Arrow Electronics Inc
NYSE:ARW
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
108.98
137.14
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Arrow Electronics Inc
You don't have any saved screeners yet
Good day, and thank you for standing by. Welcome to the Arrow Electronics Third Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference call over to your speaker today, Mr. Steven O'Brien. Please go ahead, sir.
Thank you, and good day and welcome to Arrow Electronics' Third Quarter Earnings Conference Call. With us on the call today are Mike Long, Chairman, President and Chief Executive Officer; Sean Kerins, Chief Operating Officer; and Chris Stansbury, Senior Vice President and Chief Financial Officer.
During this call, we will make forward-looking statements, including statements about our business outlook, strategies and future financial results which are based on our predictions and expectations as of today. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors in our most recent 10-K and 10-Q filings with the SEC. We undertake no obligation to update publicly or revise any of the forward-looking statements.
As a reminder, some of the figures we will discuss on today's call are non-GAAP. We have reconciled those with the most directly comparable GAAP financial measures in our earnings release. These non-GAAP measures are not intended to be a substitute for our GAAP results. You can access our earnings release at investor.arrow.com, along with the CFO commentary, the non-GAAP earnings reconciliation and a replay of this call. We will begin with a few minutes of prepared remarks, which will then be followed by a question-and-answer period.
I will now hand the call to our Chairman, President and CEO, Mike Long.
Thank you, Steve, and thanks to all of you for joining us today. Before I touch on the supply chain topic, specifically the current imbalance between supply and demand in the electronics component market, I would like to focus on the theme we've been discussing over the last few years, Arrow's ability to create even in challenging market conditions.
Our customers and suppliers recognize the value we bring as our team achieved all-time records in gross profit, operating income and earnings per share during the third quarter. Arrow's investment in design, engineering and supply chain solutions have delivered the unmatched performance that makes us a leader in our industry.
Through those investments, we have established a continuous cycle of growth that enables more customers to manage manufacturing and bring compelling new products to market sooner. It also helps our suppliers embed their design in the next generation of electronically rich products.
This continuous cycle ultimately leads to new product innovation, closer ties with customers and suppliers and better outcomes for all. Our emphasis on inventory and working capital investments as well as our key competitive differentiators of industry knowledge, media properties and experience have made us well positioned to help customers drive their business advantages. These low-risk, near-term investments are helping our customers secure manufacturing continually in increasingly unpredictable conditions.
Moving to the financials. The trajectory of the global components business was positive during the third quarter. Our global components business capitalized on continued strong demand in all regions, with sales up 25% year-over-year. Sales were above the midpoint of our expectation for the 6 quarters in a row.
Just like last quarter, it was a struggle to secure additional inventory to meet strong demand. Based on the data we collect in our market intelligence, it's increasingly clear that supply will remain short of demand through the better part of 2022. Instances of severe supply chain bottlenecks have increased, leading to widely reported production slowdowns in certain industries.
During the quarter, we saw robust demand from such sectors as transportation, industrial, communications, computing and data networking. Our demand strength across all regions and multiple end markets more than offset any one customer's or set of customers' challenges. And as a result, our global components sales of $6.6 billion set an all-time record for Arrow, and we were slightly ahead of last quarter.
In terms of profitability, we achieved significant growth, along with exceptional operating leverage during the quarter. Notably, operating income from global components increased by more than 3x the rate of sales. We continue to provide customers with value-added supply chain services that utilize our global ERP's capability and unique level of inventory insights.
Our digital platform is also helping customers manage component supply and safeguard their manufacturing processes. As a result, the revenue contribution from design and engineering activities increased within our mix during the third quarter.
Turning to enterprise computing solutions. Sales were within the range of our expectation. However, supply chain issues limited our ability to capitalize on strong demand. We saw projects postponed and pushed out during the third quarter due to an inability to secure IT hardware product. This also led to a missed software sales that would have been associated with those specific hardware refreshes.
It's not surprising that the same component shortages that are impacting global components and global ECS right now. It's a supply, not a demand issue. It's important to note that near-term postponements due to product availability may not result in a one-for-one catch-up in future quarters. End customers have immediate needs to run mission-critical applications and workloads in a secure manner and limited ability to stretch existing infrastructure.
Any bottlenecks are therefore accelerating the utilization of cloud-based compute and storage. That's good news for Arrow, is that we have the leading cloud enablement tool, ArrowSphere, ready and able to help our VAR and MSP customers meter, monitor and bill cloud right away.
In closing, I would like to acknowledge our team for consistently delivering; our customers and suppliers, admit some of the most acute and protracted product shortages and shortfalls we've ever seen. We earn our customers' trust and business during the tough times, and that certainly includes time where demand outstrips supply by a wide margin. By delivering for customers right now, we're securing strong, mutually beneficial multiyear relationships for the future.
With that, I'll now hand the call over to Chris to provide more details on our third quarter results and our expectations for the fourth quarter.
Thanks, Mike. Third quarter sales increased 17% year-over-year on a non-GAAP basis. And the average euro-dollar exchange rate for the quarter was $1.18 to EUR 1, which was roughly in line with our forecasted expectation. Changes in foreign currency benefited sales growth by approximately $55 million year-over-year.
Third quarter gross margin of 12.6% returned to its highest level since Q2 2018. Gross margin improved year-over-year in global components in each of our operating regions. Operating expense increased slightly as a percentage of sales during the third quarter but decreased as a percentage of gross profit. As a reminder, many of our value-added services and solutions can be independent of the sale of electronic components and therefore contribute more meaningfully to profit and sales.
Interest expense was in line with our prior expectation. And while the third quarter tax rate was slightly below our expectation, that was due primarily to the timing of a discrete tax item, and we also saw some favorability in regional profit mix. As we have been saying on prior calls for the full year 2021, we expect our effective tax rate to be near the low end of our long-term range of 23% to 25%.
Turning to the balance sheet and cash flow. Third quarter operating cash flow was $114 million. Compared to the second quarter, DSOs and inventory days lengthened, but were naturally offset by an increase in our payable base. As a result, our cash cycle of approximately 51 days was effectively the same as last quarter.
Our liquidity position is the best in the history of our company and continues to improve. Leverage as measured by total or net debt to EBITDA is at its lowest level in over 10 years.
We returned approximately $250 million to shareholders during the third quarter through our share repurchase plan. This matched last quarter as being the largest single quarter of share repurchases in Arrow's history, enabled by our strong profits and proactive working capital management. We remain committed to returning cash to shareholders, with approximately $413 million remaining under our share repurchase authorization plan. We're confident that we're repurchasing shares below their intrinsic value based on increasing return on invested capital and return on working capital.
Please keep in mind that the information I've shared during this call is a high-level summary of our financial results. For more detail regarding the business segment results, please refer to the CFO commentary that we published on our website this morning.
Now turning to guidance. The midpoint of sales and EPS guidance imply all-time full year records for 2021. Our forecast implies a strong seasonal increase in enterprise computing solutions' sales and profits. However, both businesses continue to face supply constraints that are limiting our ability to make the most of strong customer demand.
Our guidance reflects continued strong performance in operating leverage for global components on a year-over-year basis and for global enterprise computing solutions profitability levels to be substantially accretive to consolidated financial performance.
Finally, as we discussed last quarter, please note the CFO commentary includes information on our fiscal calendar closing dates for 2021. In 2021, the fourth quarter began on October 3 compared to September 27 in 2020. This makes this year's fourth quarter about 1 week shorter than prior year fourth quarters. Full year comparisons are not affected as our fiscal year ends on December 31 as always.
With that, I'll turn the call over to the operator for Q&A.
[Operator Instructions] Your first question comes from Matt Sheerin with Stifel.
I just wanted to just ask about the nice margin upside that you saw in components. I think that was the highest number I can remember in quite some time, at 5.9%. How much of that was driven by favorable pricing versus that mix? Obviously, you saw strength in Europe and in North America. So mix versus pricing versus the pickup in design and in demand creation that you talked about, Mike?
Yes, Matt, thanks. And by the way, thanks for noticing. I didn't have to bring up the 5% thing again this quarter. What we're seeing right now is probably about half of that profit increase, I would say, 1/2 to 1/3 somewhere in there of being structural, in other words, driven by services, some of the supply chain activities, those types of things, design group that we've been selling for some time.
As the mix goes to North America and Europe, that's largely where those services have been. The good news with that is they were growing before COVID, they grew during COVID, and they continue to grow right now. So that's more customers for us.
The other 2 pieces are really mix, as you suggested; and then secondly, pricing increases that we're seeing from the manufacturers, which some of that price increase is also why you see increased inventory, not necessarily more units, but increased price on the inventory that we have. By the way, the price increases are just really coming through. They're not done by any stretch of the imagination at this point in time.
So we fully expect that to go on all the way through 2022 and possibly beyond. But right now, I'm prepared to say that it looks like next year is going to be healthy in all cases and possibly help out with a softer landing.
Okay. And then on the computing side, you talked about some of the challenges, especially the component constraints. But it looks like your growth rate, if you look at some of the large VARs in the infrastructure market and other areas, they look like they're growing faster than your business. I know there's some netted down revenue and some moving parts there. But how do you think you're positioned to maybe start growing and reaccelerating growth in that business again?
Yes. So let me give you a little more clarity on that. Obviously, we saw growth in Europe, which was as expected. The other thing is we saw growth really in the core businesses, the VARs, everything you saw in North America, where it was notably soft with more in the public sector business. And those deals came up shorter-term.
As a result, they're harder to supply product to, and that's really where the vast majority of the shortages were. And then if you remember, computing in the fourth quarter is usually the governmental budget flush. So part of our guidance is based off of what we think we'll get for supply. It is clearly not a demand problem.
So the good news is, the sort of the core customer base is growing. The notable slowdown for us was in public sector. And by the way, that was the majority of it.
Okay. That's great. Could you just remind us what percentage of your revenue in ECS is public sector?
I would love to, Matt, but I don't think today is the day.
Your next response is from William Stein of Truist Securities.
Can you hear me?
Yes.
Mike, I'm wondering if you can talk to us about the effect of the things like the preferred supply program that one of your suppliers has installed. We learned last night that there's another vaguely similar supplier that's put one of these programs in where they're demanding very long, noncancelable, nonreschedulable orders. What sort of visibility is that dynamic introducing into your business? And maybe you can touch on book-to-bill and lead times while you're at it.
I mean any time a customer will give you more visibility, I'll start with, it's a good thing. Given the long-term nature of the supply-demand imbalance here, the more information we have from a customer, the better we can help them.
So I'll put those 2 things out there first. This sort of contractual arrangement as to the supplier that you're serious of getting supply over the next 3 years, let's say, yes, I mean, you're going to share your forecast and the supplier is going to commit to a percentage of your production capacity that you think you need.
They're not going to allow you to stock it and put it on the shelves and not ship it or not manufacture with it, but it opens a different type of dialogue. So personally, I like these arrangements for that reason. If you're sort of an old line customer that you're used to getting your shortage of sticks by pounding your fist on the table or calling up and asking somebody for a favor and then yelling at them, those customers are not likely to get their products.
And it's really come down to if you want to fix the supply chain, it has to be better visibility, it has to be longer-term commitment. And you can't just continue to whipsaw the supply chain and think you're going to get product. And you have seen that there is no real one industry anymore that wields the power to come in and really push anybody around given the marketplace in electronics and so many different items today.
So it really is going to have to be this more information, more visibility. And as a result, there will be better results for everybody over the next couple of years because this isn't really going to go away soon.
Yes. That seems clear. I appreciate that. One other, if I can. The pricing dynamics that you can deploy to perhaps enhance your margin are sometimes a bit mysterious because we know there's a big part of your business that's done on these ship-and-debit dynamics that are sort of built for a deflationary ASP sort of industry, which it's not today.
So when prices are rising, are you able to pass along more than the price increases? Or is that only in a relatively narrow set of cases, where you're more purchasing components at arm's length transactions? Maybe you can help explain this dynamic to us to understand that part of the enhanced margins.
Yes. Well, there is, I believe, a structural change going on in the industry. In the old days, when you had what we used to call allocation is because there was a temporary shortage of products, and therefore you could raise your prices. But then, when the market changed, they would come right back to where they were.
There is no more year-over-year cost reduction on parts like there used to be. Raw materials are up for the suppliers. Transportation is up for not only for the suppliers, but for us, too. Handling and labor costs are up as you have seen those types of things.
So there is a structural change in the business that really hasn't had an inflationary impact on it for probably 10 years, maybe a little longer. So these costs are real. These costs are permanent. And these costs will be charged for. And that's, I think, a little different than what we've seen in the past.
So I don't expect the pricing to reduce. In fact, we've got some suppliers telling us right now, prices are yet to go up another 20%. And if that's the case, you'll see things happen again. So it's very important for us at Arrow to have our back-office systems in order, have them be low cost for the customer, have our transportation routes be the quickest, the fastest that they can be and frankly, the shortest for the customers. And that will help them keep the prices down. But as far as the pricing going away, now there's a big change in technology, and that's not going to come back.
Your next response is from the line of Toshiya Hari of Goldman Sachs.
And congrats on the strong execution. I had 2 as well. My first question is on customer behavior in the marketplace. One of your -- one of the bigger analog companies on their earnings call talked about customers being a little bit more selective with their expedites this quarter versus 3 months ago, 6 months ago. 3 months ago, 6 months ago, customers were pulling really hard across a very broad number of device types, but more recently, they have become a little bit more selective. Are you seeing similar behavior from your customers? Or is it pretty much pulling hard across everything at this point?
Yes. So I'm not going to limit it to analog because analog is only a portion of the market, and it doesn't tell the story. The truth is, I had 5 friends a year ago, and I've got about 20,000 now, people I didn't even know of calling into the office.
Now we're seeing increased number of expedites, but the truth is, those expedites are being used more in how can we help the customer over the longer term than just a 1-month shortage that occurs and how can we help them lay out a manufacturing schedule that can make sense for all the parts on their bill of material.
So these expedite calls are not for one part, they're really for all parts that we're supplying that customer so they can get into manufacturing. So they each take longer. There's better information that flows. But as I said, we probably saw more significant, or what I would say, emergency shortages over this quarter than we've seen since this started.
Interesting. And then as my quick follow-up, I wanted to ask about market share in components. If we take sort of the midpoint of your December quarter revenue guide, I think your components business is going to be up 27%, 28% year-over-year in calendar 2021. You're clearly outperforming your nearest peer. Obviously, they had some unique idiosyncratic headwinds this year. But even x that, I feel like you guys are outperforming against them and also the broader industry.
You've got idiosyncratic tailwinds and then sort of the ADI, Maxim dynamic going forward. And just being the company you are, you probably have better access to supply vis-a-vis some of your smaller peers. So I guess, the question is how should we think about your ability to continue to outperform from a growth standpoint into '22 and beyond?
Well, thanks for that. That's -- those are nice accolades, but we still have to get up and fight the battle every single day that we're here and show the customers that it's worth it for them to place their orders with Arrow.
I would say that our ability will increase as customers continue to come to our engineering services and utilize this for some of the supply chain services that exist other than just the parts today.
Selling parts is very important to Arrow, but you are expected to be low cost and get the part from A and B on time, all of that. Those are table stakes today. But the ability to affect a customer and help a customer with their design to make sure they're getting their products out and that they are low cost and they're actually being able to manufacture is becoming increasingly important to us and our profit levels.
So as long as we continue to push that and stay in that end of the business, this cycle will be repetitive for us. And we believe we've been fortunate. We believe our strategy has worked. It's taken a long time to get here. But now, we just have to continue to drive these new businesses that we brought in or built inside the company.
Your next response is from Jim Suva of Citigroup.
And I would be remiss if I simply don't congratulate you on a great profitability, and that's just really remarkable. With that compliment though is some people will say, is this the new norm, or are you getting some extra boost from some of the shortages? And how should we think about that? Because the profitability is truly remarkable. And I know you put a lot of effort into it. So maybe if you can just kind of talk about the sustainability of the profit margins.
Yes. Thanks, Jim. We did not come out and raise our longer-term targets yet. We're still sorting through the benefits of our services, the sales that have a higher profit level at the bottom of each sale and also our supply chain solutions business, which has a higher profit level at the bottom than components parts do. And then, of course, our long-term engineering, where we actually do engineering for customers, that continues to grow.
What we're seeing is -- or what we believe is those will continue to grow into the future even if products sort of abate. So we're becoming increasingly positive that we will test the long-term bottom line number. We gave you guys a 5% in the components business in the future, but we're still doing the math because I would like to see it continue throughout 2022 and see what the growth looks like there.
But certainly, I can tell you right now, 2022 is looking a lot like today. So hopefully, that gives you enough information, and we'll be looking at the rest of the business over the year and just seeing where the growth rates are panning out before we make that commitment.
Your next response is from Ruplu Bhattacharya of Bank of America.
My first question is on inventory. Some component companies have talked about some inventory -- some level of inventory build maybe in automotive at the OEMs and in industrial in the distribution channel. So when you look at the supply chain, are you seeing any level of inventory build? And specifically, with respect to your inventory, it looks like it was up 5% sequentially. So Chris, are you -- do you think that this is a good level of inventory? Or would you like to -- do you think you need to build more inventory as you go forward? And how would that impact the free cash flow?
Yes. This is Mike. I'm going to take this and then let Chris have it. A portion of our inventory this quarter is from price increases, which just makes the inventory a little bit more valuable. So that has a piece to it.
Secondly, I think you brought up transportation or automotive. That would be fantastic if they could build some inventory because then they could build some cars. They are trying -- the automotive manufacturers are trying to build 10 million more cars next year than this year. So clearly, they need inventory to do that. They're not going to build -- pull the trigger and start building the cars until they can get to sort of an assured supply chain activity to where they know they're going to get the product.
So that's what you're sort of dealing with today. And the good news of that, in my opinion, is whatever they get, they're going to manufacture. So that's going to help. We're largely seeing that in most sectors that are growing this year and if the industry is only supplying 80% of what the market wants, there's 20% extra growth rate in there that can be utilized today, how sustainable those growth rates are over time.
So I don't think that just looking at inventory is a viable indicator for what the future is going to hold because there's a lot of moving parts. And even with our inventory, some of that is when the inventory hit at the end of the quarter and it couldn't get out the door. So that is a trigger that should cause for some questions to be asked. But it is, right now, no means an indicator that the market is slowing because I can tell you, our book-to-bill for the quarter was still off the charts, still high demand, and we're still being constrained by supply and expect that all the way through 2022.
And I would just weigh in and say to the question on our inventory levels. Again, I wouldn't spend a lot of time looking at the dollar value of inventory. I would really encourage you to focus on the cash conversion cycle. Inventory levels will rise as the business grows. Working capital levels will rise as the business grows.
The key for us is being able to manage the days it takes to convert that into cash. The other thing that you'll see this quarter is we do have some positive margin gains because of geographic mix. And we know that inventory turns a little slower in the west than it does in Asia, and that's got a margin benefit to it as well. So you've got to take all those variables into play, but our key focus here in terms of how we're running the business day-to-day is laser-focused on the cash conversion cycle.
Got it. Appreciate that. Just for my follow-up, Chris, if I can ask you, can you remind us of your capital allocation priorities? In this environment, is this -- are you looking at any potential M&A? And how should we think about prioritizing debt reduction versus share buybacks?
Yes, this is Mike. I'll answer it just so there is no question of anybody here or for you guys. Remember, our number one priority was invest in our business to grow. Our number two was M&A. And our number three was to return to shareholders. And as you can see right now, we're doing a fair amount of returning to shareholders through our buybacks, and we would expect that to continue for a while.
Your next response is from Joe Quatrochi of Wells Fargo.
I was curious, as we look into 2022, I take your comments, Mike, thinking about the components margin and the strong pricing that, I guess, is you're expecting to continue next year. Is there any reason that we should view this quarter's results from an operating margin perspective as an upper limit? Or can we continue to kind of increase that given the mix dynamic on a quarterly basis? Just or is there some level of fixed maybe investment you need to make in a certain run rate?
Yes. Let me answer it sort of a way that I answered that internal, of whatever it is, is not enough for me. So I'll start from there. And this is, is sort of 1 quarter we're still sorting out. Remember, we had some mix changes. So mix does have an impact on it, now not only mix by region has an impact, but sort of mix by our services, sales, those types of things, have an impact on it. So if all things stayed equal, I would tell you it would be equal. But we're 1 quarter in this, and what I can tell you is I'm very positive about what the future looks like. But I'm not ready to tell you that we're going to be going way north of this number going into next year.
Got it. That's helpful. And then just as a follow-up, on the ECS side, and you talked about supply availability impacting hardware and maybe driving some incremental cloud adoption. Can you just remind us, what's the difference in terms of the economics for Arrow there in terms of like revenue opportunity and margin?
Sean, you want to take that?
Yes, Joe. I think if you look at our business historically, and I think it's still pretty true, it's about 1/3 hardware, about 1/3 software and about 1/3 services, and that kind of bounces around a little bit quarter-to-quarter. But year by year, it kind of holds constant. So we make a whole variety of returns across the portfolio.
Now I like to say, not all hardware is bad and not all software is good. And as we pivot to all things cloud and all things IT as a Service, you're going to see our mix change. But the supply chain constraints we're seeing right now are probably double the lead times that we saw at the start of the year. So that will be a headwind for a little bit of a time. And obviously, that will create some downward pressure on the top line.
But just to give you another way to think about that, I mean, I don't think the market has returned to pre-pandemic levels when you think about enterprise IT. But I can say we are seeing signs of renewed activity in the data center. And the proof points for that are the strength of our storage business. Year-to-date, it's up in the high single digits.
And the second thing I would say is we've now seen our backlog at record levels, and a good piece of that is all associated with things that will land in the traditional data center. So while the hardware will be a bit of a challenge in the short run, I don't think it will persist indefinitely.
Your next response is from Nik Todorov with Longbow Research.
And congrats from us on the results. Mike, you talked about half of the component margin increase this quarter being structural. My question is, first, versus what anchor of margin is that upside structural? Is it based on the 5% that you're targeting, you kind of laid out a quarter or 2 ago? And also related to that, how much of the component margin upside is from the supply chain services agreement that you talked about, that they're earning higher margin than the core business?
Yes. I'm not going to break out the differences between the services and the supply chain services. But what I can tell you is, yes, the upside, over 5% has been impacted significantly by those sales.
Okay. And just as a follow-up question, you touched about price increases. We, similarly, in our work, have heard about acceleration in price increases, particularly in high-end semis. Can you talk about how much of your portfolio is experiencing price increases? And what is the magnitude of realized price increases as I'm assuming you're referencing list prices also going up by 20%, which I think could be different from what realized prices are?
Yes. Actually, I'm going to have the guy answer that, that lives it. So I'm going to have David West give you an answer on that because he's been shepherding these price increases through the system. And you didn't have much hair to start with, you've got less now. So you'll get to hear it.
Yes. Thanks, Mike. We've seen price increases from more than 100 suppliers, and we expect that to continue through 2022.
Okay. Maybe one last question for Chris. You remain -- you continue to post positive free cash flow. How should investors think about the sustainability of the buyback pace from the last 2 quarters, assuming the environment allows you to post positive free cash flow as the cycle continues?
Yes, Nik. I mean the key thing that impacts our view on buying back stock, obviously, the starting point, is its value. And if you look at the way we're trading today, I think we're roughly 8x forward. So the stock is cheap on that basis.
And so it's a good buy versus the intrinsic value. So that's point one. Point two is while cash flow is an important variable there, so is our leverage. And unquestionably, we're getting to a point where the cash generation moderates somewhat because of the need to invest in working capital for growth. But given the state of the balance sheet, we've got a lot of room while maintaining our commitment to investment grade to buy back stock. So to Mike's point earlier, I think that's what you should expect from us.
Thank you. There are no further questions in the queue at this time.
Thank you for joining us today. If you have any questions, feel free to reach out to me. This is Steve O'Brien. And thank you for your interest in Arrow Electronics. Have a nice day.
This concludes today's teleconference. Thank you for participating. You may now disconnect.