Vincent Keenan - Avnet, Inc. William J. Amelio - Avnet, Inc. Kevin M. Moriarty - Avnet, Inc. Philip R. Gallagher - Avnet, Inc..

Jim Suva - Citigroup Global Markets, Inc. Paramveer Singh - Bank of America Merrill Lynch Adrienne Colby - Deutsche Bank Securities, Inc. Matthew John Sheerin - Stifel, Nicolaus & Co., Inc. Adam Tindle - Raymond James & Associates, Inc. William Stein - SunTrust Robinson Humphrey, Inc. Shawn M.

Harrison - Longbow Research LLC Steven Fox - Cross Research LLC Garrett Clark - Goldman Sachs & Co. LLC.

Ladies and gentlemen, please stand by. Our presentation will now begin. I would now like to turn the floor over to Vince Keenan, Avnet's Vice President of Investor Relations. Thank you and over to you..

Good morning, and welcome to Avnet's Fourth Quarter and Fiscal Year 2017 Business and Financial Update. As a result of the sale of the Technology Solutions business which was completed in February 2017, Avnet reports the TS business as a discontinued operation and prior periods have been adjusted for comparability.

Additionally, our financial reports reflect our new segment reporting comprised of the Electronic Components and Premier Farnell operating groups..

As we provide the highlights for our fourth quarter fiscal year 2017, please note that in the accompanying remarks we have excluded certain items, including ERP accelerated depreciation, intangible asset amortization expense, restructuring, integration and other items, and certain discrete income tax adjustments from all periods covered in our non-GAAP results.

When we refer to constant currency or the impact of foreign currency, we mean the impact due to the change in foreign currency exchange rates when translating Avnet's non-U.S. dollar-based financial statements into U.S. dollars. When we refer to organic sales, we have adjusted the prior period to include the impact of acquisitions.

In addition, when addressing return on capital employed, return on working capital and working capital velocity, the definitions are included in the non-GAAP section of our press release. Before we get started with the presentation from Avnet management, I would like to review Avnet's Safe Harbor statement.

This call contains certain forward-looking statements, which are statements addressing future financial and operating results of Avnet. There are several factors that could cause actual results to differ materially from those described in the forward-looking statements.

More detailed information about these and other factors is set forth in Avnet's filings with the Securities and Exchange Commission. In just a few moments, Bill Amelio, Avnet's CEO, will provide Avnet's fourth quarter fiscal year 2017 highlights.

Following Bill, our Chief Financial Officer, Kevin Moriarty, will review some additional financial highlights and provide first quarter fiscal 2018 guidance. At the conclusion of Kevin's remarks, a Q&A will follow.

Also here today to take any questions you may have related to Avnet's business operations is Phil Gallagher, President of the Core Distribution Business. With that, let me introduce Mr. Bill Amelio to discuss Avnet's fourth quarter fiscal 2017 business highlights..

Thank you, Vince and hello, everyone. Thank you for taking the time and your interest in Avnet. I'm pleased to share our results this quarter as Avnet delivered a strong top and bottom line performance exceeding our expectations for Q4.

But before I get into the details of our results, I want to take a moment and talk about the news of our Chief Financial Officer, Kevin Moriarty's decision to step down that was announced earlier today. Kevin leave Avnet after 4.5 years of outstanding service. He has contributed to Avnet's strategy and direction in a number of important ways.

Kevin will be taking a nice long break to reconnect with his family and friends, and most importantly to focus on his health.

As all of you know, there has been a series of significant changes at Avnet over the past year, and Kevin poured everything he had in this role, and now he need to step back and refocus on what's important for him and his family. Kevin leaves a tremendous legacy at Avnet.

Having completely reprioritized our portfolio with the sale of the TS business to Tech Data and the critical acquisitions of Premier Farnell and Hackster.io. Avnet is on sound financial footing, with a strong balance sheet and a differentiated strategy. This will help us grow in the future and it's all due in part to Kevin's leadership and his vision.

With results we're announcing today, we're confident we are on the right path to return to profitable growth and have a very bright future indeed. Kevin has also done some fantastic job building a strong bench of outstanding financial professionals that allows us to ensure this transition will be smooth and seamless.

I'm pleased to announce that Ken Jacobson, Corporate Controller of Avnet, will become the Interim CFO reporting to me. Ken brings a wealth of experience in this role. In addition to his four years at Avnet, Ken has over 12 years of Big Four accounting and industry experience working with a variety of public, private and international companies.

The board and I have full confidence in Ken, and we are fortunate to have such a strong bench of financial professionals on our team. We are also initiating a full search process immediately where both internal and external candidates will be considered.

Please join me in wishing all the best to Kevin in the future and in welcome Ken to his new and important role. Let me turn to our financial results. We closed our fiscal 2017 with a strong top-line performance as revenue grew 17.9% year-over-year in constant currency to $4.6 billion with organic revenue up 8.4% in constant currency.

Leading this growth was our Electronic Components team in EMEA, where revenues increased 18.6% year-over-year in constant currency. This is their 16th consecutive quarter of year-over-year growth. I would also like to point out they continue to outgrow the market as annual revenues grew over 10% in constant currency to a record $5.5 billion.

Our Electronic Components team in Asia also grew double-digit as organic revenue increased 11.6% over the prior year in constant currency. We exclude the impact of our decision to exit certain high volume supply chain engagements due to declining returns.

The benefit of that decision are evident in our profitability metrics as gross profit margins and operating income margins in our Asia region increased 41 basis points and 45 basis points respectively from the year ago quarter.

Premier Farnell continuous to exceed our initial expectation as organic revenue increased 4% year-over-year in constant currency. And it delivered double-digit operating income margin for the second consecutive quarter.

Our digital revenue for the quarter grew to annual run rate of over $750 million as we continue to see healthy growth in customers, website visits and lead generation. As this quarter demonstrates, we have many different parts of Avnet enterprise that's generating consistent revenue growth.

Now, I'd like to tell you about some of the initiatives and investments we're making to accelerate that growth going forward. Our digital ecosystem comprised of Premier Farnell, MakerSource and Hackster.io is one of the largest and fastest growing online communities to cater to the entire hardware developer lifecycle.

As an example, Premier's Farnell element14 just passed 500,000 member mark. This community provides engineers with rich, technical content including product datasheets, design tools, development kits, user created blogs and access to field application engineers.

MakerSource, is an online resource directory that provides our digital community access to all support required at each step of the product lifecycle. This includes funding, engineering, traditional and added manufacturing, marketing , supply chain management and even website development, everything you need to start a company.

The Hackster.io community which has increased 50% since we acquired them in November is a global community on target in the next few months to exceed 300,000 engineers and makers focused on learning how to design, create, program internet-connected hardware devices.

Through a combination of Hackster.io's live ambassadors and user-created content, members can access forums and projects that address design challenges and get real-time feedback as they progress through their design process. Our suppliers are excited to participate in these growing communities, and we are adding new supplier participation quarterly.

Communities are important as they drive customer engagement, they capture new opportunities and touch many customers at once and identify new trends. As more businesses go digital, we feel these investments will allow us to stay ahead of the industry in understanding what our customers' needs are both now and in the future.

A recent enhancement to our digital ecosystem is our Ask Avnet intelligent agent. Ask Avnet is the industry's first AI to human digital platform designed to help a wide range of visitors, including engineers, procurement specialists, professional makers, find the critical insights and information that they need daily across our entire ecosystem.

Ask Avnet leverages artificial intelligence to help anticipate a customer's needs and provide them the most relevant solution for our ecosystem rather than just a list of all the possible answers. It also provide a great route into our technical and our customer support teams.

By implementing machine learning, our digital capability has actually improved the customer experience with each and every transaction, thereby providing a customer a compelling reason to return and do more business with Avnet in the future.

Another initiative that we're investing in is our advanced analytics to inform our decisions and better anticipate upcoming customer needs. One application of advanced analytics is to deliver highly qualified leads from our digital ecosystem to our marketing and sales teams.

This allows us to offer customized support when the customer needs it most, thereby providing new opportunities for growth and future differentiation. We believe the digital ecosystem we're investing in will provide great opportunities for growth.

We continue to invest in offerings that meet the rapidly evolving needs of our customer base as they design, procure and develop innovative technology products. We are leveraging our deep technical resources embodied by our field application engineers and technical support personnel to enhance our growth.

By engaging with both new and existing suppliers to deploy our field application engineers on their products, we will grow our design win business and enhance our margin profile. Suppliers who are anxious to tap that broad reach and technical breadth of Avnet are designing incentive programs that make it a win-win for both partners.

I'm happy to report that we're already seeing progress in both design registrations and design wins. In the Americas region, our electronic components team has already offset the impact of supplier program changes in high performance analog products with products from other suppliers.

In Asia, the team has been outgrowing the market in microcontrollers. These design wins often lead to higher attach rates of our products. In EMEA, we recently expanded our line card with industry leading products from Xilinx who is eager to tap the deep technical resources and customer engagements in the region.

Finally, a quick update on our transformation initiatives. As I mentioned in our last call, roughly half of the operating profit benefits from our transformation program is related to growth, which includes both revenue and gross profit margin improvements.

In addition to reorganizing the sales force in the Americas, we have global initiatives bringing innovations to HR programs, compensation, pricing and data analytics to improve the efficiency and effectiveness of our sales efforts and accelerate our growth. These initiatives are not a one shot deal, but are designed to drive a multiyear improvement.

The significant resources of both Electronic Components and Premier Farnell will expand our digital ecosystem and help our supplier partners bring their technology to market across all three regions. Now, I'd like to turn the commentary over the Kevin Moriarty to provide more color on our financial performance.

Kevin?.

Thank you, Bill and hello everyone. In our fiscal fourth quarter, revenue grew 17.9% year-over-year in constant currency to $4.6 billion and organic revenue increased 8.4% in constant currency.

Revenue growth was driven by both our electronics components group or organic revenue increased 8.8% year-over-year on constant currency and Primer Farnell, as revenue increased 4% year-over-year in constant currency.

On a sequential basis, revenue grew 2.5% in constant currency, slightly above the midpoint of our seasonal range of zero to plus 4% in the June quarter.

As Bill noted earlier, Electronics Components experienced strong year-over-year growth across all three regions with EMEA up 18.6% in constant currency, Americas growing 8.3% and the Asia region growing 11.6% in constant currency, excluding the impact of exiting the high volume supply chain engagements. Now, turning to gross profit.

Gross profit dollars increased to $135 million or 27%, primarily due to the addition of Premier Farnell. Gross profit margin increased to 120 basis points year-over-year, primarily due to the addition of Premier Farnell and improvements in the electronic components in Asia region, partially offset by declines in the Western regions.

Our gross profit margin in the Americas region declined due to supplier program changes, a higher mix of fulfillment revenue and inefficiencies related to our ERP deployment.

Adjusted operating income dollars grew 17.9% year-over-year to $155 million while operating income margin was essentially flat from the year-ago quarter as the positive impact of Premier Farnell was offset by a decline in the Western regions in electronic components.

Adjusted earnings per share of $0.84 increased $0.25 from the year-ago quarter, primarily due to the increase in operating income related to the addition of Premier Farnell. In the June quarter, our working capital increased slightly on a sequential basis, primarily due to the impact of the weakening dollar.

When you exclude the impact of changes in foreign currency exchange rates, working capital declined $80 million or approximately 2%. The sequential decline was primarily driven by a $106 million decline in electronic components, driven by a decrease in inventory and an increase in accounts payable.

Working capital of Premier Farnell increased $20 million sequentially in constant currency, primarily due to our decision to expand the breadth of SKUs in order to accelerate growth. Working capital increased $600 million from year ago quarter with a significant portion of the increase driven by the addition of Premier Farnell.

Cash flow generated from continuing operations was approximately $81 million in the fourth quarter. Avnet's fiscal 2017 cash flow from operations increased sequentially to $221 million.

During the quarter, we paid $22 million in dividends and returned another $136 million to shareholders via our disciplined share repurchase program, which brings our total cash return to shareholders to over $364 million in fiscal 2017.

Entering our fiscal 2018, we still have approximately $400 million remaining under our current share repurchase authorization.

Going forward, our intention is to maintain the same capital allocation priorities we have pursued in the past, invest in organic growth, sustain our dividend, invest in strategic M&A opportunities and return excess cash via our disciplined share repurchase program. Now, looking forward to Avnet's fiscal 2018 first quarter.

We expect sales to be in the range of $4.15 billion to $4.45 billion. Based on this revenue forecast, we expect adjusted EPS to be in the range of $0.67 to $0.77 per share.

This guidance does not include any additional acquisitions, amortization of intangibles, potential restructuring, ERP, accelerated depreciation and other expenses and certain income tax adjustments. The guidance assumes the 125 million average diluted shares outstanding and an effective tax rate in the range of 23% to 27%.

In addition, the above guidance assumes an average U.S. dollar to euro currency exchange rate of $1.14. This compares with an average exchange rate of $1.12 to the euro in the first quarter of fiscal 2017. The sequential decline in revenue and EPS reflect the negative impact from supplier channel consolidation.

Excluding this impact, the sequential revenue decline would be at the low end of the company's seasonal range. In addition, we are affirming that fiscal 2000 outlook – 2018 outlook we provided on our April earnings call of revenue in the range of $17.3 billion to $17.7 billion and EPS in the range of $3 to $3.50 per share.

With that, let's open the lines for Q&A.

Operator?.

Thank you, sir. Ladies and gentlemen, we will now be conducting a question-and-answer session. One minute please while we poll for questions. Please limit your questions to one question and one follow-up. The first question is from Jim Suva of Citi. Please go ahead..

Thank you very much for the details. Can you just help us understand a little bit more about the inventory management and build given the September sales outlook and the consolidation in the supply chain? I think you mentioned something about additional SKUs, but I wasn't clear on that, and just help us better understand your inventory management.

And with ADI and some of the other companies going to Arrow, why wouldn't inventory actually decline? It seems like that's a very big gap to say additional SKUs, but I'm probably missing some variables. Thank you..

Hi, Jim, it's Kevin. I'll start, what I would point to is sequentially we did bring inventory down in our fiscal quarter, second quarter. While lead times are expanding, our inventory philosophy is also improving.

We are balancing our inventory levels with our customer needs as our performance improves and we take advantage of near-term opportunities by broadening our SKU base. What I talked to on the call was during the quarter we increased Premier Farnell by approximately $20 million and probably directionally the same amount in the September quarter.

So overall, we do feel comfortable with our inventory levels..

Yeah, I maybe comment on Premier Farnell. If you recall, we bought that company and they were under investing in inventory for quite some time and we have seen great performance out of that unit and we're now expanding SKU rates to be more in line with what comparable competitors do in the marketplace..

Okay. That makes sense. And my quick follow-up on cash flow generation for the June quarter, say compared to June a year ago. Can you kind of help us bridge about the change for the year-over-year because sequentially I know there is seasonality, but year-over-year help us understand the cash flow differences? Thank you..

Sure. It's Kevin. You may recall last June we were coming off the Americas ERP and we had lower sales, which generated by a higher cash flow during that quarter. So, primarily year-on-year that's the most significant aspect of the decline..

Great. Thanks so much for the details and clarification. That's greatly appreciated. Thank you..

Thank you. The next question is from the line of Param Singh from Merrill Lynch. Please go ahead..

Yeah. Hi. Thanks for taking my questions. So, guys, when I look at your full-year 2018 guide and I break out Premier from the rest of the business, the implied margin for the other EM portion is close to 3%, 3.1% operating margin, which is far below, which you used to do before, Premier reaches about 4.5%.

So, can you bridge the gap between the two? How much of that the vendor program changes, how much of that is better or more mix of Asia business or any other pieces that might be changing in the meantime?.

We gave you a walk in the last, the April, the earnings announcement to kind of walk a little bit through that. So I'd tell you that the big chunk of it of course is the supplier program changes, which included both lots of new supply lines as well as margin pressures. So, we're working that through the system.

We'd still tell you that our long range plan is to get back to 4.5%.

So, that's kind of what we're still targeting for, but we got to work our way to that and as we talk about last earnings call, we made some meaningful changes in our go-forward guidance and we put together a full-year guidance, which we typically don't do, and we've come out of the chute in the first quarter and of course we've met or exceeded those guidance and we're going to do the same thing in the upcoming quarters..

So, to be clear, if volume was to come back and then you did mention that Americas volume has been still pulled (23:48) back.

So, if that were to come back, then you should be expecting a 4.5% margin, am I correct in assuming that?.

No. I'm just saying our longer range goal is 4.5%. I'm sorry, 4.5% to 5%. But we're not seeing that in the next couple of quarters, but that's what we want to aim for in the upcoming years..

Okay.

And then for my follow-up, could you remind me what the typical seasonality for the September quarter is with the addition of Premier? Or to be clear, how much revenue is actually taking ahead sequentially from the program, vendor program changes?.

Okay. In vendor program changes, we're talking about upwards of $200 million which is consistent with the doing that we told you about when we did the lock year-to-year in our last earnings call. So, there is no real changes associated with that.

And the seasonality range it's around, Kevin?.

Down 2% to plus 2%..

Okay. Got it. Thank you guys. I'll get back in the queue..

Thank you. The next question is from Adrienne Colby from Deutsche Bank. Please, go ahead..

Hi, thank you. Just a follow-up on that last comment about the midpoint of guidance, suggesting a little bit more moderate loss in sales from supplier actions, I think, around $200 million. That seems to be a little bit lower than the $1 billion in lost revenues that you've been talking about for fiscal 2018.

So, I'm just trying to understand if you're expecting a sort of a pickup in those supplier losses or if it's actually coming in below what your initial expectations are?.

No, it's coming in where we expected, it's north of $200 million..

Okay. And as a follow-up, the operating margins for Premier Farnell declined sequentially.

Just wondering what was driving that and if we should be expecting margins to stay around current levels into 2018?.

Yeah. I think what I would point to is we definitely made some marketing investments sequentially, and as well as though you can look to the double digit rate as we work into the next fiscal year..

Thank you..

Thank you. Next question is from Matt Sheerin from Stifel. Please go ahead..

Thanks. Just another question regarding the guidance. You talked about the $200 million shortfall due to the semi-consolidation. Your competitor that is winning that business guided actually for a less of an incremental growth due to the semi-consolidation. They said it's going to take place more so in the December quarter.

So I'm trying to figure out whether we're going through a transition period where you may have shipped product into your customer base in the June quarter and that maybe a reason why you're saying one thing and Arrow is saying another thing.

And then just relative to your guide for the low-end of seasonality, if you look at the component space in general now, most companies seem to be guiding in-line to better than seasonal because of lead time extensions and a fairly good outlook in terms of demand. So I'm trying to figure out why you're guiding to the low-end of seasonality..

I will take that question. This is Bill Amelio. If you recall in the last quarter, we had some meaningful changes with respect to our forward-looking guidance and that was primarily due to the changes in suppliers as well as a meaningful write-off of our ERP system in the Americas and it's already depreciation there.

We gave full year guidance, which is something that we typically don't do, and I think it's prudent from our standpoint to say that we need to demonstrate that we can hit the targets that we put out there. In the first quarter we've been able to do that and we're sticking to where we are in the second quarter.

And I'd also point to the fact that while our book-to-bills are definitely healthy, there is no question about that, there is some concern out in the market is there some double booking that's occurring. We haven't seen that yet, but there is some concern about that.

And I think taking a prudent view of the future given what we've been through is probably the most wise thing we need to do.

Regarding your first question, I'd kind of point you back to our competitor to go ask them that particular question, because I'm giving you the results as we see it as we're blowing off the suppliers out of our particular numbers. I have no way to be able to comment on their particular financials..

Okay. Thank you. And then as my follow-up, if I can ask Phil Gallagher a question. Just, Phil, you've been on board now for just two or three months, and obviously you've got a strong background with Avnet, I know you've got strong relations with the supplier community.

How do you see Avnet's position here particularly in terms of maintaining or strengthening relationships with the supplier community?.

Yeah. Hi, Matt. How are you doing? Thanks for the question. We're very optimistic, yeah, it's been about 12, I guess 13 weeks or so. Certainly been a whirlwind, that's for sure.

We've been out – or I've have been out across the world, Rick just got back from Hong Kong, was in Europe few weeks before that, across the Americas and met with north of 100 different suppliers and supplier executives. And as we see it right now, we're feeling better and better. As there's always dynamics out there, right.

We can't see what's around the corner. But as sitting right now, I feel very optimistic about our position with the suppliers and continue to improve that position..

Okay. Thanks, Phil. And Kevin, best of luck..

Thank you very much..

Thank you. The next question is from the line of Adam Tindle from Raymond James. Please go ahead..

Okay, thanks. I wanted to start Bill on the Premier Farnell, I think you mentioned that it's adding 30,000 customers a month.

Can you speak to maybe the incremental revenue per customer or timeline of conversion for a new customer to revenue? What I am trying to get at is, is anything that might suggest that the 4% constant currency growth we saw on Premier Farnell is poised to accelerate?.

Well, that statistic I gave, I am sorry I wasn't clear, Adam. But what it was is 30,000 on the – in the communities it's not customers. So, the customer base in Premier Farnell is roughly 2.1 million customers. And if you recall, Avnet Core is about 110,000 customers. So, we're seeing modest adds everywhere across the board.

I would say that – I'm bullish on what's happening with Premier Farnell and we go with that because we start performing our expectations. We do a lot of pre-work as you recall when we bought the property and we've since been in the middle of a transformation effort. We've adjusted some of our leadership there, that's gone extremely well.

We worked some key processes. We've streamlined the operations and their facilities. We're changing the footprint of the logistics program as well. And I think all those changes are really boding well with our customers..

Okay. And maybe just one, I think, kind of billing out previous questions and specifically helping us think about the shape of the year, you typically see a sequential revenue decline in December and it doesn't look like you've reflected all the supplier changes in the September guidance.

So, I just wanted to confirm, if all of the changes are reflected in September or if there is more to come in December. And if so, it would seem that December EPS should be down sequentially versus current expectations that are more flattish. Thanks..

We've got the majority of the supplier actions out and it will be just dribbles into the next quarter. So we'll see a major step function down in supplier actions..

Does that answer your question, Adam?.

Okay. Maybe if I can just get one last one. Buybacks have been well over a 100% of cash flow for the past couple of quarters and at an average price that's above current levels.

So can you just talk about the sustainability of share repurchases at this level and how you evaluated the cadence to seemingly use a larger portion of this now? It would seem to imply your view of intrinsic value as well above the markets. Thanks..

Your last point is exactly right, we believe that. Recall though, we have meaningful amount of our cash offshore and therefore we got to be very prudent with what we're doing because we wanted to keep the strength, so we want to make sure that we maintain our investment grade with respect to our debt.

And that's one of the key guiding principles that we have. So as we are able to demonstrate more operational cash flow in the Americas, we will have an opportunity to be able to continue with our disciplined share buyback program..

Okay. Thanks..

Thank you. Next question is from William Stein from SunTrust Robinson Humphrey. Please go ahead..

Great. Thanks for taking my question. Bill, you offered some good details around digital transformation, but I think the real story about integrating Premier Farnell isn't so much about growing that business itself.

But as I recall, it's more about trying to transition these low volume and engineering sample type customers that would traditionally have gone to Premier, to the Avnet platform at a margin that's not, well, let's say that's more in line with Premier's.

Can you update us on that effort, please?.

Sure. We're seriously working on strategies for us to be able to share our leads across the world, and that's going – it's going well. We'll have some metrics in the future on that, we're not yet prepared to do that, still early days. I will tell you that we have had several pilots that have worked extremely well.

We're also experimenting with some interesting new marketing automation source that will help us to be able to qualify leads in such a way that gives the hit rate on those leads to be very hot with respect to when they move over from Primer Farnell over Avnet. And therefore, that'll be something exciting for the sales people to follow-up on.

You can imagine if you hand a lot of leads to a salesperson and they don't get a good hit rate on, then you're not going to be too excited about that lead sheet.

So, therefore, we're working diligently to make sure we get the right tools in place, that when we return those leads over, they're really -- they're ones that really convert into high volume production into Avnet. So, we're pretty bullish on where we are. We're encouraged and we'll start – we'll share metrics with all of you in the future..

Yeah. Bill, let me just add to that. This is Phil, William. So, bottom line is the collaboration between the we'll call it the core core business EM and PF is extremely good. The key is qualifying these opportunities. And we've got 2.1 million customers, the amount of transactions.

And when you tie that to the communities, what we're doing is we're shifting, right and we're filtering and we're using analytics to start a better understanding what are those real opportunities versus not, because it's very complex. With the collaborations high, the analytics are coming in. And then the key is also how you contact those customers.

Is that online, do they want to sales person to call them, all those different qualifications, but some very exciting opportunities have already come out of it. As Bill pointed out, we're beta testing some new opportunities around the NPI, that we could do at Premier Farnell. So, we have much more to come in the future in that arena..

Appreciate that update, guys. Maybe one more if I can. Any update on the ERP project? We are aware that there was a big investment, there were some big problems, you now writing down that investment, and I think there is sort of a restart here, any update on the process, the investment, the results? Thank you..

Yes. We're still on track with what we said with respect to the level of the investment that we're going to put in place, with respect to going into a global system. As you recall, we discussed that our European team will be going to one instant SAP at the end of the year.

And that's on track and going extremely well with that several workshops over in Europe with the Americas team and the European team. And we feel like we're in really good shape there. So, that's really iteration on what's already over in the Europe.

And that will become the basis for the system that we implement into the Americas and eventually the global system. So, we feel like we're still on exactly the same path that we talked about before, which was a 24-month implementation for the global system and we'll keep reporting out on that eventually future quarters..

Thank you..

Thank you. Next question is from Shawn Harrison from Longbow Research. Please go ahead..

Hi. Good morning, everyone. And first, I just want to wish Kevin all the best. I wanted to delve a little bit on both the supplier losses and then just kind of what it means for the end of the year in the first question.

The loss is geographically split up, maybe a third, if you could help us with the waiting of where the revenue is coming out? And then, second, it seems to imply based upon maintaining the full year guidance at the midpoint that you will be growing organically year-over-year as you entered fiscal 2018, and I want to make sure that's correct..

I'll take the second question first. That's exactly correct. We'll be growing organically and it's to the guidance that we gave, gave last quarter, we're sticking with that. So, that's exactly right.

And with respect to the supplier losses, it depends on the particular supplier, but you'll some of that hit more in Americas than in other regions in some cases, but in general it's roughly as you laid it out..

Okay. That's helpful. And there's a follow-up.

Kevin, operating expenses on a dollar basis and interest expense were a little higher than I would have thought them to be for the June quarter, but that I mean in terms of bad math, but you can give me maybe a dollar guidance to think of both operating expenses as well as interest expense for both the September quarter as well as fiscal 2018.

How should I think that would track?.

Sure, Shawn. For the September quarter, you should be thinking in the neighborhood of down $10 million to $15 million sequentially and that's kind of how we're looking at it.

And the way I'd qualify (:38:25.) interest and other, I'd go with the aggregate amount of roughly $25 million for both interest and other for the quarter – for the September quarter..

I just ....

And then .....

Sorry..

No, go ahead..

No, but I was going to -- I guess in the interest and other I'm a bit confused because you paid down what, $1.8 billion of debt back in February. And so, I thought even with a low rate on that debt, you'd have a little bit more interest expense savings, so maybe bridging the $25 million of what you did in the March quarter would help me out..

Sure. And part of it, Shawn, is during the quarter in terms of where the facilities and the timing around that and that that's part of the dynamics here that goes in terms of where is the cash position, even as we work through the quarter.

So, we may have had lower cash levels during the quarter which created a higher interest expense as we work through the June quarter. And that's really the primary difference..

And then on the OpEx as you exit the year, is there is a range in terms of percentage dollar amount that should – it should decline fiscal 2018 versus fiscal 2017? Is that your target?.

Sure. Yeah. And I think what I would say is just turning to next year and bridging kind of what we said on the April call, we are looking for operating expense to go down approximately $90 million to $100 million this year.

And if I was to range that between the quarterly impact, think of like the 10% to 15% as we go into our fiscal Q1, the December quarter somewhere in the neighborhood of 18% to 22%. And then in the March and June quarter, somewhere in the neighborhood of 28% to 32%. A lot of things we've talked about are backend loaded.

So that's kind of our expectations as we sit here today..

Perfect. Thanks so much, Kevin..

Yeah. Thank you, Shawn..

Thank you. The next question is from the line of Steven Fox from Cross Research. Please go ahead..

Hi, good morning. My first question was regarding some of the lead generations you have been talking about on the call. I was curious if there is any common threading where you are having success, either by vertical or customer type or type of application component et cetera. If you have any more color on that it would be helpful.

And then I had a follow-up..

It's pretty much across the board, all verticals we're having good luck with. So, I wouldn't point to any particular one to say it's stands out with respect to that. And it what's more important is to say where they are in their life cycle and how quick that particular product line is going to pop into high volume production.

And that's what the analytics are that we worked to be able to move those leads over so they become ones that are successfully converted into high volume opportunities..

Yeah, Steve. I will add, this is Bill.

I think, and we don't classify it as a vertical, but we have had some specific wins in the area of IoT, in the Internet of Things that have come out of that where it's a new customer and a new application, we've been able to provide the complete solution to them around IoT, which is going to continue to be a focus for us and a big growth area..

Thanks for that. That's helpful. And then just, I might be missing something on the Premier Farnell numbers that we're seeing. So quarter-over-quarter it looks like the operating profits and the sales were down about the same amount. So that's a pretty big negative leverage.

Can you just talk to what happened in the quarter sequentially with the margin, a little bit more just for Premier Farnell?.

Sure. This is Kevin. I think what I pointed to earlier is sequentially we've roughly, as we bought the property, we've definitely have been making some investments in the marketing in some of the areas and that primarily was a sequential change in the June quarter versus the March quarter..

So then going forward do you envision more investments that keep the margins around these levels or does that start to wean off and you see margins more like you had in the March quarter?.

Yeah. I would say think of it in terms of double digit and as we kind of work through, we're obviously investing in the business, but definitely looking to be at double digit as we work through the balance of this fiscal year..

And recall, we were real clear that we have to do some investment in the IT space as well. So there will be some expense that we'll be putting there as well as capital in there in our IT systems..

Great. Thanks for that clarification..

Sure..

Thank you. Next question is from Mark Delaney from Goldman Sachs. Please go ahead..

Hi, thank you very much. This is Garrett Clark on for Mark Delaney. Congrats on a strong organic growth this quarter and thanks for taking my question.

I know you've kind of already talked about semi lead times ,or at least 10 at them, and I was just wondering if you could provide any more color on this issue, where they are today and what you would consider normal? And then, I have a follow-up. Thanks..

There's no question lead times are expanding. So, we'll be seeing that and I think we've heard that across the industry and that continued pressure will follow beyond to the latter part of the year.

But as I pointed out with respect to our guidance, there is also a concern out there with respect to double booking as that in fact is driving some of this. We haven't seen it yet in the numbers, but that's always something that we're concerned about..

Yeah. Garrett, I'll jump on that. We definitely track the bookings, we are very closely in both of our hard order backlog as well as our supply chain to be sure that we're not seeing any funny business. And I want to reemphasize we've not seen that. So, the book-to-bill is solid, it's in line with the market and feel good about that.

As far as the lead times, most suppliers are avoiding the A-word (44:11). But the for sure lead times are out 16, 20 weeks, we'll see it particularly passes for sure, our price stretch as far as anything, a lot of that driven by the automotive market frankly, and we're seeing really memory controllers. It's pretty much standard.

But again, come back to the inventory question, we also have increased our pipelines to make sure that we can cover our customers' demands through the quarter and into the future. And that's frankly our job to do the best we can to buffer that..

Appreciate that color.

A similar question sort of piggybacking on that on the inventory levels at customers, can you give any more color on inventory levels in specific end markets or just generally more color on inventory?.

Yeah. This is Bill again, I'll take that. I don't think there is any surprises there, and I think it's pretty normal. Again, we just contract our bookings in our billings, and then in our supply chain. The supply chain business is roughly 50% of our business today.

The customers are still pulling it in Yin and Yang like they always do, but it's not like their opponent access is in the right field. Any concern that our customers have ,excess inventory and finished goods or raw goods, the answer across the board would be no..

Another way to look at that same question you just asked is, what's going on with our cancellation rates, on our expedite exercise rates. And there is nothing that's abnormal with either one of them at this juncture. So I wouldn't conclude that the inventory levels that the customers are expanding in any meaningful way..

I appreciate it. Thank you..

Thank you. Gentlemen, there are no further questions at this time..

This is Vince. Thank you for participation....

Ladies and -- please proceed, Vince. Sorry..

Okay. Thank you for participating in our earnings call today. Our fourth quarter fiscal 2017 earnings press release can be access in downloadable PDF format at our website under the quarterly results section. Thank you..

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