AVT 10-K & 10-Q changes, risk factors and insider trading

Changes in customer product demands and consumption models may cause a decline in the Company’s billings, which would have a negative impact on the Company’s financial results. Changes in technology (such as artificial intelligence) could reduce the types or quantity of services that customers require from the Company. While the Company attempts to identify changes in market conditions as soon as possible, the dynamics of the industries in which it operates make it difficult to predict and timely react to such changes, including those relating to product capacityshortages andor leadexcess times.supply. Also, future downturns, inflation, or supply chain challenges, including in the semiconductor, embedded solutions, maintenance, and test and measurement industries, could adversely affect the Company’s relationships with its customers, operating results, and profitability.

One of the Company’s competitive strengths is the breadth and quality of the suppliers whose products the Company distributes. For fiscal 2025,2026, one supplier accounted for approximatelyover 10% of the Company’s consolidated billings. The Company’s contracts with its suppliers vary in duration and are generally terminable by either party at will and upon notice. The Company’s suppliers may terminate or significantly reduce their volume of business with the Company because of a product shortage, an unwillingness to do business with the Company, changes in strategy, or otherwise.

Customers, suppliers, and investors are increasingly requesting information and action regarding the Company’s supply chain due diligence, environmental impacts, cybersecurity, and other social and governance practices. Such increased expectations may increase costs and result in reputational damage and loss of business if the Company is perceived to have not met such expectations.

Tariffs, trade restrictions, sanctions, or changes in trade policies may adversely affect the Company’s sales and profitability. For example, the U.S. administration has made, and continues to make, changes in trade policies, including negotiating or terminating trade agreements, imposing higher tariffs on imports into the United States, and other measures affecting trade between the United States and other countries. Additionally, some countries are changing their trade policies relating to goods imported from the United States. These policies and related geopolitical tensions could dampen consumer demand, increase market volatility, and impact currency exchange rates, each of which could adversely affect the Company’s financial performance. Further, evaluating and complying with new and future trade measures diverts management’s attention from existing initiatives, which may negatively impact the Company’s business operations. The recent U.S. Supreme Court decision invalidating certain tariffs has increased complexity.

Threats to the Company’s data and information technology systems (including cybersecurity attacks such as phishing and ransomware) are becoming more frequent and sophisticated, including through the use of artificial intelligence and machine learning. Threat actors have successfully breached the Company’s systems and processes in various ways, and such cybersecurity breaches expose the Company to significant potential liability and reputational harm. Cybersecurity attacks have not yet materially impacted the Company’s data (including data about customers, suppliers, and employees) or the Company’s operations, financial condition, or data security,security. butHowever, future attacks could have a material impact. Threat actors, including sophisticated nation-state actors, seek unauthorized access to intellectual property, or confidential or proprietary information regarding the Company, its customers, its business partners, or its employees, and may target the Company’s systems for espionage, intellectual property theft, or disruption of operations. They deploy malicious software programs that exploit security vulnerabilities, including ransomware designed to encrypt the Company’s files so an attacker may demand a ransom for restored access. They also seek to misdirect money, sabotage data and systems, takeover internal processes, and induce employees or other system users to disclose sensitive information, including login credentials. In addition, some Company employees continue to work from home on a full-time or hybrid basis, which increases the Company’s vulnerability to cyber and other information technology risks. Further, the Company’sCompany businessrelies partnerson third-parties, whose systems and servicecontrols providersare (suchoutside asthe suppliers,Company’s customers,control. andA hostedfailure, solution providers) pose a security risk because their own security systemsbreach, or infrastructuredisruption mayinvolving becomesuch compromised.third parties could materially affect the Company’s operations.

The Company seeks to protect and secure its systems and information, prevent and detect evolving threats, and respond to threats as they occur. Measures taken include implementing and enhancing information security controls, such as enterprise-wide firewalls, continuous monitoring, intrusion detection, endpoint protection, email security, disaster recovery, vulnerability management, and cybersecurity training for employees to enhance awareness of general security best practices, financial fraud, and phishing. Despite these efforts, the Company may not always be successful. Threat actors frequently change their techniques and technology (such as implementing artificial intelligence) and, consequently, the Company may not always promptly detect the existence or scope of a security breach. As these types of threats grow and evolve, the Company may make further investments to protect its data and information technology infrastructure, which may impact the Company’s profitability. The Company’s insurance coverage for protecting against cyber attacks may not be sufficient to cover all possible claims, and the Company may suffer losses that could have a material adverse effect on its business. As a global enterprise, the Company may be negatively impacted by existing and proposed laws and regulations, as well as government policies and practices, related to cybersecurity, data privacy, data localization, and data protection. Failure to comply with such requirements could have an adverse effect on the Company’s reputation, business, financial condition, and results of operations, as well as subject the Company to significant fines, litigation losses, third-party damages, and other liabilities.

The electronic components and integrated products industries are subject to technological change, new and enhanced products, changes in customer needs, and changes in industry standards and regulatory requirements, which can cause the Company’s inventory to decline in value or become obsolete. Regardless of the general economic environment, prices may decline due to a decrease in demand or an oversupply of products, which may increase the risk of declines in inventory value. Many of the Company’s suppliers offer certain protections from the loss in value of inventory (such as price protection and limited rights of return), but such policies may not fully compensate for the loss. Also, suppliers may not honor such agreements, some of which are subject to supplier discretion. In addition, mostcertain Company sales are made pursuant to individual purchase orders, rather than through long-term sales contracts. Where there are contracts, such contracts are generally terminable at will upon notice. Unforeseen product developments, inventory value declines, or customer cancellations may adversely affect the Company’s business, results of operations, financial condition, or liquidity.

Many countries have adopted provisions to align their international tax rules with the Base Erosion and Profit Shifting Project, led by the Organisation for Economic Co-operation and Development (“OECD”), which appliesapplied to the Company as of fiscal year 2025.2026. The project aims to standardize and modernize global corporate tax policy, and levies a 15% global minimum corporate tax rate on a country-by-country basis on companies with revenue over a set threshold. Various jurisdictions are adopting related regulations at different times and in varying forms. Conflicting regulations or interpretations could increase risk of double taxation, compliance complexity, and disputes with taxing authorities. Furthermore, many countries are independently evaluating their corporate tax policy, which could result in tax legislation and enforcement that adversely impacts the Company’s tax provision and value of deferred assets and liabilities.

The market for the Company’s products and services is very competitive and subject to technological advances (including artificial intelligence), new competitors, non-traditional competitors, and changes in industry standards. The Company competes with other global and regional distributors, as well as some of the Company’s own suppliers that maintain direct sales efforts. In addition, as the Company expands its offerings and geographies, the Company may encounter increased competition from current or new competitors. The Company’s failure to maintain and enhance its competitive positionposition, including by adopting or enhancing digital capabilities, could adversely affect its business and prospects. Furthermore, the Company’s efforts to compete in the marketplace could cause deterioration of gross profit margins and, thus, overall profitability.

The Company’s operations subject it to tariffs and other trade protection measures. The U.S. administration has instituted certain changes, and may make additional changes, in trade policies that include the negotiation or termination of trade agreements, higher tariffs on imports into the U.S., and other measures affecting trade between the U.S. and other countries from which the Company imports. Due in part to these measures, some countries are changing their trade policies relating to goods imported from the U.S. These global trade disruptions and geopolitical tensions, together with any related downturns in the global economy, could dampen customer demand, increase market volatility, and impact currency exchange rates, all of which could materially and adversely affect the Company’s financial performance. Evaluating and complying with new and future trade measures diverts management’s attention from existing initiatives, which may negatively impact the Company’s business operations.

Avnet’s sales for fiscal 2026 were $27.63 billion, an increase of $5.43 billion, or 24.5%, from fiscal 2025 weresales of $22.20 billion, awith decreasegrowth ofacross $1.56all billion,EC orregions 6.6%,and from fiscal 2024 sales of $23.76 billion.Farnell. Sales in constant currency decreasedincreased 6.7%22.4% year over year, reflectingdriven aby reductionstrong performance in salesboth volumeEC primarilyand dueFarnell tooperating thegroups loweracross demandall forend electronicmarkets components. Sales declined in the western regions, while sales in Asia experienced year-over-year growth.served.

EC sales in fiscal 20252026 were $20.75$25.85 billion, representing a 6.3%$5.10 decreasebillion increase, or 24.6% increase over fiscalprior 2024year sales of $22.16$20.75 billion. EC sales decreasedincreased 6.4%22.6% year over year in constant currency. All three EC regions contributed to this growth led by the Company’s Asia region. The decreaseincrease in EC sales iswas primarilymainly dueattributable to increased sales volumevolumes decreases inand the westernmix regionsof due to the market downturn in the electronichigher-priced components industry and,and to a lesser extent,extent anfrom unfavorableincrease product mix of lower-priced electronic components. The average sellingin prices of like for likecertain electronicmemory-related components remained relatively stable between fiscal 2025 and fiscal 2024.products.

Farnell sales in fiscal 20252026 were $1.45$1.78 billion, arepresenting decreasean increase of $151.3$335.0 million or 9.5%,23.2%, fromcompared fiscalto 2024prior year sales of $1.60$1.45 billion. The year-over-year decreaseincrease in sales wasin fiscal 2026 is primarily adue resultto ofimprovement lowerin demand for single board computers and on-the-board electronic components. The increase in sales at Farnell was primarily driven by an increase in volume as increases in components pricing including certain memory-related products was a smaller contributor to sales growth during fiscal 2026.

The Company’s gross profit isand gross margin are primarily affected by sales volume, product mix, customer mix and pricing, and geographic sales mix. Gross profit inincreased fiscal 2025 was $2.38 billion, a decrease of $381.5$496.9 million, or 13.8%,20.8% fromto $2.88 billion in fiscal 20242026, compared to $2.38 billion in fiscal 2025. This increase was primarily driven by higher sales in both operating groups, partially offset by year-over-year lower gross profit ofmargin $2.77in billionthe primarilyEC dueoperating to lower sales volumes, as described above.group. Gross profit margin decreased to 10.7%10.4% in fiscal 20252026 or 9031 basis points from fiscal 20242025 gross profit margin of 11.6%. The decrease in gross profit margin is primarily due to a shift in geographic sales mix to Asia. Sales in the higher margin western regions represented approximately 53% of sales in fiscal 2025, versus 60% of sales in fiscal 2024.10.7%.

Farnell gross profit margin decreasedwas 27.73% in fiscal 2026, up 168 basis points year over year, primarily due to lower sales ofa higher marginmix of on-the-board electronic components.components and, to a lesser extent, an increase in component pricing for certain memory-related products during fiscal 2026.

Selling, general and administrative expenses (“SG&A expenses”) in fiscal 20252026 were $1.76$2.02 billion, aan decreaseincrease of $107.1$260.0 million, or 5.7%,14.8%, from fiscal 2024.2025. The year-over-year decreaseincrease in SG&A expenses wasis primarily due to decreasesincreases in variable operating expenses associated with the decrease inhigher sales volumes discussed above, from restructuring actions taken by the Company, and by the impact of changes in foreign currency translation rates.

Metrics that management monitors with respect to its operating expenses are SG&A expenses as a percentage of sales and as a percentage of gross profit. In fiscal 2025,2026, SG&A expenses were 7.3% of sales 70.2% of gross profit, compared with 7.9% and 73.9%, respectively, in fiscal 2025. The year-over-year decrease in SG&A expenses as a percentage of sales were 7.9% and as a percentage of gross profit were 73.9%, as compared with 7.9% and 67.6%, respectively, in fiscal 2024. The increases in SG&A expenses as a percentage of gross profit resulted primarily from the decreases in sales and gross profit was primarily due to increased sales without a proportionalcorresponding reductionincrease in SG&A expenses, resultingpartially offset by the decline in lowergross operatingprofit leverage.margin in EC as discussed above.

During fiscal 20242025 the Company recorded restructuring, integration, and other expenses of $52.6$108.3 million, which consists of restructuring costs of $39.5$56.1 million, integration expensesand other costs of $13.1$14.5 million, a benefit of $6.0 million for changes in estimates for costs associated with prior year restructuring actions, and $5.5$43.7 million of other expenses,costs offsetprimarily byrelated ato benefitthe ofestimated $5.5contingent million.liability associated with the consumption tax audit in Mexico.

Operating income forincreased $210.5 million, or 40.9%, to $724.8 million in fiscal 20252026, wascompared with $514.3 million, a decrease of $330.1 million or 39.1%, fromin fiscal 2024 operating income of $844.4 million.2025. Operating income margin wasincreased 30 basis points to 2.6% in fiscal 2026 from 2.3% in fiscal 2025 compared to 3.6% in fiscal 2024.2025. Adjusted operating income for fiscal 20252026 was $624.0$860.9 million, aan decreaseincrease of $276.0$236.9 million or 30.7%,38.0%, from fiscal 20242025 adjusted operating income of $900.0 million.income. Adjusted operating income margin wasincreased 31 basis points to 3.1% in fiscal 2026 compared to 2.8% in fiscal 20252025. comparedThese toincreases 3.8%were inprimarily fiscaldriven 2024. The decreases inby operating income and operating income margin are primarily due to the decrease in sales, lower gross profit margin, and impactleverage from foreignhigher currency exchange rates.sales.

EC operating income decreasedincreased 25.3%26.9% to $708.2$898.5 million, and EC operating income margin decreasedincreased 877 basis points to 3.4%3.5% in fiscal 2025, with decreases in both the EMEA and Americas regions, offset by an increase in the Asia region.2026. Farnell operating income decreasedincreased 49.3%221.7% to $32.8$105.7 million in fiscal 2025 and2026. Farnell operating income margin decreasedincreased 179366 basis points to 2.3%5.9% in fiscal 2025.2026. The decreasesincreases in operating income and operating income margin in both operating groupsFarnell are due to thehigher decreasesales inand higher gross profit primarily from lower sales and from a lower gross profit margin without a proportionate decrease in SG&A expenses.margin.

Interest and Other Financing Expenses, Net and Other (Expense) Income,Expense, Net

Interest and other financing expenses for fiscal 20252026 was $246.4$250.7 million, aan decreaseincrease of $36.5$4.3 million, or 12.9%,1.8%, compared with interest and other financing expenses of $282.9$246.4 million in fiscal 2024.2025. The decreaseincrease in interest and other financing expenses in fiscal 20252026 compared to fiscal 20242025 is primarily a result of lower outstanding borrowings andhigher average borrowing rates.borrowings.

The Company had other expenseexpenses of $6.6 million in fiscal 2026, compared to other expenses of $17.3 million in fiscal 2025, compared to other expense of $15.7 million in fiscal 2024.2025. The increasedecrease in other expenses is primarily due to differences in foreign currency translation losses.losses between the years.

Income tax expenses were $133.0 million in fiscal 2026, reflecting an effective tax rate of 28.5% as compared to income tax expenses of $10.4 million in fiscal 2025, reflecting an effective tax rate of 4.1% as compared to income tax expenses of $133.6 million in fiscal 2024, reflecting an effective tax rate of 21.1%.4.1%. The decreaseincrease in the effective tax rate in fiscal 20252026 as compared to fiscal 20242025 was primarily duerelated to the increases in tax attribute carryforwards,carryforwards partiallythat offsetwere bygenerated increasesin tofiscal valuation2025, allowances.but not in fiscal 2026.

Net cash providedused byfor operating activities was $724.5$280.9 million duringin fiscal 2025,2026, compared towith net cash provided by operating activities of $690.0$724.5 million duringin fiscal 2024.2025. The $34.5$1.01 millionbillion increaseyear-over-year decrease in netoperating cash providedflow by operating activities year over year iswas primarily due to improvementscash used for working capital in cashfiscal 2026 to support sales growth. Cash used for working capital and other as working capital levels have begun to be more in line with sales including the reduction of inventories, offset by lower cash provided by net income. Cash generated by working capital and other was $402.2$802.4 million during fiscal 2025,2026, compared towith cash generated byfrom working capital of $11.2$402.2 million duringin fiscal 2024, with the difference attributable2025, primarily toreflecting decreases inhigher inventory purchases andpurchases, the timing of payments for inventory purchases.purchases Theand Company also had decreases inhigher accounts receivable due to cashincreased collectionssales and lowercash salescollection whentiming. comparedThe Company used $61.4 million of cash from operations to settle the priorconsumption tax audit in Mexico during fiscal year.2026. IncludedOther, net in other,fiscal net2025 wasincluded a gain of $9.2 million gain recognized on the sale of a building during fiscal 2025. The Company received $90.7 million of cash from legal settlements during fiscal 2024.

The Company usesmaintains a variety ofdiversified financing arrangements,structure, including both short-term and long-term,long-term arrangements to fundsupport its operationsoperating inrequirements additionand to historicalsupplement cash generated from operating activities. The Company also uses several funding sourcesseeks to avoidreduce becoming overly dependentreliance on oneany single source of financing source, and to lower overall funding costs. These financing arrangements include public debt (“Notes”), convertible debt, short-term and long-term bank and term loans, a revolving credit facility (the “Credit Facility”), and an accounts receivable securitization program (the “Securitization Program”).

The Company has various lines of credit, financing arrangements, and other forms of bank debt in the U.S. and various foreign locations to fund the short-term working capital, foreign exchange, overdraft, capital expenditure, and letter of credit needs of its wholly owned subsidiaries. Outstanding borrowings under such forms of debt at the end of fiscal 20252026 was $24.9$162.6 million.

As an alternative form of liquidity outside of the United States, primarily in the Asia region, the Company sells certain of its trade accounts receivable on a non-recourse basis to financial institutions pursuant to factoring agreements. The Company accounts for these transactions as sales of receivables and presents cash proceeds as cash provided by operating activities in the consolidated statements of cash flows. Factoring feesFees for the sales of trade accounts receivable are classified within “Interest and other financing expenses, net” ofin the consolidated financial statements.

The Company’s Credit Facility contains certainincludes covenants withthat variouslimit, limitationsamong onother debtitems, incurrence,the shareCompany’s repurchases,ability to incur debt, repurchase shares, pay dividends, make investments and incur capital expenditures,expenditures. andThe Credit Facility also includes a financial covenant requiring the Company to maintain a leverage ratio below a certainspecified threshold. The Company was in compliance with all such covenants as of June 28,27, 2025.2026.

The Company’s Securitization Program contains certainincludes covenants relatingrelated to the quality of the receivables sold. If these conditionscovenants are not met,satisfied, the Company may not be ableunable to borrow any additional fundsfunds, and the financial institutions may considerdeem thisthe noncompliance an amortization event,event as defined inunder the Securitization Program agreements, which would permit the financial institutions to liquidate the accounts receivables sold to cover any outstanding borrowings. Circumstances that could affect the Company’s ability to meetsatisfy the requiredthese covenants and related conditions ofmay thebe Securitizationaffected Program includeby the Company’s ongoing profitabilityprofitability, andas variouswell as other economic, market, and industry factors. The Company was in compliance with all such covenants as of June 28,27, 2025.2026.

During periods of weakening demand in the electronic components industry, the Company typically generates cash from operating activities. Conversely, the Company will use cash for working capital requirements during periods of higher growth.growth, Thethe Company generatedgenerally $724.5 million inuses cash flowsto forfund operatingworking activitiescapital duringrequirements. For the fiscal year ended June 28,27, 2025.2026, the Company used $280.9 million of cash in operating activities.

LiquidityThe Company’s liquidity is subjectaffected toby manya variety of factors, such asincluding normal business operations and general economic, financial, competitive, legislative,legislative and regulatory factorsconditions, thatmany of which are beyondoutside the Company’s control. Cash balances held inoutside foreignthe locationsUnited States that cannot be remitted back to the U.S. in a tax efficienttax-efficient manner are generally used forto ongoingsupport local working capital,capital requirements, including theinventory need to purchase inventories,purchases, capital expenditures and other foreign business needs. In addition, local government regulations may restrict the Company’s ability to movetransfer funds among various locationsjurisdictions under certain circumstances. Management does not believe suchthese restrictions would limit the Company’s ability to pursueexecute its intended business strategy.

As of June 28,27, 2025,2026, there were $411.6$557.0 million of borrowings outstanding under the Credit Facility and $0.9$0.8 million in letters of credit issued, and $500.0 million outstanding under the Securitization Program. During fiscal 2026, the Company had an average daily balance outstanding under the Credit Facility of approximately $744.8 million and $476.8 million under the Securitization Program. During fiscal 2025, the Company had an average daily balance outstanding under the Credit Facility of approximately $1.00 billion and $490.5 million under the Securitization Program. During fiscal 2024, the Company had an average daily balance outstanding under the Credit Facility of approximately $1.17 billion and $596.7 million under the Securitization Program. The Company expects to redeem the $550.0 million of 4.63% Notes due April 2026 either through the issuance of new debt or from available borrowing capacity under the Credit Facility. As of June 28,27, 2025,2026, the combined availability under the Credit Facility and the Securitization Program was $1.09$1.19 billion. Availability under the Securitization Program is subject to the Company having sufficient eligible trade accounts receivable in the United States to support desired borrowings.

The Company purchases inventories in the normal course of business throughout the year through the issuance of purchase orders to suppliers. During fiscal 2025,2026, the Company’s cost of sales, substantially all of which related to the underlying purchase of inventories was $19.8$24.8 billion and the Company had $5.2$6.1 billion of inventories as of June 28,27, 2025.2026. The Company expects to continue to purchase sufficient inventory to meet its customers’ demands in fiscal year 2026,2027, some of which relates to outstanding purchase orders at the end of fiscal 2025.2026. Outstanding purchase orders with suppliers may be non-cancellable/non-returnable at the point where such orders are issued or may become non-cancellable at some point in the future, typically within 30 days to 90 days from the requested delivery date of inventories.

At June 28,27, 2025,2026, the Company had an estimated liability for income tax contingencies of $120.5$123.9 million, which is not included in the above table. Immaterial cash payments associated with the settlement of these liabilities are expected to be paid within the next 12 months. The settlement period for the remaining amount of the unrecognized tax benefits, including related accrued interest and penalties, cannot be determined, and therefore was not included in the table.

The discussion of the Company’s business and operations should be read together with the risk factors contained in Item 1A of its Annual Report on Form 10-K for the fiscal year ended June 28, 2025, which describe various risks and uncertainties to which the Company is or may become subject. These risks and uncertainties have the potential to affect the Company’s business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. As of DecemberMarch 27,28, 2025,2026, there have been no material changes to the risk factors set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2025.

For a description of the Company’s critical accounting policies and an understanding of Avnet and the significant factors that influenced the Company’s performance during the quarter ended DecemberMarch 27,28, 2025,2026, this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the consolidated financial statements, including the related notes, appearing in Item 1 of this Quarterly Report on Form 10-Q, as well as the Company’s Annual Report on Form 10-K for the fiscal year ended June 28, 2025.

The Company’s operations subject it to tariffs and other trade protection measures. The U.S. administration has instituted certain changes, and may make additional changes, in trade policies that include the negotiation or termination of trade agreements, higher tariffs on imports into the U.S., and other measures affecting trade between the U.S. and other countries from which the Company imports. Due in part to these measures, some countries are changing their trade policies relating to goods imported from the U.S. These global trade disruptions and geopolitical tensions, together with any related downturns in the global economy, could dampen customer demand, increase market volatility, and impact currency exchange rates, all of which could materially and adversely affect the Company’s financial performance. Evaluating and complying with new and future trade measures diverts management’s attention from existing initiatives, which may negatively impact the Company’s business operations. Additionally, there are several court cases challenging U.S. administration’s authority to impose tariffs, including cases pending before the U.S. Supreme Court. The outcome of these court cases could add complexity to our operations in terms of seeking refunds from the U.S. government, adjusting pricing with customers, and undertaking mitigation efforts to minimize potential impacts to our operations.

Sales related to customer billings for various tariffs waswere less than one percent of total sales for the first sixnine months of fiscal 2026 and forduring fiscal 2025.

The global electronic components market has a history of cyclical downturns followed by periods of increased demand. During the past two fiscal years, the Company’s overall business experienced a downturn marked by a decrease in sales due to a combination of elevated customer inventory levels and lower underlying demand for electronic components. As a result, the Company’s sales and operating income declined. During the second quarter of fiscal 2026, the Company experienced both year-over-year and quarter-over-quarter sales growth and an improvement in the days of inventory on hand. The Company anticipates that third-quarter sales in fiscal 2026 will grow by about 1% compared to the second-quarter sales with higher growth coming from the Americas and EMEA regions compared to the Asia region.

The following table presents the percentage change in sales for the secondthird quarter and first sixnine months of fiscal 2026 as compared to the secondthird quarter and first sixnine months fiscal 2025, by geographic region and operating group.

Sales of $6.32 billion for the secondThird quarter of fiscal 2026 increasedsales $655.6reached million,$7.12 billion, up 34.0% or 11.6%,$1.80 asbillion comparedfrom to $5.66$5.32 billion for the same quarter last yearyear, driven by saleswith growth across all EC regions and from Farnell. Sales for the first sixnine months of fiscal 2026 were $12.22$19.34 billion, an increase of $950.0$2.75 millionbillion as compared toover sales of $11.27 billion for the first sixnine months of fiscal 20252025, reflectingdriven year-over-yearby salesstrong growthperformance in both the EC and Farnell operating groups.groups across all end markets served.

EC sales were $5.89$6.67 billion in the secondthird quarter of fiscal 2026, representing a $574.0$1.72 millionbillion increase, or 10.8%,34.7%, over prior year secondthird quarter sales of $5.32$4.95 billion. All three EC regions contributed to this growth led by Asia.the Company’s Asia region. The growthincrease came primarily from the compute, aerospace and defense, and transportation end markets.in EC sales increaseswas weremainly primarilyattributable driven byto increased sales volumes and the mix of higher-priced components and to a lesser extent increasedfrom mixincrease of sales of higher priced components. Average sellingin prices remainedfor largelycertain unchangedmemory-related during the second quarter of fiscal 2026.products.

Farnell sales for the secondthird quarter of fiscal 2026 were $427.1$454.7 million, reflecting an increase of $81.6$88.0 million, or 23.6%,24.0%, compared to the same period in the prior year, with all three regions contributing to the increase.year. The increase in sales in the secondthird quarter of fiscal 2026 is primarily due to improvement in demand for single board computers globally and for on-the-board electronic components in the Asia and Americas regions.components. The increase in sales at Farnell was primarily driven by an increase in volumes as increases in components pricing were insignificant during the secondthird quarter of fiscal 2026.

The Company’s gross profit and gross profit margin are primarily affected by sales volume, product mix, productcustomer mix and pricing, and geographic sales mix. Gross profit for the secondthird quarter of fiscal 2026 increased $67.0$151.2 million, or 11.2%25.7% from the secondthird quarter of fiscal 2025. Gross profit for the first sixnine months of fiscal 2026 increased $74.4$225.6 million, or 6.2%12.6% from the first sixnine months of fiscal 2025.This increase in gross profit is primarily due to sales increases in both operating groups discussedpreviously above,discussed, partially offset by the declinedeclines in gross profit margin in the EC operating group, which was mostly driven by a higher percentage of sales coming from the lower margin Asia region.region and from differences in product and customer mix in the Western regions.

Gross profit margin decreased by 368 basis points to 10.5%10.4% for the secondthird quarter of fiscal 2026 when compared to the secondthird quarter of fiscal 2025. For the first sixnine months of fiscal 2026, gross margin decreased by 2237 basis points to 10.5%10.4% when compared to the first sixnine months of fiscal 2025. A shift in the geographic sales mix toward Asia contributed to the decline in gross profit margin. During the second quarter of fiscal 2026, sales in the western regions with higher gross profit margins accounted for approximately 50% of total sales, compared to 52% in the same period of fiscal 2025.

EC gross profit margin decreased year over year largely due to the factors discussed above.previously. Farnell gross profit margin increased year over year, primarily due to an increase in product mix of on-the-board electronic components.

Selling, general, and administrative expenses (“SG&A expenses”) increased $54.7$83.3 million or 12.5%19.1% from the secondthird quarter of fiscal 2025, and increased $80.4$163.7 million, or 9.2%12.5% from the first sixnine months of fiscal 2025. The increase in SG&A expenses is primarily due to increases in variable operating expenses associated with higher sales volumes and the impact of changes in foreign currency translation rates.

Management monitors SG&A expenses as a percentage of sales and as a percentage of gross profit. In the secondthird quarter of fiscal 2026, SG&A expenses were 7.8%7.3% of sales and 74.2%70.2% of gross profit, as compared with 7.7%8.2% and 73.3%,74.1%, respectively, in the secondthird quarter of fiscal 2025. SG&A expenses were 7.8%7.6% as a percentage of sales and 74.8%73.1% as a percentage of gross profit for the first sixnine months of fiscal 2026, as compared with 7.8%7.9% and 72.8%,73.2%, respectively, in the first sixnine months of fiscal 2025. The year-over-year increasedecrease in SG&A expenses as a percentage of gross profit is primarily due to the increase in sales as discussed previously without a corresponding increase in SG&A expenses partially offset by the decline in gross profit margin in EC discussedas furtherexplained above.in the prior discussion.

The Company recorded total restructuring, integration, and other expenses in the secondthird quarter of fiscal 2026 of $25.2$14.7 million, consisting of $9.5$7.8 million of severance and other restructuring related expenses, and $15.7$6.9 million of integration and other costs primarily related to start-up costs associated with a new distribution center in EMEA.EMEA, partially offset by a benefit due to a change in estimate from the settlement of an audit in Mexico. The after-tax impact of restructuring, integration, and other expenses were $18.3$8.8 million and $0.22$0.11 per share on a diluted basis.

During the first sixnine months of fiscal 2026, the Company incurred restructuring, integration, and other expense costs of $33.5$48.2 million, consisting of $11.1$18.9 million of severance and other employee-related expenses, and $22.4$29.3 million of integration and other costs. The after-tax impact of restructuring, integration, and other expenses were $24.1$33.0 million and $0.29$0.40 per share on a diluted basis.

Comparatively, the Company recorded restructuring, integration, and other expensesexpense costs of $3.8$9.1 million and $30.1$39.3 million during the secondthird quarter and first sixnine months of fiscal 2025, respectively.

Operating income for the secondthird quarter of fiscal 2026 was $146.2$205.5 million, aan decreaseincrease of $9.1$62.3 million or 5.9%,43.5%, year over year. Operating income margin for the secondthird quarter of fiscal 2026 was 2.3%,2.9%, aan decreaseincrease of 4319 basis points compared to 2.7% in the secondthird quarter of fiscal 2025. Adjusted operating income for the secondthird quarter of fiscal 2026 was $171.7$220.6 million, an increase of $12.2$67.9 million, or 7.7%.44.5%. Adjusted operating income margin for the secondthird quarter of fiscal 2026 was 2.7%3.1% compared to 2.8%2.9% in the secondthird quarter of fiscal 2025. The decreaseincrease in operating income margin and adjusted operating income margin is primarily due to thegrowth decreasesacross in gross profit marginEC and the increase in SG&A expenses as discussed further above.Farnell.

Comparing the secondthird quarter of fiscal 2026 to the secondthird quarter of fiscal 2025, EC operating income increased 3.0%36.6% to $187.1$235.2 million, and EC operating income margin decreasedincreased 255 basis points to 3.2%, with a decrease in the EMEA and Americas regions, partially offset by improvement in the Asia region.3.5%. Farnell operating income increased 475.2%116.8% to $20.0$23.8 million in the secondthird quarter of fiscal 2026. Farnell operating income margin increased 367224 basis points year-over-year to 4.7%.5.2%. The increases in operating income and operating income margin in Farnell are due to higher sales and higher gross profit margin, partially offset by an increase in SG&A expenses.margin.

Operating income for the first sixnine months of fiscal 2026 was $288.2$493.8 million, aan decreaseincrease of $9.3$53.0 million,million from the first sixnine months of fiscal 2025 operating income of $297.6$440.8 million. The year-over-year decreaseincrease in operating income was primarily due to the lowerhigher gross profit margin andin Farnell offset by the increase in SG&A expenses. Adjusted operating income for the first sixnine months of fiscal 2026 was $322.4$543.1 million, aan decreaseincrease of $6.0$61.9 million or 1.8%12.9% from the first sixnine months of fiscal 2025. Operating income margin was 2.4%2.6% in the first sixnine months of fiscal 2026, a decrease of 2811 basis points compared to 2.6%2.7% in the prior year first sixnine months.

Interest and other financing expenses in the secondthird quarter of fiscal 2026 were $61.4$63.1 million, aan decreaseincrease of $1.0$2.0 million as compared to $62.4$61.1 million in the secondthird quarter of fiscal 2025. Interest and other financing expenses in the first sixnine months of fiscal 2026 were $121.1$184.3 million, a decrease of $5.7$3.7 million, as compared with interest and other financing expenses of $126.8$188.0 million in the first sixnine months of fiscal 2025. The decreaseincrease in interest and other financing expenses in the secondthird quarter and first six months of fiscal 2026 compared to fiscal 2025 is primarily a result of lowerhigher average borrowing rates.borrowings.

Income tax expense for the secondthird quarter and first sixnine months of fiscal 2026 were $28.2$46.2 million and $53.2$99.5 million, respectively, reflecting an effective tax rate of 31.3%32.9% and 31.9%,32.4%, respectively. In comparison, for the secondthird quarter and first sixnine months of fiscal 2025, income tax (benefit) expense were $3.0$ (9.8) million and $18.8$9.0 million, respectively, reflecting an effective tax rate of 3.4%(12.5)% and 11.4%,3.7%, respectively. The increase in the effective tax rate for the secondthird quarter of fiscal 2026 as compared to the secondthird quarter of fiscal 2025 was primarily related to the tax attribute carryforwards generated in fiscal 2025 but not in fiscal 2026 and fromthe increasesmix toof valuationincome allowances.in higher tax jurisdictions. The increase in the effective tax rate for the first sixnine months of fiscal 2026 as compared to the first sixnine months of fiscal 2025 was primarily related to the tax attribute carryforwards that were generated in fiscal 2025 but not in fiscal 2026. See Note 7 “Income taxes” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q.

As a result of the prior factors described above,described, the Company’s net income for the secondthird quarter of fiscal 2026 was $61.7$94.3 million, or $0.75$1.14 per share on a diluted basis, as compared with $87.3$87.9 million, or $0.99$1.01 per share on a diluted basis, in the secondthird quarter of fiscal 2025.

As a result of the prior factors described above,described, the Company’s net income for the first sixnine months of fiscal 2026 was $113.5$207.8 million, or $1.36$2.49 per share on a diluted basis, as compared with $146.2$234.1 million, or $1.65$2.65 per share on a diluted basis, in the first sixnine months of fiscal 2025.

Net cash from operating activities was $63.7$9.8 million for the first sixnine months of fiscal 2026, down from $444.2$585.0 million in the same period of fiscal 2025. The decline was mainly due to $100.5$296.5 million used for working capital in the first nine months of fiscal 2026 to support sales growth, compared to $232.5$282.4 million generated in 2025. Increases in accounts receivable and inventory in fiscal 2026 were primarily to support sales growth, partially offset by increases to accounts payable from inventory purchases and certain accruals. The Company used $61.4 million of cash from operations to settle an audit in Mexico.

Net proceeds of debt totaled $264.8$284.6 million during the first sixnine months of fiscal 2026, including net proceeds of $633.8 million from the issuance of Convertible Notes, and $264.9$268.1 million for term loans, and $18.8 million of other debt, offset by net repayments of $416.7$409.5 million under the Credit Facility, $211.3and $226.5 million under the Securitization Program and $5.8 million of other debt.Program. This compares to $307.7$270.3 million of net repayments during the first sixnine months of the prior fiscal year.

The Company has repurchased $138.3 million of common stock under its share repurchase plan during the first sixnine months of fiscal 2026 compared to $152.2$253.5 million in the same period of the prior fiscal year. The Company paid cash dividends to shareholders of $0.70$1.05 per share, or $56.9$85.6 million, during the first sixnine months of fiscal 2026 as compared to $0.66$0.99 per share, or $57.4$85.6 million, during the first sixnine months of fiscal 2025.

Net cash used in investing activities decreased by $21.3$21.7 million during the first sixnine months of fiscal 2026 compared to the same period in 2025, primarily due to lower capital expenditures.

See Note 4, “Debt” to the Company’s consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information on financing transactions, including the Credit Facility, the Securitization Program, and other outstanding notes and debt as of DecemberMarch 27,28, 2025.2026. The Company was in compliance with all covenants under the Credit Facility and the Securitization Program as of DecemberMarch 27,28, 2025,2026, and June 28, 2025.

The Company has various lines of credit, financing arrangements, and other forms of bank debt in the U.S. and various foreign locations to fund the working capital, foreign exchange, overdraft, capital expenditure, and letter of credit needs of its wholly owned subsidiaries. Outstanding borrowings under such forms of debt at the end of secondthird quarter of fiscal 2026 were $104.3$125.7 million.

The Company held cash and cash equivalents of $286.5$202.4 million as of DecemberMarch 27,28, 2025,2026, of which $279.6$193.5 million was held outside the United States. As of June 28, 2025, the Company held cash and cash equivalents of $192.4 million, of which $181.8 million was held outside of the United States.

During periods of weakening demand in the electronic components industry, the Company typically generates cash from operating activities. Conversely, the Company will use cash for working capital requirements during periods of higher growth. The Company generated $344.0$149.3 million in cash flows from operating activities over the trailing four fiscal quarters ended DecemberMarch 27,28, 2025.2026.

As of the end of the secondthird quarter of fiscal 2026, the Company had a combined total borrowing capacity of $2.0 billion under the Credit Facility and the Securitization Program. There were no borrowings outstanding and $0.8 million in letters of credit issued under the Credit Facility, and $288.7$273.5 million outstanding under the Securitization Program, resulting in approximately $1.71$1.73 billion of total committed availability as of DecemberMarch 27,28, 2025.2026. Availability under the Securitization Program is subject to the Company having sufficient eligible trade accounts receivable in the United States to support desired borrowings. The Company expects to repay the $550 million Notes due April 2026 using cash on hand and availability under the Credit Facility. The Company expects to renew or replace the Securitization Program on similar terms,terms with a larger capacity, subject to market conditions, before its maturity in December 2026.

During the secondthird quarter and first sixnine months of fiscal 2026, the Company had an average daily balance outstanding of approximately $544.9$637.0 million and $659.9$652.3 million, respectively, under the Credit Facility, and approximately $454.0$488.0 million and $469.4$475.6 million, respectively, under the Securitization Program. The Company also has average borrowings that are higher than quarter end borrowings from various lines of credit, financing arrangements, and other forms of bank debt in the U.S. and various foreign locations.

As of DecemberMarch 27,28, 2025,2026, the Company does not expect to repurchase additional shares until its’ consolidated leverage ratio returns to historical levels. When share repurchases resume, the Company may repurchase stock from time to time at the discretion of management, subject to strategic considerations, market conditions (including share price), and other factors. The Company may terminate or limit the share repurchase program at any time without prior notice. The Company has $225.8 million of capacity remaining on the share repurchase program approved by the Board of Directors as of DecemberMarch 27,28, 2025.2026.

The Company has historically paid quarterly cash dividends on shares of its common stock, and future dividends are subject to approval by the Board of Directors. During the secondthird quarter of fiscal 2026, the Board of Directors approved a dividend of $0.35 per share, which resulted in $28.5$28.7 million of dividend payments during the quarter.