Avnet Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 3, 2023

There are 8 speakers on the call.

Operator

Welcome to the Avnet Third Quarter Fiscal Year 2023 Earnings Conference Call. And I would now like to turn the floor over to Joe Burke, Vice President of Treasury and Investor Relations for Avnet. Thank you, sir. You may begin.

Speaker 1

Thank you, operator. Earlier this afternoon, Avnet released financial results for the Q3 fiscal year 2023. The release is available on the Investor Relations section of the company's website. A copy of the slide presentation that will accompany today's Remarks can be found via the link in the earnings release as well as on the IR section of Avnet's website. Some of the information contained in the news release and on this conference call contain forward looking statements that involve risks, uncertainties and assumptions that are difficult to predict.

Speaker 1

Such forward looking statements are not the guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Avnet's most recent Form 10 Q and 10 ks and subsequent filings with the SEC. These forward looking statements speak only as of the date of this presentation and the company undertakes no obligation to publicly undertake Update any forward looking statements or supply new information regarding the circumstances after the date of this presentation. Today's call will be led by Phil Gallagher, Avnet's CEO and Ken Jacobson, Avnet's CFO. With that, let me turn the call over to Phil Gallagher.

Speaker 1

Phil?

Speaker 2

Thank you, Joe, and thank you everyone for joining us on our 3rd quarter fiscal year 2023 earnings conference call. I am pleased to share that we delivered another quarter of solid financial results, which exceeded the top end of our sales and earnings guidance. More importantly, we achieved these results despite The market uncertainty and macro headwinds affecting certain areas of our business. In the quarter, we grew sales 3% year over year in constant currency And we delivered adjusted earnings per share of $2 which is our 5th consecutive quarter of adjusted earnings per share of $2 or greater. We continue to manage our operations with a sharp focus on efficiency.

Speaker 2

That coupled with a stronger than expected performance in Europe and the Americas enabled us to achieve a 5% operating margin in our Electronic Components business and a 4.8% operating margin for Avnet overall. During the quarter, we saw sales growth in the Americas and EMEA regions offset by a sales decline in Asia. The decline in Asia was due to the expected From an overall demand perspective, in the quarter, we saw continued strength in key vertical segments, most notably Industrial, Transportation and Defense Aerospace, while demand in other segments like consumer and communications remained weak. Demand signals continue to realign globally, resulting in lead times trending down on several component categories. However, We continue to see constraints and shortages on other products such as high end MCUs, power and MOSFETs.

Speaker 2

Lead times for these constrained categories have improved, but more modestly than other categories. Overall, semi lead times are above pre pandemic levels And IP and E lead times are modestly above pre pandemic levels. The pricing environment remained stable during the quarter. At the beginning of the quarter, we still saw a handful of suppliers raise prices primarily due to the higher input cost for the components. As a result of the current demand and lead time conditions, our book to bill ratio remains below parity in all regions, at levels similar to last quarter and our backlog remained relatively consistent with the end of last quarter.

Speaker 2

Inventory levels remain elevated across the supply chain And our inventory increased in the 3rd quarter as well. Our customers' inventory levels are elevated due to a combination of softer demand in certain areas and overall market conditions as it relates to component availability. They continue to seek certain key constrained parts that are needed to complete their end products. As a result, we are managing through adjustments to our backlog. While cancellation rates are up, they are still within our normal range.

Speaker 2

We remain confident in the quality of our inventory and are working to improve turnover and to ensure the inventory on hand is aligned to the near term sales outlook. So with that, let me turn to the highlights for our business. Our Electronic Components business sales grew 4% year over year in constant currency, This quarter as it demonstrates our ability to continue to drive operating leverage as we focus on top line sales growth. I am particularly pleased with the Americas team delivering another solid quarter of sales and operating income. Our Americas business delivered the highest level of operating income margin in the past several years.

Speaker 2

The EMEA region delivered its 2nd consecutive record sales quarter and our Asia business was able to maintain their operating margin despite The seasonally lower sales. Asia has been impacted by reduced demand in verticals like consumer and communications. We saw overall softness in key markets like China, leading to quarter over quarter sales declines, which we expect to continue for at least the next two quarters. We achieved another quarter of record revenue and gross profit dollars for demand creation, further proof of the value we provide to our customers and supplier partners despite The mix market conditions. Demand creation and customer expansion remain critical to us as well as our supplier partners.

Speaker 2

Just a few weeks ago, I was able to meet with leaders of 3 of our top 10 suppliers. And one of the first things they wanted to discuss was demand creation and how Adnet can continue to help them grow their sales and increase their customer accounts. The success of our engineering teams and the digital design tools have been key to improving our margins, particularly in the Americas and EMEA regions. Roughly 1 third of our revenues come from demand creation, And this strategic priority is one of the elements that should enable us to achieve our higher margin goals in the medium term. Now, Let's turn to our Farnell business.

Speaker 2

Farnell's sales increased 9% sequentially and 1% year over year in constant currency. Farnell's operating margins held steady sequentially at 9% during the quarter and were down year over year primarily due to the expected unwinding of pricing premiums as certain components become more available. Overall, Farnell continues to be our highest margin business And we expect the operating margin to expand as supply constraints on single board computing devices ease in the first half of our fiscal twenty twenty four. To be clear, there continues to be a healthy backlog for single board computers and when the semiconductor components become more available to complete their production, We expect to begin to realize improved sales as we move into the September quarter. We have made substantial investments Farnell's inventory offerings over the past 3 years and plan to make additional investments where we see the potential for accelerated growth and a solid return.

Speaker 2

Our Farnell inventories have increased nearly 50% in the past year as Farnell has expanded its line card, replenished inventory levels and continue to focus on both on the board and off the board growth opportunities. Farnell's e commerce business mix continues to improve with 56% of Farnell's total sales and 74% of total orders placed through their e commerce platform. We remain excited about Farnell and continue to see opportunity to leverage Farnell's and Electronic Components' unique and synergistic collaboration, which is a key differentiator for Avnet. Our near term milestone is driving Farnell to over $2,000,000,000 of annual sales at double digit operating margins. While we are pleased with the sales and earnings results for our Q3, we are closely monitoring market conditions And the impact of component lead times on our backlog and inventory levels as products become more available.

Speaker 2

We also continue to manage through the impact inflation and higher interest rates on our overall business, which we have successfully done over the past few quarters. In the same way that demand outstrips supply over the past 2 years, supply of product has begun to exceed overall demand. Our current view supported by our supply chain industry tracking metrics is that we are experiencing an inventory correction that will take a few quarters to play out. As we manage through this correction phase, we will continue to work with both our supplier partners and customers to regulate incoming orders and prioritize getting to the right inventory levels to support sales and improve our turns. Although the market correction is underway, We are not overly concentrated to any supplier end market.

Speaker 2

We continue to believe that due to our balanced line card combined with the diverse end markets we serve, we are well positioned to outperform the overall components market, to gain market share and expand operating margins when market conditions normalize. With that, I'll turn it over to Ken to dive deeper into our Q3 results.

Speaker 3

Thank you, Phil. Good afternoon, everyone, and thank you for your interest in Avnet. With another quarter of year over year sales and operating income growth, we believe our Q3 financial performance demonstrates further progress Toward achieving our medium term financial targets led by the 5% operating income margin achieved in our electronic components business. Our sales for the quarter were $6,500,000,000 modestly higher year over year and exceeding the top end of our guidance range. In constant currency, sales growth was 3% year over year.

Speaker 3

On a sequential basis, sales were down 5% in constant currency, which is lower than our historical seasonal trend of sequential sales growth. Sales grew year over year led by EMEA with nearly 10% growth and This sales growth was offset by a decline in Asia of 10%. In constant currency, year over year sales grew 15% in EMEA, 5% in the Americas and declined 8% in Asia. From an operating group perspective, electronic components sales grew 1% year over year or 4% in constant currency. Quarter over quarter electronic components sales were 6% lower in constant currency.

Speaker 3

Farnell sales declined 3% year over year, but were up 1% from the prior year in constant currency and 9% higher sequentially in constant currency. Excluding sales of single board computers, Farnell sales grew 2% year over year in constant currency. For the 3rd quarter, Gross margin of 12.5 percent improved 79 basis points quarter over quarter and was relatively flat year over year. The sequential improvement in gross margin was primarily due to higher gross margins across all of our regions and from the seasonal shift in sales mix from Asia to the Western regions experienced every Q3. We continue to maintain discipline around SG and A expenses as adjusted operating expenses were $497,000,000 The quarter down 2% year over year and up 3% sequentially.

Speaker 3

Foreign currency negatively impacted operating expenses by $12,000,000 in the 3rd quarter as compared to the Q2. As a percentage of gross profit dollars, adjusted operating expenses were 61% in the quarter, 138 basis points lower than a year ago and 41 basis points lower than last quarter. For the Q3, we reported record adjusted operating income of $350,000,000 which increased 4% year over year and grew more than 2 times greater than sales in constant currency. This is the 9th consecutive quarter of operating income growth exceeding our sales growth by more than 2 times. Our adjusted operating margin was 4.8% in the 3rd quarter, which improved 15 basis points year over year and improved 36 basis points quarter over quarter.

Speaker 3

By operating group, electronic components operating income was $305,000,000 up 15% year over year. EC operating margin was 5%, up 64 basis points year over year and up 34 basis points quarter over quarter. All three EC regions saw year over year operating margin expansion led by our EC Americas business, which expanded operating margin by more than 80 basis points. Farnell operating income was $41,000,000 down 41% year over year. Farnell operating margin 9% in the quarter, down 5.89 basis points year over year, but held steady quarter over quarter.

Speaker 3

Farnell operating margin continued to be impacted by the During the quarter, the Farnell operating margin was also impacted by certain non recurring expenses recognized in the quarter. Farnell continues to be the highest margin business within Avnet and overall operating margins continue to benefit from our focus on their growth and continued investment in their inventories, systems and distribution centers. We expect Farnell operating margins to remain at similar levels for the Q4 of fiscal 2023 with improvements in operating margin beginning when certain components impacting the completion of single board computers become more available. Turning to expenses below operating income. 3rd quarter interest expense of $72,000,000 increased by $46,000,000 year over year and $13,000,000 quarter over quarter, primarily due to a combination of increases in interest rates and from higher average borrowings to support working capital increases.

Speaker 3

This increase in interest expense negatively impacted adjusted diluted earnings per share by $0.37 year over year. Our adjusted effective income tax rate was 24.5% in the quarter. Adjusted diluted earnings per share were $2 for the quarter, which decreased 7% year over year, but were flat quarter over quarter. Differences in foreign currency exchange rates negatively impacted Adjusted diluted earnings per share by $0.09 year over year. Turning to the balance sheet and liquidity.

Speaker 3

During the quarter, working capital increased by $232,000,000 including a $381,000,000 increase in inventories. Foreign currency negatively impacted the increases in working capital by $62,000,000 overall, of which $45,000,000 impacted inventory. As a result of this working capital increase, working capital days were 96 days for the quarter, which increased 12 days quarter over quarter. Our inventory days increased by approximately 9 days and our receivable days increased by approximately 2 days quarter over quarter. Our inventories grew during the quarter and as Phil mentioned in his remarks, this is consistent with the broader trend across the supply chain and our customers.

Speaker 3

The quality and freshness of our inventory continues to be good. Consistent with last quarter, inventory turnover slowed in the 3rd quarter as customers' Request for rescheduling of product shipments continued as customers managed through their own inventory and production timing challenges. Our return on working capital continues to be more than 2 times greater than our cost of capital, however. In the 3rd quarter, We generated $18,000,000 of cash from operations and we expect to generate positive cash flow from operations in the 4th quarter. Our debt decreased by approximately $80,000,000 We ended the quarter with a gross leverage of 2.3 times, which was an improvement from the 2nd quarter.

Speaker 3

At quarter end, we had approximately $750,000,000 of available committed borrowing capacity and our teams continue to work on selling inventory on hand and collecting receivables to provide additional liquidity. With regard to our capital allocation, in the near term, we continue to prioritize the needs of our business, including working capital and capital expenditures. During the Q3, cash used for capital expenditures was $26,000,000 For the long term, we remain committed to our roadmap of delivering a reliable increasing dividend and share repurchases to increase our shareholder value when we believe our shares are undervalued by the market, which continue to be the case in the Q3. In the Q3, we paid our quarterly dividend of $0.29 per share or 27,000,000 We have $319,000,000 left on our current share repurchase authorization as we enter the 4th quarter. Book value per share improved to approximately $50 a share or a sequential increase of approximately $2 a share due primarily to our strong earnings for the quarter.

Speaker 3

Turning to guidance. For the Q4 of fiscal 2023, we are guiding sales in the range of Our Q4 guidance is based on current market conditions and implies a sequential sales decline of 1% to 6%. This guidance assumes below traditional seasonality in sales across all regions. This guidance also assumes similar interest expense compared to the 3rd quarter, An effective tax rate of between 22% 26% 93,000,000 shares outstanding on a diluted basis. In closing, I want to thank our team for delivering another solid quarter of year over year operating income growth and margin expansion.

Speaker 3

Our team continues to deliver great results, while demonstrating our value to our customer and supplier partners. With that, I will turn it back over to the operator to open it up for questions. Operator?

Operator

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. One moment please while we poll for any questions. And our first question comes from the line of Ruplu Bhattacharya with Bank of America. Please proceed with your question.

Speaker 4

Hi. Thanks for taking my questions. Phil, last quarter you had expected in 3Q both Europe and Americas revenues to be flat to slightly down sequentially, but they grew. So what was better than expected? Which products So which verticals came in better than you had thought?

Speaker 4

And then when you look at the demand environment today versus 90 days ago, You think that the demand is the end markets are stronger or weaker? And can you talk about the pricing environment? I mean, as Things are as the lead times are coming down, are you seeing any change in pricing?

Speaker 2

Yes. Thanks, Ruplu. Appreciate that. We'll start with Europe and Americas, it was really not any one vertical, it's just a few we talked about. I mean, the automotive or transportation Continues in our world to be very good.

Speaker 2

I always say transportation that includes your Ebikes, carts, trucks, everything, right? And industrial, the industrial market has held up, frankly, probably a little bit stronger than we had anticipated this time Last a quarter ago. So it's really those 2. And then of course, in more Americas centric, The defense and aerospace has been really positive for us. So there are a handful of verticals and it's pretty like I said, it's pretty broad Across the regions, so real positive.

Speaker 2

Yes, on the pricing trends, we're kind of Holding on right now. So we touched on that in the script briefly. Actually in the beginning of the quarter, we had a handful of suppliers That actually raised prices, upwards of 15 to 20 still rate on certain again, this was key, Rubel, on certain Technology is not everything, right? It's because the input costs are still there. But other than that, I would say the pricing environment right now is relatively stable.

Speaker 2

And on the overall question on demand environment, how do I see it Going forward, we got some typical seasonality coming into play a bit with the quarter. But I would say kind of steady. Look, we know there's Inventory out there and some build ups in all the verticals to some degree. But right now, I would just say Steady. It's kind of it's holding on right now and thus the guidance that we gave for our June quarter.

Speaker 1

Got it.

Speaker 2

It's very mixed bag out there, Rupal.

Speaker 4

Okay. Yes. No, thanks for the details there, Phil. Let me ask Ken something on inventory. So it looks like sequentially inventory was up 8%.

Speaker 4

Was there some timing issue I think you talked about? So when

Speaker 3

Yes. I think that obviously with the inventory up, the working capital is higher than we'd like. We'd like to get that back down into the 80s and the low 80s. I would say part of its timing. There was some stuff that we received at the end of the quarter, but a lot of its stuff that we received during the quarter and weren't able to ship out.

Speaker 3

So I wouldn't say there's one in particular fact. I mean about 10% or so is foreign currency, 10% is Farnell and the 80% is really the bulk of The EC business across the board between all regions. And so looking at into next quarter, We'd expect inventory to be flattish. We still think it's going to take a couple of quarters to really get through the inventory levels being elevated.

Speaker 4

Got it. And Ken, if I can squeeze one more in real quick. So the core components margins, even on sequentially $200,000,000 lower revenues. It grew to 5%, so 30 basis points sequentially. So IMPRESENT performance, can you help us break that down to how much was because of mix or versus volumes versus pricing?

Speaker 4

As we think about this going forward, I mean, do you think that this level is sustainable or at what revenue levels Can this margin level of 5% be sustainable? Thank you so much.

Speaker 3

Yes. I think we need to have in the mid-six billion to make The 5% sustainable, I will say as we kind of look out there, we don't really foresee sales in any quarter dropping below $6,000,000,000 or really operating margin drop below 4% as we currently see it. But getting into the current quarter, we did have a favorable mix. So about half and half, half of it was a more favorable mix than we thought, but I would point out for EMEA and Americas, it was still below normal seasonal growth. So although we did better than expected in those regions coming out of the December quarter, it was still lower in terms of growth rates than we'd expect to see In a normal environment, and the rest was a little bit better margin in each of those regions.

Speaker 3

So they did drive a better mix. We talked about demand creation. So it's all those things we've been talking about help to contribute to the little bit higher gross margin in all the regions as well.

Speaker 4

Thanks for all the details and congrats on the strong execution.

Operator

And the next question comes from the line of Melissa Fairbanks with Raymond James. Please proceed with your question.

Speaker 5

Hi, guys. Thanks so much. Congrats on a great quarter and guide. Really nice progress on the margins. It's really good to see in this kind of an environment.

Speaker 5

I know you're probably tired of talking about it, but I'd like to dig in on the inventory levels. Thanks for providing the color on the FX impact. I'm curious if price inflation is also impacting the new inventory you're bringing in. You've seen continued price increases in the past quarter. We've heard a few suppliers so far this quarter signal that more price increases are coming.

Speaker 5

And then separately, there's a number of suppliers that have been holding inventory back from the channel, including distribution. As the supply continues to ease, we'd expect these suppliers to begin releasing more inventory. Is there a potential for your inventory levels Continue to rise as this happens?

Speaker 3

Melissa, I'll take the first part. I mean, I think How I'd characterize it is pricing is clearly an impact not only to the sales growth, but also the inventory levels. But I would say it's more muted than it was a couple of quarters ago. So that's a component. I wouldn't characterize the inventory increase overall.

Speaker 3

Let's say 80% coming from the core business. I wouldn't characterize, let's say, more than 25% coming from pricing. And you kind of see that in our sales growth as well. Going back to the question about whether or not Inventory levels could rise. I mean, I think we that's a possibility that's what we're aiming to resolve.

Speaker 3

I would say it rose more than we expected it to rise coming to this quarter. But what I would say is, if that happens with certain suppliers that are going to give us more inventory because of our demand or our orders, we're Working on the other ones, the handful that did contribute to the increase this quarter. So it all kind of be puts and takes in the overall kind of ins and outs of inventory.

Speaker 2

Yes. Thanks, Ken. And Melissa, this is Phil. Thanks for the comments and the questions. On the inventory, I want to reemphasize It's fresh inventory.

Speaker 2

It's good inventory. It's not aging. And if I get any Pareto, there's a Handful of concentration where the inventory has really grown. So it's not across the board, right? So it's not every line or every technology.

Speaker 2

So it's really, I would say the classic Pareto there with the concentration in a handful. And then the other thing is we're balancing the customer's requirements, kind of going back to the previous how do we see demand And it depends on the vertical, but we're managing the customers. How much can they take? Maybe they might have a little bit too much inventory. So we're trying to manage being in that center technology supply chain, the suppliers and the customers and what the real needs are.

Speaker 2

And we're in the for the long haul with these customers. So where they maybe can't take it this quarter, hey, can they take it next quarter And then maybe we have to extend a little bit AR as you heard went out a little bit as well. It's all kind of hand to hand combat on every one of these deals.

Speaker 5

Okay, great. Thanks very much. That's super helpful. Maybe just one really quick follow-up, this might be for Ken. So this is definitely not a normal cycle because of some of these supply constraints and changing behavior of holding more inventory on the supplier side.

Speaker 5

Does this potentially change the normal countercyclical pattern of the working capital release in your model?

Speaker 3

I guess I wouldn't say we see it that way. I think it could take a few more quarters to get that Flow going right, because typically that normal seasonality would be sales go down, so therefore my inventory goes down and I collect the receivables from those higher sales and that's what creates the cash. That still holds true, but the inventory hasn't gone down, right? We look at more cash flow than we got this quarter, next quarter, but the key is going to be getting the inventory down to actually Create that larger countercyclical effect. So we don't believe it's changed.

Speaker 3

We have not seen the inventory, Whereas you've seen other cycles, the hemichord goes down a couple of quarters after the sales go down.

Speaker 5

Okay, great. Thanks very much. That's all for me.

Speaker 3

Thanks, Moises.

Operator

And the next question comes from the line of Matt Sheerin with Stifel. Please proceed with your question.

Speaker 6

Yes. Hey, thanks and good afternoon everyone. Phil, just your comments regarding, I mean, I think you said That you expect that the correction or inventory correction to take a few quarters. And it seems like you're lagging some of your suppliers because your Business obviously is holding up. You're one of the few companies within semiconductors that were still up year on year.

Speaker 6

So it seems like you're just getting started here. In terms of your visibility and how long that will take, are you expecting your sequential or less than seasonal Trends at least through the rest of the fiscal year or the calendar year?

Speaker 2

Yes. Thanks, Matt. First of all, the seasonal trends and the typical seasonality has kind of been thrown out The window, so it's tough to let me just tell you what we're seeing. And our guide reflects that. And As far as our estimate based on the backlog we have, inventory we show pipeline coming in And the revenue forecast gave me the facts to say, yes, I think it's about a couple quarter, maybe it's 2 or 3 quarter Kind of burn off.

Speaker 2

It's just a very different cycle than we've seen before. And there's so many mixed signals, Matt. I mean, some verticals, I. E, PC, consumer are down, mobile and then other ones are up, right? So the industrial continues to be Strong or steady in automotive.

Speaker 2

So it's given us just so many different mixed signals this time, but that's our estimate. We think the demand And what we see in our forecast we're getting in from our customers, it's going to allow us to 2 to 3 quarter cycle. I think it's correction, Mac, more than a cycle.

Speaker 6

Got it. And in terms of your own inventory build, is that a function of Suppliers may be shipping ahead of their lead times because of their own, maybe seeing cancellations from other customers and then you seeing cancellations and push outs from customers and that's why sort of it's piling up, if you will?

Speaker 2

Yes. I don't know. I don't think so. I think they're catching up. I mean, because lead times in many cases are coming in, so they're catching up to the old promise dates or required dates.

Speaker 2

We're not I mean, I really want to emphasize, and the suppliers, As noted earlier, been working with us. They're not shipping early. So we are not taking in products quarters early or anything along those lines. Some of it is just catching up so quickly, then you can't pass it on to the customers because even if they were missing the gold, they can't build it all in a month, So they got to plan out their manufacturing if things are coming in quicker than they thought. So it's kind of a like I said earlier, everyone's a bit of a one off.

Speaker 2

But I do not believe That the suppliers want to ship early or are shipping early at this point in time, we're not seeing that.

Speaker 6

Got it. And I know you're guiding revenues down roughly 4% sequentially. Would you expect all regions to be down sequentially? I

Speaker 3

mean, I think I would say Normally, Matt, Asia would be up a little bit coming off of the Lunar New Year and they're up less than we like and then EMEA and Americas would be down. It's kind of so it's a little bit more unfavorable mix than it was in the Q3, I would say, with the 6,250,000,000 And that's typical

Speaker 2

in the West, Matt. Europe and America is coming down from the March quarter is typically one of the largest quarters.

Speaker 6

Okay. And just lastly on that interest expense, which is up obviously significantly year over year and you're still guiding to that $70,000,000 level Or so, I would think that that would be a priority for you in terms of your balance sheet to try to work down those short term borrowings. Is there a plan there?

Speaker 3

Yes, Matt, I mean, I think that's the priority as cash gets generated, we pay down the debt and I think we're kind of hit the plateau there with the peak there, the $70,000,000 but yes, we got to work that down as well. And clearly, you can see the headwind it's created with the EPS, right? Our EPS would be a lot more Robust hadn't we had that additional expense to fund the working capital.

Speaker 6

Yes, fair enough. Okay, thanks for the answers. I appreciate it. Thanks.

Speaker 2

Thanks, Matt.

Operator

It may be necessary to pick up your handset before pressing the star keys. Our next question comes from the line of Joe Quattarocchi with Wells Fargo. Please proceed with your question.

Speaker 7

Yes. Thanks for taking the questions. My first one, I wanted to ask about the change in collections that you're seeing. You talked about that last quarter and maybe you referenced it again this quarter. I guess, are you seeing that spread to additional customers?

Speaker 7

And then Kind of coupled with that, were there any sort of change in customer behaviors just given kind of some of the banking issues that we've seen across several of the regional banks?

Speaker 3

Yes. Thanks, Joe. I mean, I think from an overall quality of the receivables, aging receivables, I would actually say it improved a little bit from the end of December. Part of that blip in December was our customers' year ends and things like that. But I think it's more of the same.

Speaker 3

It's Payment terms are stretched out a little bit, but we're collecting and we don't have any near term headwinds we're seeing from customers going bankrupt and that's Part of the inventory equation as well. So I think we feel pretty good that we're in a steady state there in terms of collections and we're working with our customers. So feel good there. On the banking situation, we were able to and congratulations to our treasury team to close a debt deal right before some of that noise happened To give us a little bit more liquidity, we're glad we're able to get in before the noise. We had some customers that had their banking and some of these Regional institutions that were impacted, but overall it's not been an impact to us, I would say.

Speaker 2

Yes. I just would add on the AR. Just AR's receivables Strategic for us, right? So we knowingly are working with our customers. So there's no real surprises on the AR going out.

Speaker 2

And we're As we get the inventory in, if they can't afford to take it right now, we'll hold a little bit more or if we ship, we extended their receivables. Again, they're all 1 on one conversations with the customers, because again, we're in it for the long haul. We want to keep them viable and keep them afloat in some cases. So But we have been really proud of the credit and collections team. They've done a phenomenal job thus far.

Speaker 7

Got it. And then just as a quick follow-up and I apologize if

Speaker 1

I missed it. You said that total book to bill was relatively the

Speaker 7

same as last quarter. Did that change at all really by region?

Speaker 2

Not really. It's below parity, Joe, and some of that negative book to bill It's us moving backlog as well, right? So we're adjusting where suppliers are allowing that and if some of the NCNRs get Kind of some relief there. We're managing that as well. So some of that's, I'll call it, self inflicted for the right reasons, right, to get the real because suppliers want To know what the real pipeline is too, right?

Speaker 2

And we want to go to our customers and say, hey, do you need this or don't you need it? So most of it's or much of it is on our own. And the other thing is, we're not seeing as much in the cancellations. The cancellation rates are Pretty much within our range, okay, in that 30 25% to 30% range. We are seeing some push outs, right, which again is not necessarily A bad thing, but the customers are still reluctant to cancel the backlog, which is interesting.

Speaker 7

Got it. Thanks for the color.

Speaker 3

Thanks, Jeff.

Operator

Hey, everyone. There are no further questions at this time. And I'd like to turn the floor back over to Phil Gallagher for any closing comments.

Speaker 2

Yes. I would just thank everyone for attending today's earnings call

Operator

And ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

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