months.

Three to 4 months. Great. Any questions from the audience? Okay. Jim?

There's a lot of times a debate when somebody -- a chip company like Texas Instruments makes a decision to use distribution less or go internal. And then there's sometimes when I've seen over the years and decades, companies embrace distribution more and less direct. Where are we in this cycle? And what you saw happen with TI, is it percolating to others? Or what's your kind of view on that? Does it simply just happen? Or are we going through something secular?

Well, TI has been working on this for many years, Jim, as you know. And by the way, thank you for having us at the conference. It's an annual event and we really appreciate it. TI has been working at this for several years. A few years ago, they decided to do their own demand creation, and that was well known. They've also been investing. And if you think about, if you want to go direct, that is a lot of floor space, people, distribution capability you need because when we talk about our TI business was $1.7 billion, that's an awful lot of components that are flowing through your distribution centers globally. So that was a stated goal for TI. They've made investments. And so the decision itself was not a surprise. I think the timing was a bit of a surprise coming, but I can honestly say we don't have any other supplier talking to us about that. And I think it's just more what our semi suppliers focus on. They focus on new product development and getting their product to market. And they kind of like the demand creation that we do, sending out engineers to get them to, again, that middle market where it's just not economical for them to be sending people. But we have hundreds of suppliers, so we get much more revenue from the middle market customer than they would.

Just a quick follow-up on...

Any impact from Brexit and the recent tariffs?

The tariffs? It seems to be in a better place than it's been in many, many months. It's changing, but it seems like Brexit is better thought out and less of an impact than maybe we were afraid of 6 to 8 months ago. Any movement on the China-U.S. trade is positive for us, right? It takes away uncertainty. Hopefully, that will continue. So I think we're a little less sensitive to tariffs and Brexit today, but still it could change.

Yes. On the Texas Instruments disengagement, I think that the time line for the disengagement is -- will be completely by the end of 2020. Can you talk about the cadence of the disengagement? And what's the conversation you are having with your customers?

Yes. Well, it goes back to that statement. There's a lot of components that have to get transitions, right? So it's a very, very big task. So I think if you go back to our last earnings call or when we put out the 8-K, we expected it to move rather quickly and maybe be substantially done by the summer. The agreement is by the end of this year. It's a big task, so it may go through the year.

So would that be more skewed toward the first half or it's just barely...

I would assume equally through the year. I mean, I think that would be the preferred -- and I don't want to speak for TI, but the preferred solution. But we both have the same interest at heart, which is the customers, that there's just a lot that has to change and a lot of repositioning of inventory. So we'll see how the timing goes.

Got you. ON Semiconductor was here yesterday. I think they are one of your vendors. They mentioned they will expand their relationship with distributors, which is, I think, opposite to what Texas Instruments is doing. Can you comment on your conversation with your vendors after the TI decision?

Yes. I think many -- right, if you're a -- in the same space and you know that Avnet is not selling TI, then they see that as an opportunity to work with us closer to -- because we will put more focus on their products.

Got it. So are you having conversations with your vendors right now?

Yes. When we put -- that's a good question. I see where you're going, Tim. So when we put out the 8-K on the change in the TI, we had several suppliers have CEO-to-CEO discussions on that very point.

Got it. So what's your plan to absorb the top line deleverage right now given that, in the near term, that TI is going away and you're probably -- it takes time to ramp the new vendor relationship?

Yes. So remember that the TI business, because there was no longer demand creation, was predominantly fulfillment, which is lower gross margins. So we gave a range, a figure in the 7% gross margin range for fulfillment versus a corporate average of 12%. So our plan is not necessarily to replace $1.7 billion, but to replace it with maybe $900 million to $100 million -- I'm sorry, $900 million to $1 billion of revenue at "margins associated with supply chain engagements", it could be some demand creation, things of that nature, and to couple that with -- we announced about a $35 million cost reduction. And those 2 together would replace the gross profit or the lost profits from the TI transition. I would say that these things happen over the years in distribution. Something similar happened to us, unfortunately, 3 or 4 years ago because of some ERP issues where we lost suppliers. Hey, we worked through it. We got it back. We've added suppliers. You just bring up Microchip. Well, we didn't have Microsemi. Microchip buys Microsemi. And now we're doing Microsemi business as well. So there's an ebb and flow here. It will just take a little time.

Got it. So on the regional exposure after the TI disengagement, is there a change in terms of doing business in different region?

Well, it was -- that business was a little bit more weighted to Asia than Americas and EMEA.

Okay. Got it. So switching gear to margins. You have experienced some margin headwind the last year. And you mentioned product mix and top line headwinds are the key reasons for the margin pressure. Can you maybe just talk about the factors? Which are getting better, which are getting worse, which are just...

Yes. I think, look, when you look at our margins, there's really 3 overriding things we're focused on. One is the higher-margin business of Farnell. And we need to get Farnell back to a double-digit operating margin and that's -- part of that is a recovery in the market with passive pricing and volumes and to continue on the plan that we've been going through with some of the combining back offices. But that's very, very important, to get Farnell back. The second thing is, well, we have a program to reduce our OpEx by $245 million. And today, we're at about $180 million of savings. So we still have, what would that be, $65 million left to go, and that's going to take 4 to 5 quarters, but very, very focused. The last would be Americas. We talked about, over the last year or 2, that Americas, when we had the ERP issue last year, their operating margins went down. And I'm really pleased to report that Americas, they've been growing revenues just about every quarter for the last 5 or 6 quarters. I think 4 out of 5 quarters, we've had sequential growth in Americas, and that compares very favorable to our peers. And so continuing taking share in Americas and with that comes the benefit of operating leverage.

For the near-term margin expansion, do you have to see the subsectors like industrial, automotive to come back to drive your margin growth? Or you can manage the margins at the current level?

Yes. We gave some discussion of that the last earnings call. We are focused on achieving some level of margin growth through the -- really the cost optimization programs that we have, and a return to normal market conditions with macro would definitely be on top of that.

Got it. So your margins -- I think the implied margin guidance for the December quarter is slightly below 2% -- at roughly 2%. I think that's lowest since the financial crisis. Do you think that you have approached the bottom of the margin performance? Why or why not?

Yes. It really depends on where the economy goes. We're believing that it's bottomed out and that March and April we'll see recovery. So our expectation is that, with a book-to-bill slightly below 1, that would indicate to us that March will probably be very similar to December quarter. And if we get an uptick in demand in March, that will bode us well for our June quarter, which is typically when you start to see seasonal upticks.

Got it. Okay. Any questions from the audience?

Speaking of book-to-bill slightly below 1, and you mentioned earlier that like Microchip recently guided higher, are you seeing, net-net, more positive indications? Or is that just an outlier? What I'm trying to get at is it seems like through this show, companies have been talking a little more positively than maybe a couple of months ago.

Yes. Thank you, Jim. We are feeling more positive than we were a couple of months ago. In fact, our one-on-one before this, we were talking about what was book-to-bill through the cycle. Well, 5 or 6 quarters ago, our book-to-bill was close to 1.1. And as a company, I think we bottomed out in the summer more as a 0.9, and now we seem to be approaching 1. So we do have a good trend developing. And it's pretty broad as far as across the globe. It's in each of our businesses.

Got it. Any more questions?

Just curious, can you just describe what you think is kind of driving sort of the recent uptick? I mean, it's -- maybe it's kind of obvious, but how much of it is just kind of caution going into the end of the year last year, given the concerns about sort of trade and all that? And now is there just kind of a little bit of a relief? Are you -- do you think we're seeing kind of end demand improve kind of across various sectors? Just maybe talk through that a little bit.

Yes. I think that a more stable trade is definitely helping. I think the inventory correction that's associated with any cycle is well along, meaning in Asia, we think the inventory correction is complete. In EMEA, we think it's near complete. And that's -- those are good signs, right? That means that as demand picks up, we'll see a pickup in demand. In Americas, it's a little harder to say because it's unclear where Americas demand is going. Right now we're seeing a more positive outlook, to Jim's question, than we did 3 months ago. As far as industry, aerospace and military continues to remain strong. And even with the Boeing announcement, we may see a little softening on aerospace, but being picked up on the military side. Automotive and industrial, not really much change.

Questions? Quick follow-up questions on inventory. I think many component suppliers have mentioned the channel inventories had an issue for pricing. And I believe your -- I believe your inventory days right now is at roughly 70 days in the past 2 quarters, which is much higher than the 40 to 45 days back in 2011, 2013. I guess, 2 questions here. Number one is, do you think that you need to work down the inventories to get better margins? And number 2 is that -- what's the optimal inventory levels do you think that you can see the margin improvement?

Yes. That's a good question. What might be skewing that is the addition of Farnell a bit because Farnell, serving the engineers and having to have a breadth of SKUs for the engineers, has much higher inventory days. I mean, it's approaching like the 200-day type market. And that's really just what the industry is. But leaving that aside, yes, we've been on a program for the last 1.5 years to better manage our working capital. We know that there's still room in the inventory to come down. I would say it's maybe a little bit macro-related, but more just part of the continual working capital reduction plan, Tim, that we have going on. Working capital in total, 1.5 years ago, we're in the 95-, 96-day range of working capital. Today, we're at 84, and our goal is to get it down to 70, but that's going to take 5 or 6 more quarters. But we made a lot of good progress.

Got it. So on Farnell, I think you mentioned this is a catalog business. You had good progress in terms of margin expansion, I think, in 2018, but -- and first half of 2019, and then you had something like a margin headwind in the past 2 quarters. What's the main difference between the catalog versus broad line distributors? And then can you provide some color on how do you plan to drive the margin back to low-teens?

Yes. So, well, the main difference is, who is the customer, right? Within the same company, the production side is buying from what you would call mainline core distribution. The engineering side is buying from Farnell because it's an online sale. It's got far higher SKU count and much lower order size and you can get it delivered in a day or 2, right? So just totally different scenario in that. I'm sorry, what was your question though?

So how do you plan to drive the margin back to low-teens?

Yes. So -- say it again?

10% double-digit margin.

How do you get the margin back? So different topic, I'm sorry. I thought you were still on inventory. So my apologies, Tim. Last quarter, we were at 6.5%. So why did it drop to 6.5%? One of the things that happens is because the margins in a catalog distributor are higher, they tend to get maybe a little bit better supply picture. So last year, when certain components were short, what you found was that people that would typically have been buying from mainline Avnet were concerned about being short parts and having their production going down, they would be coming on to the catalog distributors like Farnell, which had the impact of both raising revenue and raising prices. And really, the key is raising prices. So you saw that a lot on the passive side of the business. So once the macro slowdown happened and components were greater availability, those customers that are typically mainline distribution customers went back to their historical buying patterns and we saw prices of things like components drop pretty precipitously. And that was really the main reason for the slowdown in the Farnell operating margins.

So you really have to see the lead times comes back or goes longer?

Yes. We need a little of both. So -- and that's what we tried to lay out in our earnings call last time. To get back to the 10% to 15% range or just, say, get back to 10%, yes, we definitely need some correction back to normal market on the passive side. And historically, if you go back over the last 15 years and look at that, it's like a 6-month process. So that would also bode well that maybe this pricing demand on those components will be back to normal more in the March quarter. But other than that, it's really just sticking to what we've been doing, which is the OpEx reduction. So we just opened a new distribution center in Europe for Farnell that has higher capacity, much lower cost in total. There's an example of cost reduction helping drive margins. And we continue on the other topics we talked about, combining back offices of Farnell and -- in traditional Avnet. Even today, if you go to Singapore, you'll have 2 distribution centers. If you go to Chicago, you'll have 2 offices. And as we speak, both of those -- those are the types of things that are getting consolidated. That's going to help Avnet, but also help Farnell itself.

So can you remind us the -- your passive component exposure as a percentage of your total revenue and what's the trend over there?

Yes. We call it IP&E, which is connectors and passives and other electronic components. It's about 20% of the total globally. Farnell might have a little -- slightly higher mix, 20%, 25%, and it's been increasing.

It's been increasing because the demand for passive component or it's just your offerings?

Market share.

Market share. Got you. Okay. Any questions?

Can you talk about trends in the TI -- sorry, can you talk about trends in the 5G business, the exposure that you have and what you guys are seeing there?

Yes. We're seeing, this is more on the Asia side, more demand from infrastructure build-out on 5G. And we think longer term, 5G is going to help our IoT business because it's, like you see today, more and more connected devices. And to us, that's very important because the connected devices that we sell have a much higher gross profit than our normal business. IoT products will have a gross profit in the 25% range compared to our corporate average of about 12%. And the reason is it goes back to what we talked about earlier. When you sell an IoT product, yes, you're still selling electronic components and you're still selling sensors, which may have a 10%, 12% margin, but you're also selling engineering services, which is more in the 20%. You're selling software apps, which is why we bought Softweb, which is in the 50% gross margin. So you get a blended average in the mid-20% range.

If I can just clarify, the 5G exposure is mostly Asia. What about the North American build-outs and Korea and Japan build-outs for 5G?

How much exposure do we have by country in Asia?

Yes. Like, what about the exposure in America? Do you have exposure to 5G build-outs in Americas as well? Or is it mostly Asia?

The growth we've seen recently has been more Asia-focused. IoT would be global, but that's more long term.

Yes. So a follow-up question on Farnell. You put that as one of your priorities. And probably in the past 2 quarters, you had some growth headwind. How should we think about Farnell growth like in the near term as you continue to integrate the business? And I think during the last earnings call, you mentioned Brexit as one of the key milestone for you guys to monitor in terms of the growth back to the normal level. Is -- any progress over there?

Yes. Think of Farnell as being in the 6% operating margin range today and getting it to the 8% to 10% by the summer. And then as we get more and more of a recovery, that should benefit Farnell as well.

Okay. So that 8% to 10% was the top line growth that you embedded for, for that?

I think it was a 6% top line growth, which is really what the historical cycles have shown.

Got it. So you are expecting the cycle or the demand for Farnell get back to the normal level in the summer of this year?

Getting toward the normal.

Getting toward, got you, okay. In the past, you mentioned the demand weakness in industrial and automotive, which are the 2 segments that was higher margins for you guys. Can you talk about how do you track the end demand in those 2 markets? Is that a PMI, auto sales or other metrics that you're tracking in terms of -- for the demand? And if the end demand recovers, how fast would you see the demand coming back?

The latter is probably a matter of months, like 3 to 4 months. We track most of our businesses on a variety of metrics. PMI is clearly a key metric. Really, by region, we look at book-to-bills. This gives us a pretty good indication of what is the trend in demand for that market or that region.

Got it. So if we see the auto sales remains at flattish on a year-over-year basis, what's the implication to you guys? Do you -- would you see that some demand? Or is it still flattish, consistent with the auto sales? Or it's just not quite a relevant metric for you guys?

Say that again?

For auto exposure, I think it's probably low to mid-teens for total revenue.

Okay. Like, auto is a really good example of -- we should grow with the overall auto market because, right, we're mainline and many, many customers, but auto has higher content. So that's why auto has been really a focus on us as there's more and more electric vehicles, but really the electronic content in the vehicle, that helps us quite a bit.

Got you. Your IoT effort. You mentioned you are partnered with -- you have a partnership with Microsoft Azure. Can you maybe just help investors understand what exactly the partnership is about and how much of revenue would benefit from this partnership in general?

Yes. We've had the partnership for about a year. I would say that really most of the opportunities and leads in our IoT business comes from Microsoft because they're interested in the cloud business. They don't necessarily have hardware people inside their business. So it's a really good -- we help one another on that. What's the partnership itself? It's just a document where we make certain investments, they make certain investments. And it's worked out well for us.

Who do you compete in that space?

That's a really good question because sometimes we're asked, well, do you compete with Accenture or other big IoT? And, well, let's go back to who are our customers. Our customers are the middle market OEMs and manufacturers, right? So I can honestly say we don't really have any one single major competitor. In fact, most of these opportunities come about that the customer is trying to develop a connected device, right, and they need capability. So that may come direct from our core salespeople or it may come from Microsoft or somebody else, but we will work with them on the design, selling, recurring revenue for the connectivity, the cloud storage. Our Softweb business will develop a mobile app for them or a desktop app to manage the device in the field. And that's important because that's -- they then have one-stop shop, and they're not really competing it, right? The success in our IoT business today is really a function of how fast will those products come to the market.

Can you share the -- your percentage of revenue in IoT? And then what's the recurring percentage of the total revenue?

Yes. Okay. Let's just talk in dollar terms. Today, IoT is very, very small. So it's a $100 million business, right? So the reason it's important though because it's high growth, so let's say we get it to $500 million. Well, if you have $500 million and you have a 25% gross profit, there's $125 million, right? So we don't need billions of dollars of IoT revenue. I hope nobody at Avnet is hearing this because their goal is to get billions of dollars of IoT revenue. But it has a very long -- very strong drop-through to the bottom line.

So that's not a near-term driver, but it's a long-term -- longer-term margin driver for you guys?

Two to 3 years.

2 to 3 years.

To have a material bottom line impact.

Yes. Tom, you mentioned the cost saving. Can you maybe just give us an update like cost savings? You have $65 billion (sic) [ $65 million ] left probably in the next 1 year for the margins. And what's the update? What progress you are making in the cost saving?

Cost savings are right on track. I think maybe we're doing it a little faster than we expected. We feel good about the progress we've made. This last $65 million is fully identified by project. It tends to be things that we've been working on for the last 12 months that are now coming to fruition like building the new distribution center in Europe. So we feel very confident we'll hit the $245 million and probably more.

Got you. One of the investment thesis for Avnet is that your cash generation is strong when the demand is slowing down. So how should we think about cash generation when you see the demand picking up in the second half or in the summer of this year?

Yes. So we've generated $800 million over the last 3 quarters, right? So as demand picks up, we all look forward at Avnet to the day where we're buying inventory and growing inventory because it will be a sign of recovery in the markets. So can we continue at an $800 million pace over 3 quarters? No, that's not a long-term pace. I think we've always talked about, at our current size, cash flow is in the $500 million range, and that's probably more to what you should expect. But in the near term, while the markets are slow, we're taking advantage to really focus on our working capital management and generate the cash. And what we're using the cash for has been, at least for the last 4 or 5 quarters, is buybacks. And I would expect to see maybe a little bit changing shift. I mean, not huge, but smaller tuck-in acquisitions to the extent that we can add a distributor that has $100 million to $200 million of revenue, but they bring a different either market or supplier we don't have. That's clearly of interest to us, especially with the TI, right? That would be a good replacement. With this slowdown, we're very concerned -- not very concerned, we're very focused on making sure we retain our investment-grade rating. So we look at maintaining a gross leverage of about 2.5x or so. And when we look at capital allocation, those are really the main points. We continue to have our dividend program. And our expectation that we'd like to say is continue doing what we're doing, which is grow at 5% or so every year.

Regarding the acquisition, is there any regional focus for you to do that like in the future?

No. This is not a regional focus. I think what we're seeing is more Americas and EMEA. And the intent there is that these are -- build our business out, but they have to have good returns. So I don't want anybody to worry about paying high prices or things of that nature. On top of that, we -- in the last 12 months, we bought Softweb, we bought Witekio. Those are smaller software companies, but they really help to fill out our IoT capabilities. So they could be part of the mix as well.

Got you. So with the TI disengagement, it seems like your Asia exposure will be smaller compared to probably like in the past. Can you maybe just talk about your Asia exposure? Is that more focused on a certain group of small -- a group of big customers? Or is it more like just fulfillment to broader-based customers?

It's fulfillment to a broader base and much of it is associated with our mainline suppliers. We also do some business in Asia. That would be Asia suppliers that need somebody to have a broad reach into all the different countries throughout Asia.

Got you. We have time for some questions. Are there any questions from the audience? Okay. My last question to you, Tom, is that can you maybe just share with investors like what do you feel that -- as investment thesis for Avnet, why you feel they're excited about Avnet and stuff?

Well, a couple of things. First is just the opportunity with Farnell and IoT and the higher-margin businesses. And we think we're -- we put a lot of the basic building blocks in place for both of those to do well in the market. I think one thing that people probably don't discuss or look at as much as they should have is the performance of our Americas business. There's a lot of talk about, hey, are you growing in Asia, but that's lower margin, a lot of focus on TI. But if you look at where are we competing as a distributor and doing well or gaining share because of our distribution capabilities, our performance, our pricing, our on-time delivery, look at Americas. Americas, we've had revenue growth in 4 of the last 5 quarters. I think if you look at the broader distribution market, that's a little unique. And it's a good indication of really the capabilities we have in-house and the talent of the people at Avnet.

Got you. All right. This concludes the meeting. And thanks for coming.

Thanks, Tim. Thank you, everybody.

Thanks.