Revenue: $1.2 billion in Q1, a decrease of 16.8% from the previous year.
Profitability: Adjusted EBITDA margin at 19.9%, down 150 basis points year-over-year; non-GAAP diluted earnings per share were $2.84, a 28% decline from prior year.
Gross Margin: Improved sequentially to 48.1% due to higher services and software margins and reduced supply chain costs.
Restructuring Savings: On track to achieve $120 million of net annualized operating savings by midyear.
Working Capital: Improved due to renegotiation of long-term supply commitments and reduction in component inventories.
Future Guidance
Q2 Sales: Expected to decrease between 1% to 5% compared to the prior year.
Full Year Outlook: Raised, with sales growth anticipated between 1% and 5%, adjusted EBITDA margin expected to be around 20%, non-GAAP diluted earnings per share in the range of $11.25 to $12.25, and free cash flow expected to be at least $600 million.
Q2 Adjusted EBITDA Margin: Projected to be slightly above 19%.
Debt Management: Prioritizing debt paydown in the near term with a net debt to adjusted EBITDA leverage ratio of 2.6x.
Trends, Market Conditions, Sentiment
End Market Recovery: Seeing modest recovery in demand with notable large order activity, especially in mobile computing and retail sectors, but not yet observing a broad-based recovery.
Asia Pacific Challenges: Continued weakness in China contributing to the steepest sales declines in the region.
Supply Chain Improvements: Substantial progress in renegotiating supply terms and reducing inventory levels.
Market Sentiment: Optimism exists among partners and customers regarding a recovery in the second half of the year, but additional momentum in large orders is awaited before confirming a broader market recovery.
Notable Quotes
”As expected, our first quarter performance was impacted by continued broad-based softness across our end markets and regions…” - William Burns, CEO.
”…we are beginning to see a modest recovery in demand as we saw sequential improvement from the fourth quarter.” - William Burns, CEO.
”Given the progress on our actions, we are raising our full year outlook for sales, margin, and free cash flow.” - William Burns, CEO.
”We generated $111 million of free cash flow as we begin to realize benefits from reducing inventory levels.” - Nathan Winters, CFO.
”We are hosting an innovation day on May 14 at our headquarters near Chicago…” - William Burns, CEO, indicating future focus and confidence in long-term strategy.
