Annual Report for Fiscal Year Ending June 28, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition andResults of Operations

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 past three fiscal years, the following discussion should be read in conjunction with the description of the business appearing in Item 1 of this Report and the consolidated financial statements, including the related notes and schedule, and other information appearing in Item 8 of this Report. Discussions of fiscal 2023 items and year-to-year comparisons between fiscal years 2024 and 2023 are not included in this Form 10-K and can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 2024. The Company operates on a "52/53 week" fiscal year. Fiscal years 2025, 2024 and 2023 each contained 52 weeks.

The discussion of the Company's results of operations includes references to the impact of foreign currency translation. When the U.S. Dollar strengthens and the stronger exchange rates are used to translate the results of operations of Avnet's subsidiaries denominated in foreign currencies, the result is a decrease in U.S. Dollars of reported results. Conversely, when the U.S. Dollar weakens, the weaker exchange rates result in an increase in U.S. Dollars of reported results. In the discussion that follows, results excluding this impact, primarily for subsidiaries in EMEA and Asia, are referred to as "constant currency."

In addition to disclosing financial results that are determined in accordance with generally accepted accounting principles in the U.S. ("GAAP"), the Company also discloses certain non-GAAP financial information, including:

The following table provides a reconciliation of operating income to adjusted operating income:

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Management believes that providing this additional information is useful to financial statement users to better assess and understand operating performance, especially when comparing results with prior periods or forecasting performance for future periods, primarily because management typically monitors the business with and without these adjustments to GAAP results. Management also uses these non-GAAP measures to establish operational goals and, in

many cases, for measuring performance for compensation purposes. However, any analysis of results on a non-GAAP basis should be used in conjunction with results presented in accordance with GAAP.

Industry outlook

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.

The impact of these changes in trade policies will depend on various factors, including (i) when trade measures are implemented, (ii) the ultimate amount, scope, nature, and duration of tariffs and other trade measures, and (iii) the extent to which the Company can mitigate impacts and pass on any increased costs associated with these changes. In addition, the impact of trade disruptions on general economic conditions and demand for electronic components is difficult to predict.

The Company employs and continues to develop systems and other measures to mitigate the impact of tariffs, including selective supply chain, logistics, and pricing actions. The Company also has contingency plans to respond to a range of economic scenarios. The Company's management continues to monitor and evaluate the changing tariff situation, as well as the overall environment in the electronic components industry. However, despite these efforts, the Company may not be able to fully mitigate the impact of changes in trade policies or an economic downturn.

The global electronic components market has a history of cyclical downturns followed by periods of increased demand. Beginning in the second half of calendar year 2023, the industry began to experience 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 has seen decreased sales, resulting in lower operating income. The duration of the current downturn is uncertain. The Company expects sales in the first quarter of fiscal 2026 to be approximately 2% growth across all regions from the fourth quarter of fiscal 2025 sales.

Additionally, the Company's inventories relative to its sales are higher than they have historically been as a result of this industry downturn. The Company has and may in the future purchase additional inventories from electronic component suppliers, even in an industry downturn, if the Company believes the purchase will benefit the Company's financial or strategic business objectives.

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Results of Operations

Sales

Analysis of Sales: By Operating Group and Geography

The table below provides sales change rates for fiscal 2025 as compared to fiscal 2024 as reported and on a constant currency basis by geographic region and operating group.

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Avnet's sales for fiscal 2025 were $22.20 billion, a decrease of $1.56 billion, or 6.6%, from fiscal 2024 sales of $23.76 billion. Sales in constant currency decreased 6.7% year over year, reflecting a reduction in sales volume primarily due to the lower demand for electronic components. Sales declined in the western regions, while sales in Asia experienced year-over-year growth.

EC sales in fiscal 2025 were $20.75 billion, representing a 6.3% decrease over fiscal 2024 sales of $22.16 billion. EC sales decreased 6.4% year over year in constant currency. The decrease in EC sales is primarily due to sales volume decreases in the western regions due to the market downturn in the electronic components industry and, to a lesser extent, an unfavorable product mix of lower-priced electronic components. The average selling prices of like for like electronic components remained relatively stable between fiscal 2025 and fiscal 2024.

Farnell sales in fiscal 2025 were $1.45 billion, a decrease of $151.3 million or 9.5%, from fiscal 2024 sales of $1.60 billion. The year-over-year decrease in sales was primarily a result of lower demand for on-the-board electronic components.

Gross Profit

The Company's gross profit is primarily affected by sales volume, product mix, and geographic sales mix. Gross profit in fiscal 2025 was $2.38 billion, a decrease of $381.5 million, or 13.8%, from fiscal 2024 gross profit of $2.77 billion primarily due to lower sales volumes, as described above. Gross profit margin decreased to 10.7% in fiscal 2025 or 90 basis points from fiscal 2024 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.

EC gross profit margin decreased year over year largely due to the change in geographic mix, partially offset by increases in gross margin from certain supplier engagements. Average selling prices of like for like electronic components at EC remained relatively stable between fiscal 2025 and fiscal 2024.

Farnell gross profit margin decreased year over year, primarily due to lower sales of higher margin on-the-board electronic components.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A expenses") in fiscal 2025 were $1.76 billion, a decrease of $107.1 million, or 5.7%, from fiscal 2024. The year-over-year decrease in SG&A expenses was primarily due to decreases in variable operating expenses associated with the decrease in 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, 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 without a proportional reduction in SG&A expenses, resulting in lower operating leverage.

Restructuring, Integration and Other Expenses

In fiscal 2024, the Company initiated a restructuring plan to reduce SG&A expenses including within the Farnell operating group. These efforts continued in fiscal 2025 and included EC Americas and EC EMEA.

As a result of these restructuring initiatives, the Company incurred $56.1 million for restructuring expenses consisting of severance and other employee-related expenses of $32.2 million for reduction of over 400 employees across the Company, $5.6 million of facility exit costs primarily related to an office closure in the Americas, $14.9 million of asset impairments, and $3.4 million of other restructuring costs primarily related to software licenses not in

use. The Company also recorded $14.5 million of integration costs, a benefit of $6.0 million for changes in estimates for costs associated with prior year restructuring actions, and $43.7 million of other costs primarily related to the estimated contingent liability associated with an ongoing consumption tax audit in Mexico.

See Note 13, "Commitments and contingencies" to the Company's consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information related to the consumption tax audit in Mexico.

The after-tax impact of restructuring, integration, and other expenses were $87.6 million and $1.01 per share on a diluted basis.

During fiscal 2024 the Company recorded restructuring, integration, and other expenses of $52.6 million, which consists of restructuring costs of $39.5 million, integration expenses of $13.1 million, and $5.5 million of other expenses, offset by a benefit of $5.5 million.

See Note 17, "Restructuring expenses" to the Company's consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information related to restructuring expenses.

Operating Income

Operating income for fiscal 2025 was $514.3 million, a decrease of $330.1 million or 39.1%, from fiscal 2024 operating income of $844.4 million. Operating income margin was 2.3% in fiscal 2025 compared to 3.6% in fiscal 2024. Adjusted operating income for fiscal 2025 was $624.0 million, a decrease of $276.0 million or 30.7%, from fiscal 2024 adjusted operating income of $900.0 million. Adjusted operating income margin was 2.8% in fiscal 2025 compared to 3.8% in fiscal 2024. The decreases in operating income and operating income margin are primarily due to the decrease in sales, lower gross profit margin, and impact from foreign currency exchange rates.

EC operating income decreased 25.3% to $708.2 million, and EC operating income margin decreased 87 basis points to 3.4% in fiscal 2025, with decreases in both the EMEA and Americas regions, offset by an increase in the Asia region. Farnell operating income decreased 49.3% to $32.8 million in fiscal 2025 and Farnell operating income margin decreased 179 basis points to 2.3% in fiscal 2025. The decreases in operating income and operating income margin in both operating groups are due to the decrease in gross profit primarily from lower sales and from a lower gross profit margin without a proportionate decrease in SG&A expenses.

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

Interest and other financing expenses for fiscal 2025 was $246.4 million, a decrease of $36.5 million, or 12.9%, compared with interest and other financing expenses of $282.9 million in fiscal 2024. The decrease in interest and other financing expenses in fiscal 2025 compared to fiscal 2024 is primarily a result of lower outstanding borrowings and average borrowing rates.

The Company had other expense of $17.3 million in fiscal 2025, compared to other expense of $15.7 million in fiscal 2024. The increase in other expenses is primarily due to foreign currency translation losses.

Gain on Legal Settlements and Other

During fiscal 2024, the Company recorded a gain on legal settlements and other of $86.5 million in connection with the settlement of claims filed against certain manufacturers of capacitors.

Income Tax

Income tax expenses were $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%. The decrease in the effective tax rate in fiscal 2025 as compared to fiscal 2024 was primarily due to the increases in tax attribute carryforwards, partially offset by increases to valuation allowances.

See Note 9, "Income taxes" to the Company's consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion on the effective tax rate.

Net Income

As a result of the factors described in the preceding sections of this MD&A, the Company's net income in fiscal 2025 was $240.2 million, or earnings per share on a diluted basis of $2.75, compared with fiscal 2024 net income of $498.7 million, or earnings per share on a diluted basis of $5.43.

Liquidity and Capital Resources

Cash Flows

Operating Activities

Net cash provided by operating activities was $724.5 million during fiscal 2025, compared to net cash provided by operating activities of $690.0 million during fiscal 2024. The $34.5 million increase in net cash provided by operating activities year over year is primarily due to improvements in 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 million during fiscal 2025, compared to cash generated by working capital of $11.2 million during fiscal 2024, with the difference attributable primarily to decreases in inventory purchases and the timing of payments for inventory purchases. The Company also had decreases in accounts receivable due to cash collections and lower sales when compared to the prior fiscal year. Included in other, net was a gain of $9.2 million recognized on the sale of a building during fiscal 2025. The Company received $90.7 million of cash from legal settlements during fiscal 2024.

Financing Activities

Net repayments of debt totaled $274.9 million during fiscal 2025, including the repayment of $357.3 million under the Credit Facility, and $2.5 million for other debt, offset by net proceeds of $84.9 million under the Securitization Program. This compares to $156.5 million of net repayments during fiscal 2024. The Company paid cash dividends to shareholders of $1.32 per share, or $113.3 million, during fiscal 2025 as compared to $1.24 per share, or $112.0 million, during fiscal 2024. The Company has repurchased $303.5 million of common stock under the share repurchase plan during fiscal 2025 compared to $162.7 million during fiscal 2024.

Investing Activities

The Company's purchases of property, plant and equipment decreased during fiscal 2025 by $79.0 million, when compared to fiscal 2024, primarily due to a distribution center investment in EMEA in fiscal 2024. Included in other, net were net proceeds of $9.2 million on the sale of a building received during fiscal 2025.

Financing Transactions

The Company uses a variety of financing arrangements, both short-term and long-term, to fund its operations in addition to historical cash generated from operating activities. The Company also uses several funding sources to avoid becoming overly dependent on one financing source, and to lower overall funding costs. These financing arrangements include public debt ("Notes"), short-term and long-term bank 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 2025 was $24.9 million.

As an alternative form of liquidity outside of the United States, 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 fees for the sales of trade accounts receivable are classified within "Interest and other financing expenses, net" of the consolidated financial statements.

See Note 7, "Debt" to the Company's consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for additional information on financing transactions including the Credit Facility, the Securitization Program and the outstanding Notes as of June 28, 2025.

Covenants and Conditions

The Company's Credit Facility contains certain covenants with various limitations on debt incurrence, share repurchases, dividends, investments and capital expenditures, and also includes a financial covenant requiring the Company to maintain a leverage ratio below a certain threshold. The Company was in compliance with all such covenants as of June 28, 2025.

The Company's Securitization Program contains certain covenants relating to the quality of the receivables sold. If these conditions are not met, the Company may not be able to borrow any additional funds and the financial institutions may consider this an amortization event, as defined in 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 meet the required covenants and conditions of the Securitization Program include the Company's ongoing profitability and various other economic, market, and industry factors. The Company was in compliance with all such covenants as of June 28, 2025.

Management does not believe that the covenants under the Credit Facility or Securitization Program limit the Company's ability to pursue its intended business strategy or its future financing needs.

See Liquidity below for further discussion of the Company's availability under these various facilities.

Liquidity

The Company held cash and cash equivalents of $192.4 million as of June 28, 2025, of which $181.8 million was held outside the United States. As of June 29, 2024, the Company held cash and cash equivalents of $310.9 million, of which $179.6 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 $724.5 million in cash flows for operating activities during the fiscal year ended June 28, 2025.

Liquidity is subject to many factors, such as normal business operations and general economic, financial, competitive, legislative, and regulatory factors that are beyond the Company's control. Cash balances held in foreign locations that cannot be remitted back to the U.S. in a tax efficient manner are generally used for ongoing working capital, including the need to purchase inventories, capital expenditures and other foreign business needs. In addition, local government regulations may restrict the Company's ability to move funds among various locations under certain circumstances. Management does not believe such restrictions would limit the Company's ability to pursue its intended business strategy.

As of June 28, 2025, there were $411.6 million of borrowings outstanding under the Credit Facility and $0.9 million in letters of credit issued, and $500.0 million outstanding 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, 2025, the combined availability under the Credit Facility and the Securitization Program was $1.09 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 has the following contractual obligations outstanding as of June 28, 2025 (in millions):

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The Company purchases inventories in the normal course of business throughout the year through the issuance of purchase orders to suppliers. During fiscal 2025, the Company's cost of sales, substantially all of which related to the underlying purchase of inventories was $19.8 billion and the Company had $5.2 billion of inventories as of June 28, 2025. The Company expects to continue to purchase sufficient inventory to meet its customers' demands in fiscal year 2026, some of which relates to outstanding purchase orders at the end of fiscal 2025. Outstanding purchase orders with suppliers may be non-cancellable/non-returnable at the point 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, 2025, the Company had an estimated liability for income tax contingencies of $120.5 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.

As of June 28, 2025, the Company may repurchase up to an aggregate of $364.1 million of shares of the Company's common stock through the share repurchase program approved by the Board of Directors. 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. During fiscal 2025, the Company repurchased $301.4 million of common stock.

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 fourth quarter of fiscal 2025, the Board of Directors approved a dividend of $0.33 per share, which resulted in $27.7 million of dividend payments during the quarter.

The Company continually monitors and reviews its liquidity position and funding needs. Management believes that the Company's ability to generate operating cash flows through the liquidation of working capital in the future and available borrowing capacity, including capacity for the non-recourse sale of trade accounts receivable, will be sufficient to meet its future liquidity needs. Additionally, the Company believes that it has sufficient access to additional liquidity from the capital markets if necessary.

During fiscal 2026 the Company may use cash for investing and financing activities including the payment of cash dividends and capital expenditures for distribution centers and information systems including digital tools and capabilities. The Company may also use cash in fiscal 2026 for share repurchases and for acquisitions.

Critical Accounting Policies

The Company's consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses. These estimates and assumptions are based upon the Company's continual evaluation of available information, including historical results and anticipated future events. Actual results may differ materially from these estimates.

The Securities and Exchange Commission defines critical accounting policies as those that are, in management's view, most important to the portrayal of the Company's financial condition and results of operations and that require significant judgments and estimates. Management believes the Company's most critical accounting policies at the end of fiscal 2025 relate to the valuation of inventories and accounting for income taxes.

Valuation of Inventories

Inventories are recorded at the lower of cost or estimated net realizable value. Inventory cost includes the purchase price of finished goods, and any freight cost incurred to receive the inventory into the Company's distribution centers. The Company's inventories include electronic components sold into changing, cyclical, and competitive markets, so inventories may decline in market value or become obsolete.

The Company regularly evaluates inventories for expected customer demand, obsolescence, current market prices, and other factors that may render inventories less marketable. Write-downs are recorded so that inventories reflect the estimated net realizable value and take into account the Company's contractual provisions with its suppliers, which may

provide certain protections to the Company for product obsolescence and price erosion in the form of rights of return, stock rotation rights, obsolescence allowances, industry specific supplier rebate programs and price protections. Because of the large number of products and suppliers and the complexity of managing the process around price protections, supplier rebate programs and stock rotations, estimates are made regarding the net realizable value of inventories. Additionally, assumptions about future demand and market conditions, as well as decisions to discontinue certain product lines, impact the evaluation of whether to write-down inventories. If future demand changes or actual market conditions are less favorable than assumed, then management evaluates whether additional write-downs of inventories are required. In any case, actual net realizable values could be different from those currently estimated.

Accounting for Income Taxes

Management's judgment is required in determining income tax expense, unrecognized tax benefit liabilities, deferred tax assets and liabilities, and valuation allowances recorded against net deferred tax assets. Recovering net deferred tax assets depends on the Company's ability to generate sufficient future taxable income in certain jurisdictions. In addition, when assessing the need for valuation allowances, the Company considers historic levels and types of income, expectations and risk associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies. If the Company determines that it cannot realize all or part of its deferred tax assets in the future, it may record additional valuation allowances against the deferred tax assets with a corresponding increase to income tax expense in the period such determination is made. Similarly, if the Company determines that it can realize all or part of its deferred tax assets that have an associated valuation allowance established, the Company may release a valuation allowance with a corresponding benefit to income tax expense in the period such determination is made.

The Company establishes contingent liabilities for potentially unfavorable outcomes of positions taken on certain tax matters. These liabilities are based on management's assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The anticipated and actual outcomes of these matters may differ, which may result in changes in estimates to such unrecognized tax benefit liabilities. To the extent such changes in estimates are necessary, the Company's effective tax rate may fluctuate. In accordance with the Company's accounting policy, accrued interest and penalties related to unrecognized tax benefits are recorded as a component of income tax expense.

In determining the Company's income tax expense, management considers current tax regulations in the numerous jurisdictions in which it operates, including the impact of tax law and regulation changes in the jurisdictions the Company operates in. The Company exercises judgment for interpretation and application of such current tax regulations. Changes to such tax regulations or disagreements with the Company's interpretation or application by tax authorities in any of the Company's major jurisdictions may have a significant impact on the Company's income tax expense.

See Note 9, "Income taxes" to the Company's consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for further discussion on income tax expense, valuation allowances and unrecognized tax benefits.

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Recently Issued Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Tax Disclosures ("ASU No. 2023-09"), which updates income tax disclosures related to the effective income tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction. ASU No. 2023-09 will be effective for the Company in fiscal year 2026 and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU No. 2023-09 on its disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures: Clarifying the Effective Date ("ASU 2025-01"). The guidance is designed to improve financial reporting by requiring public business entities to disclose additional information about specific expense categories in the financial statement notes at interim and annual reporting periods. ASU No. 2024-03, as clarified by ASU 2025-01, will be effective for the Company in fiscal year 2028 and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU No. 2024-03 on its disclosures.

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