Good morning, everyone. My name is Ruplu Bhattacharya. I'm with the IT Hardware and Electronics Manufacturing Services Equity Research team here at Bank of America. Thanks for coming to the third day of our Global Technology Conference. As part of my coverage, I also cover global distributors, and today we're honored to have Avnet, which, as you know, is one of the largest global distributors in the world. From the management team, we have CFO Ken Jacobson. Ken became CFO, I think, September of last year, but he's been with Avnet since 2013, and prior to that, he was with First Solar. He has more than two decades of experience, so we're really happy to have you here, Ken.
Thanks, Ruplu.
Thanks for coming. We also have Joe Burke, who leads the investor relations team at Avnet, but beyond that, he also is VP for Risk and Treasury. Avnet is in good hands. All right, folks, we're gonna get started. Ken, maybe I'll ask you a high-level question: Can you talk about demand trends by region and maybe by vertical? What are you seeing out there?
I think, you know, we just completed our third quarter, and it was a, you know, a higher than expected quarter. How I'd characterize it is, you know, demand is still pretty good, especially in the vertical markets we serve. You know, we're pretty diverse in terms of the end markets. Yeah, we have some exposure to consumer, which is obviously down, some exposure to the data center, but, you know, a lot of our business is really in the industrial space or the transportation space, which is automotive, but also think about things like e-bikes, golf carts, anything with wheels or anything that moves, a lot of electronics and all those type of applications. You know, we're seeing demand still remain pretty steady. It's muted a little bit, but it's still pretty good. It's not declining.
It's still holding up. I would say that's a broad-based statement across all regions. Although we're seeing some softness in China, and in those kind of verticals I just talked about, we're seeing continued strength in the Americas and EMEA. In fact, EMEA had a record quarter last quarter, and they have a really broad-based customer set in the industrial space. In the Americas, aero and defense, unfortunately, continues to be strong and probably will be for the foreseeable future just 'cause due to geopolitical concerns. You know, generally, end demand is holding up pretty good. I know we'll get to the inventory question, you know, generally it's been pretty good and I would say steady.
Clearly we're not seeing 20% year-over-year growth like we have seen over the past couple years, but this last quarter, we grew 3% year-over-year in constant currency, just to give you some flavor.
Maybe just to dig on that a little bit deeper, you mentioned China is soft. I mean, can you just talk about what's happening there? You still have COVID-related costs or any disruptions happening there?
I would say it's less about COVID. I mean, I think we've continued to operate despite COVID, and COVID, you know, had challenges when you couldn't ship product into a customer 'cause they were shut down. In general, I would say, you know, the any costs we have are kind of steady state when it comes to that. Really from an overall China demand, we're just seeing some general softness, not only on the consumer side, for example, but in general. You know, there's some little bit of slowdown there, and Phil likes to refer to it as kind of a wobbly environment, and that's been going on for the past couple quarters, and that was reflected in our guidance for this next upcoming quarter, which was -1% to -6%.
A lot of that's because of Asia still remaining a little bit softer than we expect. We do kind of foresee, you know, a multi-quarter kind of correction. As we kind of enter into the new calendar year, we would expect, you know, some of that business in Asia, including China, to start to kind of come back. Clearly, you know, consumer's been down for the past several quarters. At some point, those type of things are gonna come back, right?
Right. You talked about demand holding up. In terms of visibility, I mean, would you say that versus 90 days ago, has visibility improved, or has it deteriorated? When we think about forecasts from customers, in general, like, how long a forecast do you get from your customers, and has that changed over the years given all of the supply shortages? Are customers giving you a longer-dated forecast?
I mean, I wouldn't say the visibility's changed. I would say the visibility we have is, one, we have a backlog, right? That gives us a lot of comfort going out, let's say, 90 to, you know, up to 180 days, where we have true customer demand. We've got other indicators, like our book-to-bill. We've got cancellation rates. Those are kind of factors we consider when we talk about visibility, and, you know, clearly pretty good visibility one to two quarters out and a little bit less out there.
A lot of the visibility we were getting with the supply shortages were, you know, lead times were extended, so we were getting customer forecasts even as far as 18 months because that's what they needed to give us so we could place orders, because lead times may have been, you know, 75 weeks at the peak. As lead times have come down and improved, you know, the amount of forecasts that we get from customers is lower, but there's still longer term planning with both our suppliers and customers that give us visibility, and clearly some of the supply chain planning we have gives us some visibility as well. In general, you know, better visibility out to one to two quarters, but, you know, we do have some indicators, including, you know, new wins, for example, right?
We know when those are gonna onboard. That's part of, you know, our belief that there's some wins coming that we kind of see and gives us line of sight to some of that growth into the next fiscal year.
Got it. Got it. You talked about cancellation rates. I mean, how are they trending? What's a normal level of cancellation, and how is it trending versus normal?
I mean, I think there's normally lots of cancellations, right? Customers adjust their, let's say, forecast, MRPs. You know, there's puts and takes, some pull in, some push out. I would say cancellation rates have been within a normal range. I would also say book-to-bill, even though it's below parity, that's across all regions, it's been pretty steady. It's been consistent for the past few quarters. The backlog's been pretty consistent. If you compare the backlog year-over-year against the last 30 days, I mean, it's been pretty within a tight range. All those are, you know, positive indicators that kind of demand is, let's say, stable.
Okay. You talked a little bit about backlog. I mean, how is that trending, and what's a normal level of backlog, and is it still extended for you?
Lead times?
Lead times.
I mean, backlog, I think, has been pretty steady, and backlog really just represents the, you know, orders we need to ship, that we know we need to ship when the product comes in. That's been pretty steady across all regions. I would say from a lead time perspective, it's improved, but it's still elevated, especially when you think about power, some high-end microcontrollers. I mean, those things are still pretty hard to get and have a long pull in the tent, and therefore it's, you know, creating part of the situation with inventory in the broader ecosystem. Although lead times have improved, I believe 80% of semiconductors, for example, are still extended relative to pre-COVID levels.
Mm.
It's improved, but it's still, you know, takes much longer to get product than it did prior to the pandemic.
I see. What about lead times and passives? Are they extended as well?
Again, they're improving, but still, you know, most stuff in the IP&E space, interconnect, passive, electromechanical, is still extended relative to COVID times. It's more available, passives are available, but it's still longer lead times than we would like or that have been historical.
Ken, I wanna talk about inventory because that's a concern that some clients have. Let's start with overall channel inventory. I mean, what's your view on inventory in the overall ecosystem? Is there any excess inventory, and is there a cancel or a correction that's happening in the system?
Our view as of right now and as of our last third quarter when we had our earnings call in May, was, you know, we're in the process of correcting, and we believe it's a multi-quarter inventory correction. You know, some might call it a soft landing. You know, correction is different than a downturn, because in a correction, you've still got, you know, decent demand. What we see right now is, yes, elevated inventory levels, not only within the distribution channel, but also at our supplier partners with elevated inventory levels at our big customers, including EMS and also at the OEMs, right? Inventory levels are elevated.
You know, part of that is lead times coming down, which has led to, you know, suppliers catching up on inventory levels, and part of it's the fact that you still can't get all the parts you need to make your final builds. All of those factors are contributing to, you know, I would say, elevated inventory levels. I wouldn't say it's necessarily obsolete inventory, probably excess in terms of it's gonna take a couple quarters to burn through the inventory. It's really about, you know, everything's built up. You need the kind of customer to be able to finish their builds, then consume new inventory. That's kind of the situation. We call it slow turns. Our inventory days have shot up, you know, close to 20 days. That's really 'cause inventory is turning slower than it was.
Still very new inventory. We know the customers have demand for it. You know, the analogy Phil likes to say as he talks to a customer, they need help with their inventory, they need help with receivables, right? Because they're trying to get all the parts they need to finish their goods. They'll ask them a question: "Well, how's business?" "Business is great, better than it's ever been." You know, that's, you know, the kind of consistent theme is, you know, the demand is still there, especially in the industrial base, which gives us comfort that, you know, it does take a little time to burn down the inventory, but it's still needed inventory.
Maybe talk to us about pricing. If there's excess inventory at suppliers, if lead times are coming down, what are you seeing in terms of pricing from suppliers? Are suppliers still raising prices? The next question I'm gonna ask you is, you know, if and when suppliers start to lower prices, how does that impact your P&L?
I think the word we like to use on pricing is stable. In January, we noted a handful of suppliers still raised prices, and the reason they raised prices is input costs are higher. You think about, you know, at the fab, think about freight costs, all those things, labor costs, everything's up, so the actual cost to build a component is up. That's what a lot of the price increases have been related to. From our perspective, you know, we've passed those on, so we haven't necessarily benefited on a gross margin perspective from all the pricing increases over the last couple of years.
We have benefited in terms of, you know, higher sales growth due to those price increases, and we attribute about 25% of our growth over the past couple of years due to pricing, the rest due to volume and, you know, overall demand mix, things like that. How we see it right now is because the underlying costs are still up, the pricing environment is relatively stable. From our viewpoint, you know, clearly, as product becomes more available and perhaps as part of a way to get rid of some of the higher inventory levels, right. Normal competitive pressures of us competing with our nearest competitors in terms of sometimes you go with price, you try to take share.
You've got the normal dynamics in terms of our discounting price to get more customer business, but I think we've built into our expectations some level of normal competitive pressures while we continue to focus on higher margin type of opportunities like demand creation, IP&E, supply chain as a service, and our front-end business.
To the second part of the question, should prices come down, we have mechanisms in place, good relationships with our suppliers, in that, there's concepts called ship and debit, where we're able to, you know, go back to the supplier and say, "Hey, we've got a price for X, we'd like to sell it for Y." They work with us to get the cost of sale back to where we would want it to be. The good relationships with our suppliers, with most of them, have that kind of mechanism in place that helps us on the downside.
Would you say that there's no inventory risk in terms of, like, it's not like you're buying inventory today and that becomes overpriced because suppliers lower their prices? Are you always protected in that case?
Yeah, I would look at it a couple of ways, and I think that Joe's right in terms of, you know, if a supplier was to lower their price, their list price, for example, we would have protection for stuff we haven't sold because of the fact that we're still holding it. On a broader statement, I guess what I would say is our risk is more of, you know, having to hold inventory for longer to get rid of it until demand comes there versus, you know, obsolescence risk.
You know, clearly, first of all, you know, semiconductor components, IP&E, they have a long shelf life. They don't go bad like food or something like that. You know, the idea would be we'd bring less inventory in, sell through the inventory we have, right? You might hold it a little longer. We're seeing a little bit of that now with the, with the slower turns. Really, from a historical perspective, you go back, you know, till several years, have been around for over 100 years, go back the past 25 years, never had any serious inventory exposure, inventory write-down, including 2000, 2001, we were able to get through it. Just a matter of it takes time to correct, and that's why we call about it, you know, multi-quarters to get through it.
You know, that's our view right now. Suppliers are being pretty good about not sending too much inventory our way. What they're doing is catching up, 'cause lead times are coming in for a demand that's been out there. They're not necessarily stuffing us or loading us up with more inventory than we necessarily need.
I'm going to skip to a question that I thought I'd ask later, because we're talking about inventory, I mean, would you say that your inventory is now elevated because, you know, are some parts just hard to get, and you need to keep more inventory? How should we think about, you know, your working capital requirements over the next couple of quarters or maybe a year? Like, when do you think inventory normalizes, how does that impact your cash flows?
I guess I would characterize it as, I don't see us having a lot of inventory now for, let's say, safety stock or, you know, supply chain resiliency. I think that's a future opportunity where customers are gonna wanna hold more inventory to protect themselves. The example we use is a $2 part holding up a $100,000 luxury vehicle. I mean, automakers aren't gonna let that happen again, and they'd rather hold 180 days of stock of $2 parts to avoid, you know, the, not selling the car. We see that as coming, you're gonna need the supply to kind of improve still in order to have that happen, to have that excess of the strategic buffer stock.
You know, what I would say we're seeing is, you know, a catch-up, that customers were ordering inventory, and there were hard to get parts. Now, as suppliers catch up with lead times, they might have had orders out for 52 weeks, lead times come down to 26. Now they've maybe got a year worth of parts, and they've kind of got to work through it, right? Because they can't build a year's worth of end products in two months, three months, right? What it is really they've got more than they need for their current production levels, but it's still needed in terms of the next six months, the next year, and that's kind of part of the correction.
You know, and again, our inventory builds have been specific to certain technologies, where lead times have come in, and it kind of built up a little bit, as opposed to broad-based build of all suppliers, all inventory. It's been more pocketed, where five or six suppliers might make up 80% of the inventory build.
The level of inventory, the dollar value is one thing, but I think what's more important to me is the turns, inventory turns. Are they good? I mean, are they normal, or are they weak? I mean, how would you characterize inventory turns at this point in the cycle?
I think they're, we can do better, and we should do. They're elevated. I mean, I guess they're lower than we'd like. Normally, we're in a, you know, at least a 4-6 turn type of basis, so our inventory days should be, you know, 70 days, we'll call it, and we're up to 83. There's, you know, 10 to 15 days of reduction we should have there. That's all about turns. I don't think the dollar amount of inventory is necessarily a concern. As we continue to grow, that dollar amount may stay stable, but you're gonna see the turns improve. I guess if it's a stable demand environment, you know, as we start turning it faster, that would yield to excess cash flow generation.
Got it. Maybe I'll ask you one more question on inventory, and then I'll move on. You know, inventory on a dollar basis is up year-over-year. How much of that is because there are more pieces of inventory in your inventory versus the value of that inventory? The cost of the inventory has gone up year-over-year.
I think at a high level, similar to the sales growth being about 25% of our sales growth coming from higher prices, inventory levels would be, you know, generally about the same. It's not all pricing. It's a lot of, you know, volume or mix, right? It could be a higher dollar MCU relative to a connector, and that's, you know, 15x the cost, as illustrated purposes. I mean, I think if the inventory is building really due to price, then you'd expect to see a higher sales growth when it's sold through. You know, I wouldn't say it's as much pricing. I'd say it's more volume or mix causing some of the inventory build.
Again, it's really just a matter of turning it, and we do think it's fresh, it's good, it's needed by the end customers. It's just a matter of it's turning a little slower due to the, you know, buildup of inventory on our end customers as well as the OEMs.
Got it. Okay. Let's move on. One thing that keeps happening in the semiconductor space is that suppliers tend to merge. I mean, they tend to consolidate. In the past, I think you've been hurt somewhat because of that. How, you know, have you recovered from that? I mean, how do you see, and maybe as part of this question, I'll ask you, how is your share trending over the next? Are you gaining share in any region? Have you lost share? If you can just update us on that. Another thing is on your line card. Are you happy now with the strength of your line card, or, you know, what's the trend there?
Yeah, I'll start with the line card, Ruplu. We're very proud of the line card that we have. I mean, we have supplier relationships that go back 40 or 50 years. You know, we can't control what happens within the consolidation in the industry. You know, there's been times where we've won, and times when we've lost some suppliers. But, you know, always looking at our line card, looking to fill gaps and areas where we need to. You know, we've done quite well. I mean, I think if we had a large disengagement back in 2019, we're an $18 billion company or a $25 billion company now.
We've been able to make up for that, and one of the ways we do that is make sure that, you know, if we, if we did have a loss, you know, comp plans are not changed. Just tell the team, "Go out and get that business." You know, again, we're very, very proud. We have a great line card, and that's served us well in the past, and we expect that to continue on into the future.
Yeah, I'd say from a market share perspective, measure market share a few different ways. One is, you know, against our biggest competitor, how are we growing versus their growth? Well, seven consecutive quarters of outgrowing them. When you think about our supplier partners, you know, we're number one or number two in all of our big supplier partners. To Joe's point, we love our supplier technologies we have. We've made up all the business of the lines we've lost. If you really take that into consideration with our growth over the past three or four years, you know, the growth rates are even higher when you, when you say we made up $1.6 billion of business from a major analog supplier that we lost.
You know, we feel pretty good, and I think part of that was, you know, really going back the last couple years, our focus was getting back to basics, and part of basics with our business is really helping drive demand and supporting our supplier partners, right? We're an extension of their sales force, we're an extension of their customer base, and we're meant to cover the long tail of customers. You know, how we win with our suppliers is we help increase their customer count, help increase their business, right? Then they wanna give more business to us. Our supplier relationships are probably as strong as they've ever been. We're comfortable, never confident, or I guess confident, never comfortable. But we feel pretty good about there, and, hey, there's always potential consolidation in this industry.
There always has been, and I think over time, you know, we've won more than we've lost. We're really proud of our line card. I think, we're not scared of that. That's always been, part of the industry, but we feel pretty good that we've got everything we need to serve our customers, and that's the important thing.
Maybe let's talk about revenue growth. I mean, if I go back to the last Investor Day, I think you gave a medium-term revenue growth target of 5%-8% CAGR. I mean, help us unpack that. How much of that is market growth versus you gaining share? How much of that is pricing? Why is 5%-8% the right target? How should we think about revenue growth in the near term versus medium term?
Well, first of all, when we presented at Investor Day, you know, we took, you know, trusted industry sources, and, you know, we took a look at our verticals and the demand as the industry sources forecasted. You know, the good thing about our vertical business is we think we're focused on the right verticals, industrial, automotive, transportation, you know, and it's not just automotive anymore, as Ken mentioned before. It's, you know, it's golf carts, it's e-bikes, it's boats, it's you name it. Then, and in addition, aerospace, military, defense. We think we're in the right verticals. You know, we do have some communications consumer business that's a little sluggish right now, but that really didn't factor into it.
As we looked at it, you know, we saw that we're in the right markets with the right with the highest growth CAGRs over the next few years. That's that's how we got to that number. Now, things will change based on macro ±, but, you know, we think we're we're in good position with the verticals that we serve.
Okay.
I think if we win more business, like we have been doing, we'll be at the higher end of that range. If we're kind of staying with the overall growth, and again, the content, the electronic content and all things around us is just only continuing to expand, and that's kind of a lot of the proliferation of electronics. Think about electric vehicle or just a vehicle in general, compared to 10 years ago, how much electronic content is in the bill of materials now. That's the trend we're gonna see across industrial applications. Talk about AI, 5G, I mean, there's plenty of opportunities and a diverse set of opportunities to kind of fund that growth. That's why our supplier partners are investing in capacity.
I think longer term, if you look at the history, 5% has been a reasonable growth rate for semis, right, on a normalized basis. This past couple of years has been extreme growth, but, you know, mid-single digits has been a normal growth rate we've experienced in the past, clearly, when you normalize for those supplier losses.
Maybe let's talk about margins. I think one of the areas where, you know, you guys have done a phenomenal job is on the core business. If I remember, I think two years ago, the core business was at 2% operating margin, and last quarter, you reported 5%. How much of that is sustainable? I mean, what are the drivers for, you know, improving margins further in the core business, and how should we think about that?
The biggest thing about our model, if you think about the distribution model, is really, you know, creating operating leverage with scale. Over the past couple of years, what we've done is improved our scale. From our business perspective, you know, we've got capacity in our warehouses. We may need to invest longer term for new warehouse capacity. You know, we're gonna invest in our people. 70% of our cost is people cost, we're gonna give raises, we're gonna make sure we take care of our engineers and things like that. The reality is, if we're growing 5%, we don't necessarily need to nearly add 5% of cost, right? The operating leverage we can create in this model is significant.
You know, our view has been, consistently, if we just get back to taking our fair share of the market growth, we'll be able to continue to hold or expand margins. You know, I think the growth over the last few years has kind of led to a more steady revenue base, and that revenue base then yields an operating margin. You know, we're not planning to get to our expectations, which is really a 5%+ long-term operating margin across all of Avnet, through necessarily, you know, improving gross margin. We think we can hold gross margin, because we've got a lot of higher gross margin opportunities, you know, demand creation, where we help generate demand.
For parts, for small and medium-sized business, for our suppliers, that yields a 400 or 500 basis point better margin than just a normal, you know, component sale. IP&E is about the same. We've got supply chain services, a lot of higher margin opportunities that can offset just general competitive pressure on fulfillment-type margins. We'll continue to operate efficiently. When we do look at cost actions, we look to reinvest those dollars. Really just being very disciplined on costs and becoming more efficient in how we provide services to our supplier and customer partners allows us to kind of keep costs under control, and we've seen that over the past couple of years of very little cost increase, even though we've been able to grow the business, you know, 40%.
Yeah, no, that makes sense. If you're talking about margins, let's talk about your catalog business for now. Last year, margins were within your target range of 10%-15%. Last quarter, it was down to 9%. Give us the lay of the land. What's happening with Farnell margins? What's impacting that? When should we think that you can get back into the target range there?
Farnell is our high service business, and so compared to, you know, let's say, we're like Costco or a grocery store or a Safeway, Farnell's like the 7-Eleven, right? You wanna go in and buy a single Coca-Cola instead of buying a 24-pack. We're able to high- yield a higher margin for that, especially for the speed and convenience they provide. In that business, which is, you know, roughly 7% or 8% of our revenues, you know, they did benefit a lot from the shortages, and they were able to extract a higher gross margin for the components they did have. What we're seeing right now in that business is a correction of their gross margins.
You know, they have about 3x the gross margin of our core business, a little less than that, but we've seen that gross margin have to have some pressure as well as, you know, just overall muted demand, and that's causing some pressure on the operating margin. There's also some investments we're making in that business specific to IT systems and warehouses because it is a higher margin business, again, double-digit EBITDA versus our business that we are shooting for a 5% EBITDA. You know, 2x the operating margin. You know, a little bit of OpEx there, and that's all kinda leading to a compressed operating margin. What we see over the next, let's say, a few quarters is, you know, some recovery of that operating margin.
You know, one, because of the fact that there's, you know, new business they have coming in, a new supplier line like ADI. National Instruments is another supplier that they're exclusive with, they've got some new suppliers that have, you know, growth potential, as well as single board computers. You know, the Farnell businesses has about 10% of their business historically been single board computers, and single board computers just haven't been available because of the supply constraints, that backlog is robust, we start to see that coming back online here in the next fiscal year. Coming into the September quarter, we'd expect to see the single board computers available, therefore, the backlog starting to get filled, therefore, that helps the growth rate, that helps the operating margins.
A combination of factors, but a lot of it's really the unwinding of their pricing premiums that they've experienced through the part shortages that's kind of putting pressure on their current operating margins.
Okay. In the time that we have left, I wanna ask you a couple more questions. Let's talk about capital allocation. I mean, how do you think about, you know, M&A? Would you lever up to do a larger M&A? I don't know if there are opportunities out there. How about like, you know, buybacks versus debt reduction? Just help us prioritize all of these.
Yeah, I'll start. You know, our capital allocation is first to support the business. You know, we don't have a lot of capital expenditures for factories or distribution centers. A lot of our cash goes into the working capital. That's what we've done. We couldn't have had, up until December of last year, a double-digit year-over-year sales growth without having, putting a lot of the cash back in for the receivables and inventory that we needed. Support the business, number one. You know, we do pay a steady and increasing dividend over time. You know, support the business means working capital, CapEx, and things like that. The distribution centers and the systems. You know, working capital is important. M&A.
We'll take a look at M&A where as and when it makes sense for us. You know, I mentioned the dividend and the buybacks. The thing that we have now is, since we've had elevated inventory levels, as that burns off, we think we're sitting on a good amount of cash when that turns, and we'll be in a good position to look at our share repurchase because we think we're undervalued at this point in time.
Speaking of that, maybe I'm gonna ask you the last question, which may be difficult to answer, but, you know, you've if you look at what's happened with Avnet, you've recovered from supplier consolidation, your revenue growth is good, you've got core operating margins at 5%. Farnell is 9%, which is still much better than the core. Yet, when I look at the stock, it's trading at just above tangible book value. Why do you think that is? I mean, what are investors missing, and why should they invest now in Avnet? A couple of different questions, but I'd like to get your thoughts on that.
I mean, I think, again, we think it's a great value in the stock because we're trading well below book value. You know, the thing we haven't talked about much is the countercyclical balance sheet. Let's say demand went down 10%, our sales went down 10%. What that means is we're gonna generate a lot of cash because our inventory levels will correct, we'll collect the receivables, and therefore, we'll generate a lot of cash. If you look at our history, anytime sales have gone down, we've been able to, you know, generate a lot of cash, which then gives us flexibility in capital allocation priorities, and typically that's coming with a lower stock price. You know, if you look at our buybacks over the past 10 years, it's been pretty robust.
I think the thing people are missing is, you know, one, you know, our execution is back. We've had some unforced errors over the past few years. You talked about that, supplier loss. If you really look over the past three years since Phil Gallagher took over as CEO, we've executed really well, and we've repaired our supplier relationships, and really gotten back to the basics in terms of, you know, focus being on value-added distribution. Talked about it before, though, I mean, this is a really great neighborhood to be in. The proliferation of electronics is here to stay. We've got the right line card to help us do it, and we've got the right end markets, really where the growth is gonna be.
You know, we're gonna get through whatever this correction is, in the worst case, sales go down, we generate a lot of cash and then figure out what to do with that cash. The reality is, you know, our position within the electronic supply chain is critical, and it's a great neighborhood to be in. I think we're really poised for a lot of momentum going into the future, even if there's some, you know, uncertain waters here over the next couple of quarters. We feel pretty good about where we're at, and that's how I'd leave it.
Okay. No, that makes sense. Ken, we've talked about a lot of different things. I really appreciate you taking the time to come here and wishing you great success over the next year.
Thanks, Ruplu.
Thank you. Thanks, Joe.
Thanks, Ken. Appreciate it.