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

All right. Let's get started. Thank you, everyone, for attending day 3 of our Bank of America Global Technology Conference. My name is Ruplu Bhattacharya. I'm part of the equity research team here covering IT hardware and technology supply chain companies. Today, we're honored to have the whole team from Avnet. Avnet, as you know, is a global distributor based out of Phoenix. We have CEO, Phil Gallagher, who has been with Avnet for almost 40 years. So I mean he is a real industry veteran. He's seen many ups and downs. So we hope to learn a lot from Phil today. We also have CFO, Tom Liguori, and he's been with Avnet since January of 2018. And again, he, too, has more than 30 years of experience in finance and operations. Prior to Avnet, he was working for Advanced Energy and also for MFLEX. So he also has a ton of experience. And we also have Joe Burke from Treasury and Investor Relations. So thanks, everyone, on the team for joining us today. I'm going to first pass it on to Joe for him to give the safe harbor statement.

Yes. Thank you, Ruplu, and good afternoon, everyone. As a reminder, today's discussion may include forward-looking statements that include -- involve risks, uncertainties and assumptions that are difficult to predict, and actual results could differ materially. Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent filings with the SEC. And any forward-looking statements are only as of the date of this investor call. Avnet undertakes no obligation to update or supply new information after this call. With that, I'll hand it back to you, Ruplu, and thank you very much.

All right. Thanks, Joe. I'm going to pass it on to Phil. I believe you have some opening comments.

Yes. Thank you, Ruplu. Really appreciate it. Thanks, Joe. And again, thanks for hosting us. And I hope everyone listening is doing well and staying healthy. And I appreciate your interest. We appreciate your interest in Avnet and where we are and where we think we're heading. I just want to start out by acknowledging the hard work from our team, especially over this past year. I mean I'm proud of the strides we've made as an organization, particularly amid such complex operating environments. And that goes to everybody on the call as well. It's been an interesting year, to say the least. We do believe Avnet's role in the supply chain is now more vital than maybe it's ever been, okay? And more and more customers and suppliers are relying on our teams to help support their supply chain management on some of the challenges we're seeing in today's environment, increasing opportunities for us pretty much as we speak. As far as Avnet, the core, well positioned across all operating regions, supporting our margin progression at 3% and 3.5% by June of next year, which Tom will more than likely elaborate on during the call. We had record performance in Asia the past 2 quarters, even without the guys in Texas. We saw a steady improvement in EMEA, our highest-margin region, as well as continued improvement and better-than-expected results in the Americas as well. We have the sales and FAEs, excluding staff, a distribution footprint cost structure in place and ready to capitalize with continued opportunity that the market is affording us. Farnell, we continue to see Farnell as a huge opportunity. They delivered the operating margin of 6% last quarter, which was at or a bit above the expectations. And it's a differentiated growth margin -- or growth engine for us, and an important component of Avnet's overall value proposition to the marketplace. Demand creation remains fundamental to our long-term growth and profitability story. We're continuing to invest in digital, design tools, FAEs, our account management teams and our partner relationships to see the value, insofar as see the value in what we're doing. And lastly, we're proud of the relationships that we've built with our suppliers and our customers, overgoing by way of 100 years. And yes, Ruplu, I've been here for about 40% of that time at Avnet in my 40 years. But we're celebrating our 100 years, and we have supplier relationships today that some exceed 60 years of partnership. So we're really proud of that and continue to build on those partnerships as we move forward. So we've worked hard to achieve, what we believe, is a very strong foundation, and really excited about the path forward for Avnet and the Avnet team. That's it, Ruplu. I'll turn it back over to you.

Okay. Great. I mean that's a good overview, Phil. So maybe let's start with the most recent quarter. I mean you saw strong revenues. The economy is reopening. I mean you also had some easy compares. I mean just when you think about this, how do you feel about the sustainability of revenue growth here?

Well, we're feeling pretty good. I mean the book-to-bills are positive and above parity in all regions. We're not giving new guidance today, but we feel good about the guidance we gave at the last earnings report just a couple of months ago. The backlogs continue to build. The markets are robust at this point in time. And we went to build off of the last quarter, right? We grew year-on-year last quarter, without TI, 22% year-on-year, right? I mean that's pretty -- it's pretty phenomenal, over $250 million. So -- and that's replacing the guys in Texas, which, I know, is on our investors' minds, okay? So we're getting that, if you will, in the rearview mirror. So we feel good about where we are. As I said in the opening comments, there's more opportunities coming our way as our supply chain expertise continues to shine, if you will, in the marketplace. And it's exciting. We're sitting in the middle of the technology supply chain, so we see everything that's happening from the supplier side, everything from the customer side, and we're right in the middle of the action. So I'll close out by saying Asia continues to be strong. Tom said that last quarter in the earnings that they have recovered, if you will. We continue to see Europe progressing and recovering, and the Americas as well. So it's healthy across the board. And then, Farnell, as I mentioned in the opening comments, we're very -- I'm pleased with Farnell and the progress we're making with Farnell, and the contribution it has to our differentiated growth opportunity in the marketplace.

Got it. Okay. Yes. No, that makes sense. Maybe if you can just -- we'll talk about many different things, but to start off, how are you seeing demand in the various end markets for both the component side as well as for Farnell?

Yes. I'd like to put it in the -- if you go back, first of all, it's good, okay? And then -- and it's diverse. And I'll be a little bit more deliberative. It seemed in the January and February time frame, we're starting to have some of the lead times extensions and whatnot. The conversation was all about automotive and transportation. And certainly, that's still a headline. I mean, obviously, what's happened there was the chip shortages and the production line has been opened and shut in the automotive industry. It's still a big issue and a big challenge. But looking now, and here we are in early June, it's not just automotive. I mean we have defense, industrial, even medical, although that's slowing a little bit from last year, the consumer is really just -- it's across the portfolio and the verticals, which, I think, I believe, is exasperating some of the issues around some of the lead time extensions. Just -- it's more broad-based. But in the industrial segment, the defense segment, aerospace, not so much. Consumer, it's all across the board. I mean, Ruplu, try and go buy a washer dryer or an oven or something, they all have electronics in them, right? So the pervasiveness of electronic content and semiconductor content is just continuing to expand.

Right. No, I mean, that makes sense. Phil, last quarter, on the earnings call, you mentioned something interesting that stuck with me. You mentioned that customers are seeking to reduce supply chain risk by securing longer-term supply agreements and exploring second sources. So I mean there are 2 things there. So how do you think these long-term supply agreements kind of impact the industry and also Avnet? And then in terms of exploring second sources, that kind of suggests to me the opportunity to gain share. So can you just talk about how -- what opportunities -- how is your share progressing in the market?

Yes. So we've clearly grown some market share, which is great news, particularly in the last several quarters. That's really positive. As far as the customer's longer-term agreements, we have customers with long-term agreements today, right? I mean we're ingrained with so many of our customers from the supply chain -- from design chain through supply chain, and we've got contracts with some that are 10, 15, 20 years old. And remember, Ruplu, we have hard contracts, hard orders, then we got forecast management. So this is where the expertise really comes in. We're taking in thousands of MRPs from customers on a daily, a weekly, monthly basis, and we're getting the forecast management and we're tracking that. So we're really fully integrated. And what's happened at -- I'd say the -- people sometimes will take supply chains for granted until they can't get what they need, right? We can all relate to that right now. So people are reevaluating their supply chains, okay? And they're going to say, who's the experts that can really help us? And we like to classify ourselves as an expert in that area. So we're starting to see more opportunities from our suppliers coming to us, where they might be handling some business on a direct base in Tier 1. And some of the Tier 1, Tier 2 customers that maybe weren't traditionally using a supply chain expert like an Avnet beginning to come to us. So we're seeing more and more opportunities in that regard. And as far as securing longer term, a lot of that is based on the lead times, right? So as lead times continue to go out, customers want to continue to engage in longer-term agreements. But most of our customers we've been dealing with, I mean, we're loyal to them, they're loyal to us, so we have a lot of long-term agreements today, right? Look, put it this way, less and less of our business is what we call translation building. It's much more in a contract basis.

Got it. No, I mean that's useful context. Maybe I'm going to expand on that. So you talked about lead times, right? So can we talk a little bit about the semiconductor shortages you're seeing? Which parts are having longer lead times, which are -- and have a shortage? And how long do you think this component shortage is going to last? Is it just on the semiconductor side? Or are you seeing anything in the passes as well?

Yes. So again, if I go back to what I started with 3 or 4 months ago, most of what we were talking about is in the high-end controller space, right? That was the tipping point, if you will, or the beginning of lead times going out. Well, now, it's not just the high-end micros. It's 16-bit, it's 18-bit, in some areas, in power. And I think it goes to -- and we've not seen -- I've seen maybe some modest improvement, but not much improvement in the lead times at all, as a matter of fact. And I think it goes to my comment on the broadening of the market growth, right, is in all these other verticals, which now is expanding the issues around some lead times across different commodities. As far as the IP&E, interconnect or passive area, all of them pretty steady. We're starting to see some lead times, but not dramatic. In the connector area, again, it's pretty public knowledge, for resins and plastics and some of that, we're starting to see some issues there. But it's definitely lagging -- I mean, not to worry. In 2018, it was all about MLCCs and capacitors. This one's definitely more around the semiconductor space.

Got it. Got it. And then I want to ask you a conceptual question. I mean if lead times are extended and the customers are ordering for further out, how are you protecting yourself, right? I mean how do you make sure that you don't get stuck with inventory that, if the end market demand doesn't pan out, that -- how do you make sure that you don't get stuck with excess inventory?

That's a great question, and that's kind of what we do for a living. So we have a weekly call with our asset management teams around the world. Again, we're taking in all these forecasts, and we have a lot of analytics around it. Again, nothing is perfect, right? But we have a lot of analytics around it. And what we -- were tracking customers with -- for increased volumes that are forecast, right, that maybe are out of the norm, right? So we have these bandwidth of what they're ordering each week or forecasting each week. And if we start to see that go up too high, something that looks unrealistic, we -- it kicks out, and we make sure we have that dialogue with the customer to firm up. Is that real backlog? Do you really need that? Not need it, et cetera. And as time goes on, we just try to contractually hold the customer, as does suppliers to us, the customers are responsible. When I use the word responsible, I think we just need to be responsible. Is there anything perfect? No. We've seen cycles go up and down? Yes. So we just need to manage through that like we have in the past. So we were -- we've been around 100 years. It's not -- so I'd say it's not our first rodeo, but we'll just navigate it carefully. And what suppliers and, frankly, some of them helped us this time, they've actually have put some NCNRs in place and have published that, right? So we get the opportunity to try and pass that on, and we do, do to our customers as well. So that helps with the non-cancel, non-return.

Got it. One thing that -- I'm sure you get this question all the time, I mean, how do you filter out double ordering in the system? And do you have any visibility into your end customer inventory or total inventory in the supply chain? I mean, typically, in a regular cycle, I mean, cycles are always inefficient. I mean they tend to overshoot and undershoot. And in the past, we've had cycles where there's been excess inventory in the channel. Do you think this cycle is different? And just what your thoughts are on inventory in the channel and double ordering and how you're dealing with that?

Yes. So let me just start with the double ordering, and then I'll comment on this cycle versus others. On the double ordering, we try to track that. But more of the double ordering will be captured by the suppliers. Supplier might see X number of companies ordering a similar product or the same exact product X number of times. They help to catch that. What we'll catch, what I mentioned a little bit earlier, we're -- let's say, Ruplu Inc. is buying 50 pieces from us every week of a widget. But all of a sudden, it goes up to 500 a week. Well, we capture that, it kicks it out, and make sure that, are they inflating their quantities, are they trying to ensure they get extra product even if they may not need it, okay? We do the best we can to capture that. So -- and I'm sure there's some of that going on, and I'm sure there's some of the double order, but it's really hard to track. As far as customers and inventory, we have limited visibility. We -- the customers we're really strict -- tightly engaged with, we have good visibility. We're dealing with tens of thousands and hundreds of thousands of customers so it's hard for us to predict or be accurate as to how much inventory they actually have. I can just tell you, I'm on the phone every day, or Teams call with the customers and suppliers. Just got off with a couple just a few minutes ago, and the demand feels real. I mean when they calling -- I think that they wouldn't call if they don't really need that product. And we ask that question, "Hey, how many do you really need?" We call the drop-dead quantity. "Hey, we need 1,000." "Okay. Do you need 800, or do you need 1,000, right?" So -- well, that's a dialogue that's happening every day. As far as this cycle versus others, I -- this one, well, it's different for a lot of reasons. I mean, we're talking before the call, but it's all of COVID, and that, evidently, the shutdowns of factories in this time a year ago was so unknown. There's a lot of different variables to this cycle, obviously. And now what was happening in Malaysia the last week or 2 with some further plant reductions going on, and we don't know the impact of that yet. There's -- I think there's so much more dynamics. As I compare it to '99 -- 2000, 2001 when the market went down, that was much more top heavy, right? So you had -- that was much more networking, comm, data center, PC, Y2K in that they were just overinflated and bang. Obviously, we know what happened there. This one does seem more broad-based from a vertical standpoint, as I started off. And the pervasiveness of electronics is -- and semiconductors is so much more into so many different end products and the content is going up. It feels different from that standpoint. So we're not overly reliant on one vertical segment, okay? So that's why I think this one feels a little bit different. And a lot of guys who were factoring themselves have outsourced some of that. So you have noticed an additional third-party in fabs and wafer manufacturing, right, as we know with the GLOBALs and the TSMCs.

Got it. I've got maybe a couple of more overall industry-related questions. And then I want to get into more around questions that impact the P&L. Just on pricing. I mean do you think an inflationary environment is good for or bad for Avnet? I mean are you seeing price increase from your suppliers? And how often can you renegotiate your pricing with your end customers? And if you can comment on both Farnell, what they're seeing as well as on the component side -- the core side?

Yes. Sure. So I won't comment if it's good or bad. I mean, it's happening, right? So we know there are price increases. We've got north of 50 different suppliers coming at us with different price increases. And our job is to manage all that. You can imagine 50 suppliers, how many SKUs that is that we're managing into our customer contracts. So the answer is -- from the standpoint of, do we pass it on? The answer is yes, as much as we possibly can. And we track that by supplier, by part number, by customer. And we're not -- but we're not being opportunistic here. We're not trying to hurt the customer by any stretch. Just where we are in the supply chain, we certainly can't be the ones to absorb that. And again, the suppliers are really, really helpful with that. And our guys thank our customers, too. They've been very understanding. And does anybody like it? No. But it's a fact of supply-and-demand curve right now. But -- so when the customers -- suppliers pass it on us, we work to pass it on to the customer, and we're very transparent about it and we're very open about it. And which I said, right now, the concern is more about supply than the ASP inflation. And that, over time, will fix itself. And then you got Farnell. Yes, we're seeing positive signs of Farnell. Yes, activities up nicely with Farnell. So we're really pleased with what's happening there at this point in time as well.

Got it. Another question I'm sure you get quite often. I mean Texas Instruments, they've consolidated their distribution partners. Can you give us an update, I mean, how much of that revenue have you replaced? What's your strategy for that? And then do you see more industry consolidation happening? And just what's your strategy to deal with that going forward?

Yes. So on Texas. So we feel we've replaced roughly 45% to 55%. We track that on a global basis. We track it by regions, by country, by city, by customer. We know exactly the revenue we get in each one of those accounts. And in Asia, effectively, we've replaced it totally. We've had 2 record quarters in Asia without TI. So we're really -- we're getting some market growth there, too, Ruplu. So it's -- we're not naive. We know that's healthy, but it's a really, really positive progress there. But there's been 3 strategies, and we've talked about this. One, cross-reference. Is there really a part -- pin-for-pin, we call in the industry, an exact part that we have in alignment with other suppliers that we can replace the -- that company inside of our customer. That's about 7% to 10% of the opportunity. So that's already happened where we can get that done. The other bucket, okay, is demand creation. So we have a product, and we want to design that out. That's a longer pole in the tent. It's going to take 18 to 24 months because customers typically aren't going to go reverse engineer something that's already a product in the marketplace. But you got to catch them on the next generation. And it's a case in point we were able to replace, whether it's one of the MSPs with an ASIC device in a medical application. That's, fully replace it, roughly $50 million. That's not going to show up for 18 to 24 months because it's the next generation. So that bucket is actually our largest bucket, and we're having good success there. And the third one is what we call share shift. This kind of goes to a question you asked earlier. Customers like choices. Customers, sometimes, gets left out of these equations, right? They like to have options, they like to balance their desk, if you will, of other procurement, their spend and their receivable or, in this case, payables. So there, we go into share shift. That might -- what's that mean? Other suppliers with maybe other distributors or direct business shifting inside those accounts to Avnet. That's the third bucket. We've had really good success there, where customers say, they want -- we lost Texas, "Hey, we'll help you with these other lines to make up the difference." So we track all 3 buckets, and we're feeling pretty good about that replacement in 24 months. As far as industry consolidation, that's not new. I mean we -- it's accelerated on the supplier side. Back in the '90s, it was more of us doing that, aggregating the marketplace. We can't control that, right? All we can control is the performance that we're -- how we perform in each of our current supplier partners. And we've been a benefactor of that as well. I mean Infineon acquired Cypress, we got Cypress back. Microchip acquired Microsemi, got Microsemi back. And we're proud of what we have currently. We've got Broadcom, Marvell, Xilinx, all pretty much exclusive. So we can't control those things. All we can control is our own performance with those suppliers who they see Avnet as a valuable partner.

Got it. All right. So I'm going to turn more now into questions on revenues and margins. And Tom, please feel free to chime in here as well. I mean, so your long-term target for overall operating margin, I believe, is 3% to 3.5%. Can you just comment on how we should think about margins for both segments, Farnell, as well as for the core business? And how does the mix impact that from a geography standpoint? And you're trying to get more design wins. How is that happening? And how does that impact margins? So just your thoughts on how much margin progression should we really expect over the next couple of quarters?

Thanks, Ruplu. So actually, the 3% to 3.5%, that's more a near-term target. So it's 4 quarters away. We said by June of 2022, which is -- time goes by fast. Why is that so important to us internally? That's where we think we can get to that will translate into an earnings per share of $1 per quarter plus, which would be very important. And I think what's good to see is that multiple quarters now of margin expansion. So we're getting a track record going. Thanks to Phil's leadership, the response of our teams is very good. And our revenues were up 20% and our headcount is down. So the productivity is really positive to see. To get to the 3% to 3.5%, well, that means getting core or core distribution to 3% plus. And that's something we've done before, pre-COVID, we were at 3% plus. It means that EMEA and Americas continue to grow their revenues, right? These economies, they're still coming back, but that's a positive, right? It gives us runway. Demand creation, this last quarter, demand creation revenues were a record. That's very positive. This is how we continue to grow that margin expansion. And something that Phil said early on today, it's really, really important. We have the FAEs in place, the sales team in place, the distribution center footprint in place, the cost structure to handle a lot more revenue. We did that deliberately, and that means that, as we grow, we don't have to add a lot of cost, we get a lot of drop-through. On the Farnell side, we really can't say enough about their performance. We laid out 100 basis point margin improvement every quarter. They're tracking ahead of that. I think you're going to see that again this quarter. The investments we made in expanding their SKUs in their e-commerce, they're paying off. And like core, Farnell has been at 12%, not 10%. So these are near-term targets. We wanted to give investors a road map of where we can be in 12, 14 months or so. And so far, so good. You brought up mix. Mix is important more from the gross margin percentage, right? But right now, we have Asia as our record revenues. And EMEA and Americas, those regions are still recovering. And as they get back to where they were pre-COVID, that will just be very positive to our margin outlook.

Got it. You mentioned a couple of different things that I want to make sure I address. One is you talked about cost, right? So in the past, you've specified some cost reduction programs. Can you just update us on where those stand? And do you see any more avenues for reducing more of the costs?

Yes. So the way we view our costs, specifically our OpEx, is we're trying to manage that through our gross profit dollars to get drop-through. But here's what's important. We still have cost reduction opportunities that we're right in the middle of. One is financing some outsourced -- outsourcing some finance transaction processing, which we've talked about with you, Ruplu, as well as some distribution cost savings. The good news about those is it gives us some room to continue to pay merits in a hot job market, to invest in e-commerce capabilities to make sure that our FAEs have best-in-class online design tools when they're working with customers. So we're not focused on bringing OpEx dollars down. We're focused on continuing the cost reductions to be able to fund growth investments.

Got it. Another thing that is important for investors is free cash flow. I mean, typically, they think of this business as a countercyclical balance sheet business. But given this component-constrained environment, I mean, do you think inventory turns are consistent where we are in the business cycle? How do you think your working capital days progress from here? And then if you can also address the other thing that impacts free cash flow, which is your CapEx requirements. I think you said you were going to operate both facilities for Farnell for the time being. So I mean, do you expect to add more warehouse space in the near term? So any thoughts on working capital turns, CapEx and free cash flow?

Yes. So let's start with like the ending answer, right, the cash flow. Cash flow from ops, we've said before, we see this continuing, at least for the next 3 years we should be able to generate $300 million to $400 million every year in a growth environment. So let's dissect the pieces. On inventory, yes, we wish we had more inventory, right? So our days inventory, it is a little depressed. That will come back normal. Our net days working capital was 72 days. We expect that to be mid-70s, 75 days, 76 over the long term. But that's what generates $300 million to $400 million. The good news on CapEx, for many of our investors, you saw that -- we used to spend about $120 million, $130 million of CapEx a year, but that was because we were developing in-house systems. Now more and more systems are cloud-based. So our CapEx needs, going forward, are more in the $80 million to $90 million range, and that helps with our cash flows. You touched briefly on capital allocation. I'll just say this. Because of what we just said about our expectation for cash flow from ops over the next 3 years, we're very comfortable. We just increased our dividend by 5%. There may be more to come on the dividend. The reason the dividend is important, it gives everybody a steady, reliable return on cash, good cycle, bad cycle, a steady reliable return on cash. We talked about CapEx. We continue to look at M&A from the perspective of what helps us strategically. And these are companies that have $100 million to $200 million of revenue, they bring a supplier, a product or maybe more IP&E-type revenue, that's important. And the same thing with buyback. I mean we will do buybacks opportunistically. On any given quarter, you may not see M&A, you may not see buybacks. But when you look at over a year or definitely over the 3-year, I mean, you should expect all of that as part of our capital allocation.

Okay. No, thanks for all the details on that. Appreciate it. We have a few more minutes left. Maybe I'm going to ask you a more topical question. I mean we're getting asked from investors, are you seeing more suppliers go direct in this supply-constrained environment? And likewise, on the customer side, do you think that COVID has kind of shown customers that they need to depend more on distribution for design services? So maybe if you can just talk about what you're seeing from suppliers in terms of using the distribution channel, more or less? And same on the customer side, do you think your design activity -- I mean, how are you doing that? Are you going out and trying to find more business? Or do you now see more customers coming to you for more design services?

Yes. Thanks, Ruplu. I'll take this one, Tom, or start it off. As far as ours as a strategy, seeing that they're more direct, the answer is yes, no, not at all. As a matter of fact, I see them coming more our way to help them build out supply chain solutions. I mean what's core to us is what we're doing, demand creation and building out logistics and supply chains, right? That's core to us. Well, as far as they want to put their money in the R&D, manufacturing, marketing, there's a -- so supply chains, that really isn't one of their cores. They do it for their first-line customers. But long-short, we're seeing more of them come our way, and we're seeing opportunities from our customers as well increasing because of the uncertainty around supply chains. And obviously, the COVID was a natural disaster that caught everybody short. And I think it's put more credence into the value that we bring to the market, no question about it, we're seen as an expert. On demand creation, Ruplu, we're actually seeing demand creation increase. We mentioned last quarter, our demand creation revenues were the highest they've been. Our registrations and design wins are up. A lot of this is still done through means like we're doing here today, all right? So we're still doing a lot of engineering with -- a lot of design with the engineers out there. But we're also investing a lot in digital tools, right? So we'll continue to invest in account managers, continue to invest in FAEs. By the way, they're starting to go out now, which is good. And then we're investing in digital. There's more and more. I think this has accelerated the digitization of the industry and of what we do, which is great. The customer wants to do self-serve design. They want to go into our AVAIL tool, which is a block diagram tool that we now have available. So I think it's going to accelerate the digital side, okay, which is just going to make our FAEs that much more productive. So our suppliers are going to continue to lean on us for demand creation. We hit that long tail of tens of thousands of customers for them, and design is roughly 28% to 30% of our business is revenues generated, attach some demand-created design wins, and it runs between 300 and 400 basis points higher than our traditional margins. So we're definitely doubling down in that space.

Got it. I have 2 more questions. Phil, when you became CEO, you said you're going to relook at the sales organization and go to market. Are you happy with where you -- where things stand? Do you think you need to hire more people? And then on the line cards, I know you've been adding more on the Farnell side. Do you think there's opportunity for you to expand the line cards going forward for both the core and Farnell?

So in the first part, we're pleased with the progress we've made in the last, let's call it, 6 to 9 months. To Tom's point, we've not reduced at all, I'll call it, customer supplier-facing resources. And all our Regional Presidents and our President of Farnell have green lights to add where they believe they need to add, account management, FAEs, inside sales, customer service, et cetera. So yes, pleased -- nope, not. Confident, never comfortable, Ruplu. So we know we have work to do, but we do believe we're moving in the right direction. I think that customer confidence, as far as confidence, is proof of that right now with the share gains that we've made. And the Farnell question was -- are we pleased with Farnell?

On the line cards, I mean, are you -- or do you think -- yes.

Line cards? Yes. So in Farnell, we've already -- the synergies -- revenue synergies and sales lead opportunity between Farnell and Avnet have been great, from Avnet to Farnell and Farnell to Avnet. What we've been able to help Farnell with are lines like Renesas, IDT, Xilinx, Microns, they realized that they didn't have the greater Avnet relationship has brought to them. So we're very pleased with that. We just added on one of the largest test and measurement companies on the Farnell, pretty much exclusive, National Instruments. So we're very excited there. And as far as the overall line card, we're always evaluating the line card for the technologies, right? We want to make sure we've got the, we call it, gaps and overlaps. If we have a gap in the line card technologies, we always want to fill it with our current suppliers where we possibly can. If they can't, if it's something really niche-y -- niche technology, then we'll go ad where we need to be -- to add. And that's really to go service the customers because the customers want complete solutions from us. So we want to be able to provide them with complete solutions. So we're always evaluating the line card, again, we call it, gaps and overlaps. And that will always be the case. But we're very confident with the relationships we have today with our suppliers.

Excellent. So we're out of time. So thank you so much. Again, I want to thank both Phil and Tom and Joe. You guys -- we covered a lot of different things. I mean, I think, you guys are doing a great job. So thank you so much for coming to our conference. This year, we had this through video. Hopefully, next year, we're going to be able to do this live. So thank you so much again for coming. And for the investors on the call, if you have any questions, please feel free to let us know. We'll pass it on to management, and we'll get you the answer. So thank you so much. Thanks, again, Phil, Tom and Joe.

Okay.

Thank you.

Thank you, Ruplu. Appreciate it. Bye-bye now.

Bye, everyone.

Bye-bye.