Good morning. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the TD SYNNEX Third Quarter Fiscal 2022 Earnings Call. Today’s call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. At this time for opening remarks, I would like to pass the call over to Liz Morali, Head of Investor Relations. Liz, you may begin.

Thank you. Good morning, everyone, and thank you for joining us for today's call. With me today are Rich Hume, CEO; and Marshall Witt, CFO. Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events including statements about strategy, plans and positioning, as well as our expectations for fiscal year 2022. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release in the Form 8-K we filed today and in the Risk Factors section of our Form 10-K and our other reports and filings with the SEC. We do not intend to update any forward-looking statements. Also, during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K available on our Investor Relations website.

Thank you, Liz. Good morning, everyone, and thank you for joining our call. One year ago, we held our first earnings call as TD SYNNEX, having closed our merger on September 1, 2021. In our first 12 months together, we've accomplished a lot and have validated the value proposition that led to our merger. Over the past 12 months, we generated $62 billion in revenue, over $1.7 billion in adjusted EBITDA, and $11.35 in non-GAAP earnings per share, representing 35% in accretion and well above our initial 12-month target. In addition, we have already realized merger-related cost synergy benefits of $140 million, which is ahead of our initial expectation of $100 million in the first year. Making those results possible, our teams have been hard at work, harmonizing every area of TD SYNNEX, from partner-facing elements, benefits and policies, the organizational design, finance and IT systems, corporate branding, and culture. As a result, we have become one combined company through an incredibly busy and dynamic year. And I would like to personally thank our more than 22,000 coworkers for their exceptional work, dedication, and perseverance in helping to make it possible. With the first year behind us, we believe that the thesis for our merger is stronger today than we anticipated last September. Our partners, now more than ever, realize the importance of broad global capabilities and deep customer relationships to help them efficiently expand. For our 150,000 plus customers, the majority of which are small and medium-sized IT resellers, it is increasingly important to have a trusted partner to help them navigate the IT landscape, especially in high growth technology areas such as hybrid cloud, security, analytics, IoT as well as others. We are pleased with the fact that these areas had robust growth in the quarter and continue to outpace our overall growth rates on an annualized basis. In addition, our Hyve business, which serves the hyperscale infrastructure space, also exceeded our revenue growth expectations for the quarter. Turning to the third quarter, we performed above our expectations with worldwide revenue growing 7% year-over-year and 15% in constant currency when normalized for the merger-related revenue recognition policy alignment. This is better than the adjusted growth of 10% year-over-year that we expected when we provided our Q3 outlook in June. Growth in the quarter came from across our business, with robust demand in endpoint, data center and hyperscale infrastructure. In PCs specifically, where we primarily serve the commercial segment, we continued to see solid commercial client device demand and ASP increases during the quarter. We also saw robust revenue growth on a constant currency basis across all three regions. Fiscal '22 has played out in line with our expectations at the beginning of the year with strong customer demand in areas like data center, networking, hybrid cloud, hyperscale infrastructure, and security projects. Supply chain disruptions continue to exist and remain elevated in the areas of data center, infrastructure, and networking, although improved in areas like endpoint, including PCs, which have seen moderating year-over-year growth rates. Given the variety of factors that have led to these supply chain issues over the past two or three years, it will take time to get back to a normalized supply chain environment. Our backlog remains elevated compared to our historical levels, and we anticipate that we will continue to see industry supply imbalances well into 2023 in some product categories. As we look ahead to the fourth quarter, we project a solid demand picture as evidenced by our revenue guide of mid to high-single digit growth when adjusted for constant currency and the merger-related revenue recognition policy alignment. Despite the uncertain environment ahead, we believe we have built a strong resilient business that has a long history of successfully operating in many different macro cycles. Our broad solutions portfolio, liquidity profile, and variable cost structure have allowed us to deliver results through dynamic changes in the economy. We continue to believe that the overall IT market will grow. We also believe that solutions like hybrid cloud, security, hyperscale infrastructure, IoT, and analytics will have growth rates above the overall IT market. And as we have discussed in the past, we are investing in these high growth areas. Progress is evident on our high growth technology strategy as year-to-date revenue in this area grew more than 20% and represented more than 20% of our third quarter total gross billings. We were also recently recognized with two very important partner awards. TD SYNNEX was named Hewlett-Packard Enterprise Global Distributor of the Year for 2022, and the Microsoft Worldwide Partner of the Year for 2022, our second consecutive year in achieving this honor. These acknowledgments are important testaments to our commitment to invest and partner with top technology vendors, providing our customers with outstanding solutions based on leading edge, cloud, and as a service technologies. For our customers, this is key, as we help simplify complexity, accelerate their time to market, reduce the skills gap, and help them expand their portfolio to new markets. Marshall will provide further details on our merger-related cost synergy attainment in a few minutes. So let me give you an update on our ERP system consolidation in the Americas. As mentioned earlier this year, our Canadian conversion efforts were successful, and approximately 90% of our Canadian business is now transacting in CIF, the ERP system used by legacy SYNNEX. Our U.S. transition is now underway, and we expect to have a meaningful portion of that activity migrated by early Q1 with the remainder transitioning throughout fiscal 2023. In closing, I am proud and energized by how the efforts of our entire global team have come together and believe that we have the necessary market-leading capabilities and resources to serve the IT partner ecosystem now and into the future. Before I turn it over to Marshall to provide additional details on our financial performance, please note that our thoughts are with all of those impacted by Hurricane Ian. The safety and well-being of our coworkers is top of mind for us, and with one of our main offices in the Tampa Bay area, we are carefully monitoring the storm's progress and projected path.

Thanks, Rich, and thanks to everyone for joining us today. We performed well in fiscal Q3 with revenue growth above our expectations and margin growth year-over-year. This is a testament to the focus and commitment of our team amidst the hard-to-predict macroeconomic backdrop. Please note that comparisons versus prior year are on an as-combined basis which assumes the merger occurred at the beginning of the period. Total worldwide revenue for fiscal Q3 was $15.4 billion, up 7% year-over-year, and up 15% in constant currency when normalized for the revenue recognition policy alignment relating to the merger. This is better than the 10% adjusted year-over-year growth rate we expected when we last spoke in June. Euro devaluation accounted for an approximate $700 million headwind year-over-year. From a revenue perspective, all three regions grew in the quarter. And we saw broad-based product growth across distribution, with robust double-digit growth in high growth technologies. Hyve had a record quarter as this high growth technology business responded to unusually strong hyperscale demand. Gross profit was $916 million and gross margin was 6%, down approximately 30 basis points from Q2, primarily due to customer and product mix. Total adjusted SG&A expense was $544 million, representing 3.5% of revenue, in line with our expectations and down approximately 30 basis points compared to Q2. Non-GAAP operating income was $398 million, up $44 million, or 12% year-over-year. And non-GAAP operating margin was 2.6%, up approximately 10 basis points year-over-year, driven by cost discipline and merger synergy execution. On a constant currency basis, non-GAAP operating income increased 15% year-over-year. Due to the higher-than-expected interest rates during the quarter, non-GAAP interest expense and finance charges were $50 million, $5 million above our outlook, and the non-GAAP effective tax rate was approximately 24%, in line with our expectations. As a reminder, our Outstanding Senior Notes bear a fixed interest rate, while interest rates on borrowings under our term loan are variable, and borrowings under our revolving credit facility bear a floating interest rate. We have partially hedged the variable interest rate on our term loan. Total non-GAAP net income was $263 million, and non-GAAP diluted EPS was $2.74, consistent with our previous guidance. Now turning to the balance sheet. We ended the quarter with cash and cash equivalents of $351 million and debt of $4.1 billion. Our gross leverage ratio was 2.4 times and net leverage was 2.2 times. Accounts receivable totaled $8.1 billion, up from $7.9 billion in the prior quarter. Inventories totaled $9.8 billion, up approximately $1.3 billion from the prior quarter, but offset by approximately $1.2 billion of increased accounts payable as our partners continued to adjust their terms. More than half of the inventory increase was within our distribution network. This increase was due to strong revenue growth and the elevated backlog. As a reminder, the majority of this inventory is covered by price protection agreements and recovery of inventory carrying costs. The remainder of the increase represents purchases for our hyperscale infrastructure business to support the demand forecast of our customers. These inventory increases carry minimal risks and generally result in margin increases for Hyve. We expect this inventory to translate to revenue and profit generation in Q4 and beyond. All in, we expect inventory returns to improve in Q4 and into fiscal '23. Our net working capital at the end of the third quarter was $3.9 billion, an increase of approximately $300 million from Q2. Our cash conversion cycle for the third quarter was about 23 days, up two days from Q2. And our cash used in operations in the quarter was approximately $67 million. From a shareholder return perspective for the current quarter, our Board of Directors has approved a cash dividend of $0.30 per common share. The dividend is payable on October 28, 2022 to stockholders of record as of the close of business on October 14, 2022. We continued executing our share repurchase program in the quarter, repurchasing $30 million of our stock and $83 million through the first three quarters of fiscal '22. We remain ahead of pace to achieve our targeted repurchases of $100 million for fiscal '22 and are on track for our medium-term target of 50% free cash flow returned to shareholders in the form of dividends and buybacks. We have $317 million remaining on our three-year stock repurchase authorization, which expires in July of 2023. Finally, from a merger-related cost synergy perspective, we remain ahead of plan for year one, expecting to recognize $140 million, compared to our initial plan of $100 million. We continue to expect to achieve a total of $200 million in cost synergies by August 2023. Now moving to our outlook for fiscal Q4. We expect total revenue to be in the range of $15.2 billion to $16.2 billion, which when adjusted for currency impacts of approximately $700 million and revenue recognition policy alignment of approximately $450 million equates to growth of around 8% at the midpoint on a year-on-year basis. Growth rates are expected to be lower than Q3, primarily due to the unusually strong hyperscale demand in Hyve in Q3 and our cautionary approach to guidance, given the macro backdrop. Our guidance is based on a euro to dollar exchange rate of 1.01. Non-GAAP net income is expected to be in the range of $259 million to $298 million and non-GAAP diluted EPS is expected to be in the range of $2.70 to $3.10 per diluted share based on weighted average shares outstanding of approximately 95.2 million. This equates to a full year '22 non-GAAP EPS of $11.19 to $11.59 compared to the outlook of $11.15 to $11.65 that we provided in June. Interest expense for Q4 is expected to be approximately $60 million, and we expect the tax rate to be approximately 24%. In closing, despite the current economic headlines, we are confident in our business and bullish on the growth prospects for our company. Given our participation in large and growing markets, our solid history of execution and shareholder value creation, and our decades of experience in managing through economic cycles.

Good morning, guys and thanks for the opportunity. Just, if you are just revisiting real quick the high growth technology area that was up year-to-date 20%. Rich, can you remind us how big that is of the total business?

Yeah. So usually, Keith, we talk about the high growth technology segment in terms of gross billings because a lot of those offerings, especially the cloud-based ones get netted. As we said in the prepared script, it now is slightly over 20% of our entire business side from a gross billings perspective.

And, Keith, gross billings for the quarter came in just under $20 billion.

Great. Regarding the guidance, as a follow-up, we're navigating a volatile period, and while it's clear that you're optimistic about the business's trajectory, could you elaborate on the factors influencing your guidance for the upcoming quarter? What might help you reach either the higher or lower end of your projected range?

Yeah. There's a few things that are influencing our overall thoughts for Q4. One is interest expense. Just to step back, when we guided Q3, we guided at $45 million and, of course, we came above that at $50 million. We guided for Q4, it's $60 million. So that's probably the biggest EPS difference in terms of where we thought we'd be. Certainly, the comment I made about the broader macro environment is putting us in a position of just being cautious. And as usual, Keith, when we look at the hyperscale infrastructure range, we tend to guide at the lower end of that range.

Great. Appreciate guys. Thank you. Good luck.

Thank you, and good morning, guys. So your first question from me, can you just provide us an update on how backlog has tracked exiting this quarter and how the mix of that is shaking out? Also, where do we stand relative to what you would consider to be normalized levels? And any thoughts to when we might reach those more normal levels?

Thank you for the question. To address your queries, the backlog has decreased, but it's a mixed picture. In the endpoint segment, the backlog has declined, and we're noticing that the PC ecosystem is becoming more manageable. Notably, there's one vendor that has seen a significant reduction in backlog due to their effective progress in addressing it, which puts them in a strong position moving forward. We don't view this as a situation where backlog depletion will lead to difficult growth; demand remains robust. To summarize, although the endpoint backlog is down, this trend primarily stems from one vendor's strong performance. In the Advanced Solutions segment, we still have many areas experiencing backlog growth, though some remain stable or are declining. We haven't yet hit a peak in this segment and expect to see stability well into 2023, contingent on any unforeseen events like COVID flare-ups. Overall, we anticipate maintaining an elevated state for some time, with potential for better stabilization around mid-2023.

And I'd just add to that, you asked the question, Joseph, on what is normalized levels. It's a good question. We didn't track it very extensively pre-pandemic. But if I were just to guess and I'll also look at Rich, it's usually about a month's worth of turn, is how I think about it.

Yeah. And we are materially over that still.

No. Appreciate all the colors and then maybe just a quick follow-up on the Hyve business. It sounds like this quarter, the business is very strong, like, you guys highlighting record levels, but there seems to be broader concerns from the investment community around hyperscale spending moderating going forward and I think it's led by commentary from some of the component suppliers in memory and storage alike. Just given what you're seeing from your customers today, can you provide any color on what you're seeing relative to demand trends there going forward and are you concerned of a potential digestion period heading into 2023? Thanks.

Yeah. Maybe I'll start and then turn it over to Marshall. So first, just a reminder to everyone, we state this every opportunity we get. Hyve is a lumpy business. But we feel as if it always offers great growth attributes on an annualized basis. And so, as Marshall said in his prepared comments, this time the lumpiness was up more positively than we thought. So, we see good demand and candidly, I think we see demand consistent with our guide here as we look into Q4, which still is pretty good demand overall for that segment. So, I think that from a strategic perspective, we always talk about over the longer periods, hyperscale sort of segment being double-digit sort of growth attributes, and I know nothing that would cause me to think differently relative to that segment.

Yeah. Joseph, I would just add in regards to hyperscale infrastructure on the supply chain constraints. There is also a supply chain inefficiency on the data center availability and opening. So the hyperscalers are struggling to keep up with their capacity themselves. So, we do have quite a bit of product that is in queue, ready to be positioned and put into data center. So, it's not just the supply chain itself, but it's all the way through to getting the inventory into datacenters.

Yeah. If I could, just to kind of finish Marshall's thought, this inventory that he talks about in queue, we have hard orders for all of it. It's just the ebbs and flows of the construction of the datacenters.

No, makes sense. Appreciate all the color.

Hi. Thank you for taking my questions. Rich, based on your comments, it seems like demand remains robust. You mentioned ongoing demand in the PC business, the endpoint market, and over 20% growth in the Advanced Solutions sector. However, I'm trying to understand how this aligns with what we've heard from OEMs. Some have indicated a decline in both the consumer and commercial PC markets, as well as some emerging weakness in enterprise businesses. Can you help us bridge the gap between the strength you're experiencing and the concerns raised by OEMs? Is it possible that your success is due to market share gains or revenue synergies? How can we reconcile the differing perspectives from OEMs with your observations?

Yeah, Ruplu. Thanks for the question. First, I think it's important to highlight once again that we don't have a big reliance upon the consumer segment. And from our numbers perspective, the consumer segment is where things are being more deeply felt. Second, I think, once again here, we benefit from our portfolio. We have the privilege of serving the top-tier PC vendors in the market, and sometimes, those demands for product ebb and flow between them depending on their cycles, et cetera. So I think that, that serves us well. I know that Marshall has some more detailed comments he wants to make, but I just want to be clear that when we take a look at our Q3, both the endpoint and advanced segment had pretty significant growth and actually relative to the midpoint of our guide, the upside for us really came from that endpoint segment, which is PC ecosystem content, as well as Hyve as Marshall had talked about earlier. We look into Q4, we see an overall reasonably healthy environment as well. So, we really feel pretty comfortable relative to the execution in each of our segments as we move into Q4. But Marshall, I know that you have some particular ASP and unit volume information you want to share.

Yeah, Ruplu. On the PC ecosystem for our distribution network, it's not an exact science, but if we look at our Q3 results, volume was probably in the low-to-single digit growth rate and ASP was probably in the high-single to low double-digit growth rate. So, all in net-net, we grew in the PC ecosystem business.

And I think, Ruplu, what's going to happen through time is that those ASPs will probably start to abate or come down in the U.S., probably in the not too distant future. So, there will be some moderation there. Europe is a little bit more tricky to figure out from an ASP perspective. We all know that things might start to abate from an inflationary perspective, but you know the currency hockey stick weakening of the euro is sort of a second dimension that manifests itself in increased ASP. As we know that, that industry is pretty much a dollar-based industry, so, takes a lot more euro to buy sort of the PC category. So I think that, that ASP dynamic in Europe might have a bit longer of a life relative to what we might see in other jurisdictions.

Okay. Thanks for that, Rich. I appreciate all the details. Can I ask you, you had also talked about solutions aggregation and integration as a new opportunity for the combined company. When do you think that materializes? And is this like in the next 12 months or is this an opportunity that is longer term and what type of investments do you need to see the revenues, material revenues from that opportunity?

That's a great question. During our Investor Day, we discussed that we are building solutions aggregation from 2022 through 2024. We are making significant progress in integrating multi-vendor solutions into our cloud marketplaces. This occurs frequently, and we have also been developing a range of what we call click-to-run solutions, which are pre-configured solutions available on our cloud platform. This development certainly helps accelerate the growth of our overall cloud platform. Generally, the margin profile of aggregated solutions is better than that of individual product sales. This is a process we've been focused on from 2022, continuing into the future, and it is a crucial part of driving our cloud growth. As we have mentioned, by late 2024 or 2025, we anticipate moving into an orchestration model, and we are currently enhancing those platform capabilities. Regarding your final question, the necessary investments include resources, particularly engineering resources for qualifying these aggregated solutions, additional technical sales resources, and investment in the platform, which is already being systematically increased over time.

Okay. Great. Thanks for all the details. Appreciate it.

Hi. Thank you for taking my question. Sorry, if we could go back to guidance and look at it on a sequential basis using kind of our estimated historical, it seems like growth is slower than usual for the fourth quarter. Marshall, could you maybe give us kind of like what are the headwinds? What are your expectations for currency? Are you expecting kind of a step down in Hyve at the low end of the range? And then if I kind of interpret the comments on backlog, is it fair to assume that maybe 3Q benefited from PC backlog coming down, but in fourth quarter, you think overall backlog will stay flat? Just anything to kind of bridge us to the 2% growth in the fourth quarter?

Sure. I'll start and then let Rich help to touch on whatever you want plus backlog. So, if you do think about the sequential relationships, actually, we did have a strong Q3. And so that does make the compared Q4 a little bit more unusual. Typically, we'll see a 5% to 10% revenue growth rate, added 8% constant currency, is kind of right in the middle. So, I think that explains some of the relationships. If you think about the headwinds, we did call out FX continuing to be impacted by the euro, we're guiding at 1.01. It wasn't that long ago when we were at 1.18 or 1.19. So that continues to have some headwinds for us. And then, I did mention in the conversations around Hyve, when we do guide, we typically go towards the lower end of the plot of the Hyve outcome and the ranges. But with that said, we still expect year-on-year growth within the hyperscale infrastructure, high growth technology business, as well as solid growth in the distribution networks, whether it's Asia-PAC, Europe or Americas. Rich, do you want to add anything else?

No. Thank you, Marshall. It's quite comprehensive.

Thank you. Regarding your merger synergies, historically both companies have outperformed and generated more synergies than expected. Do you believe there is potential to increase the $200 million target? Additionally, with the macro environment weakening, how are you approaching your spending? Would you consider consolidating the ERP systems in Asia and Europe as a contingency plan if we face a recession? What are your thoughts on spending and synergies?

Yeah. I'll touch on synergies. So you're right, Ashley. We have typically overperformed our synergy target, not only earlier but higher. Right now, as you saw in our prepared remarks, we're at $140 million so that stepped up $10 million from the last time we spoke. We still are confident in the $200 million of synergies as we exit the second year. But I do also believe that as we get closer to this year end and kind of doing a bottoms-up thought for all of fiscal '23, we'll probably have a more informed conversation on what that outlook may be, but for now, the $200 million is a good number.

Yeah. On the back end on the ERP systems, we've got a lot of work to do. In the U.S. in particular now, we're in the middle of that migration from the legacy Tech Data ERP onto the CIS system. We are steadfastly focused on that. The plan was that we would maintain our ERP systems outside of the U.S. and then keep everybody, all hands on deck because we're going to have a combined $40 billion entity. We want to make sure we aren't distracted and get that done properly. And then sometime down the road, we will carry out an evaluation to determine whether there are future changes to the ERP or whether it makes sense the way we're aligned right now.

Okay. Thank you.

Thank you, Ashley. Have a great day.

Okay. Thanks. Good morning. I guess, I wanted to start on EMEA, since you said its strength in Europe as a reason for the mid-teens non-GAAP operating income growth in constant currency during the quarter and that's probably surprising to some people. So, maybe you could comment on the cadence of demand there and what you're seeing here at the end of September in the EMEA region? There's just so many macro headlines on recessionary fears and everything related to that. Just wondering what you're learning real time there, the cadence of demand through Q3 real time in September and what's embedded in your guidance for Q4 for Europe?

Sure. Adam, I'll begin and then Rich can add his thoughts. In Europe, we observed a month-on-month strengthening year-on-year, with continued robust performance in August. Our guidance reflects this confidence as we look ahead to Q4. It's somewhat unexpected to see such persistent strength and growth. Our European teams, like others globally, conduct thorough analyses and forecasts and are quite confident, considering the overall economic situation along with supply chain challenges, which contribute to our insights for Q4. Sure, Adam. First, it's a bit of a pleasant surprise. When we look at the entire channel, it experienced a mid to slightly higher single-digit growth rate overall. If I'm remembering correctly, we significantly exceeded that growth based on our visibility. Our business in Europe has strengthened, and as mentioned, we build our outlook from a granular country-to-country perspective. The overall assessment is a robust outlook for the fourth quarter. We are aware of the challenges in Europe highlighted in the news, but technology appears to be a solution driving efficiencies for many businesses. We often note that during tough times, IT growth outpaces GDP, and we believe consumption will remain above historical levels. The duration of this trend remains uncertain, but for now, we see a solid environment in the third quarter and expect it to continue into the fourth quarter.

Okay. As a follow-up, Marshall, regarding cash flow, which has been unpredictable since the merger, you mentioned an inventory build. I understand the role of the Hyve component, but you indicated that most of this build is tied to the distribution business. I'm trying to understand what made you confident in allowing inventory days to keep increasing in the core distribution business, especially since you have a more cautious outlook for future growth. Typically, we would expect a stronger forecast for growth as inventory days increase and for the timing of that to play out. Additionally, I want to touch on cash flow because it is crucial given your medium-term targets. Are there any structural factors you can discuss beyond the cyclical inventory days, particularly regarding payables and receivables? There seem to be various offsetting factors, and I'm curious if there are temporary advantages and how we should view the normalized structure and cash conversion cycle beyond inventory days. Let's start with the cyclical aspect of inventory and how the business plans to generate $1 billion in cash flow next year.

Yeah. Sure. I'll start and then Rich certainly chime in as you've got out of the comment or effect. We still expect to generate $1 billion in free cash flow in '23 assuming a stable supply chain environment, so that just want to make sure that you understand that. And then just going one level down or clicking into that, in Q3, our inventory did go up by over $1 billion as we said, both for distribution and Hyve, but it caused reasons, accounts payable offset that for the most part. As I said in my prepared comments too, Adam, inventory should and we expect this to translate to revenue and profit generation in Q4 and beyond. Obviously, there's volatility, supply chain, and there's some temporary effects and delays in our cash flow. Thinking back and just looking at our seasonality, we just finished our first year around the sun together and it does give us a sense of what cash days do. When we look at last year, we finished at $15 in cash days and now we're at $23, so up $8. What caused that? Basically, the split 50-50 between, we'll call it Hyve infrastructure and in distribution. We do think that, that starts to abate and unwind in Q4 and into '23, but at the end of the day, it really does come down to the overall certainty or volatility around supply chain and how that manifests itself into '23. Rich, anything else you want to add?

Yeah. So, Adam, I want to make sure everybody understands that it's not lost on us the importance of free cash flow and generating free cash flow. As I think about it, a big part of this has been due to the volatility, the ups and downs of the prior pandemic et cetera. And I actually went and carried out some analysis to take a look across our vendor base and look at what's happening with their inventories and largely speaking, they're elevated pretty materially as an aggregate group. That being said, I fundamentally believe that moving forward, we will find our way to our profile in cash days. We do start to, as I said earlier, see stability within the PC ecosystem so there is less erraticness and it might be a little bit bumpy in the AS space for the first couple of quarters of next year, but I think that we find a pretty great swing as we move through the year. So yes, I'd say correct, that they're elevated, but we have all the confidence that we can manage to the profile once we get some of these challenges around the supply chain settlement.

Thank you.

Yes, lot of questions on cost synergies. I'm curious, are you seeing any meaningful revenue synergies? Just what are your thoughts there?

We definitely see significant opportunities for revenue synergies. As we transition to a unified ERP system, these opportunities become much easier to implement. This is because we can leverage vendors that one side had access to while the other did not. I believe that starting early next year, we'll see an increase in these synergies, and throughout the year, we'll be able to take greater advantage of them as we integrate fully into the ERP system. We'll complete all necessary training, not only for the ERP but also for cross-training with the vendors unique to each side. All of this will support our activities and growth in fiscal year '23, and we are optimistic about the opportunities that lie ahead.

In the midst of a significant integration, if we enter a substantial recession, should we anticipate being opportunistic with some smaller deals?

Yeah, I would say, regardless of the economic environment, I think we've been pretty steady in our ability and appetite to look at deals that are appropriate and value-added, whether it's a footprint expansion or capability expansion, but Rich?

No. I think that's right. I mean, we are frequently around the table with our strategic teams looking at the pipeline, if you will, and we believe we have the balance sheet if we see the right set of assets to pursue them. I think that although the market would articulate that there is a buying opportunity just based on the way multiples are rolling, I think people are still of the realization of, hey, I was here and I'm still worth where I was, so some of that test of time we'll have to pass and again, I think that our company will continue to be acquisitive as the two companies previously have always been and it's a matter of just finding the right assets and being patient to make sure that you find things which are complementary to your business.

Thanks guys.

Yeah. Good morning, guys. I'm actually on for Ananda. So, my question is, are you guys seeing any impact on pricing broadly and if prices were to come down, would you see any impact on the margins?

I’ll start by stating that we are currently experiencing a situation of either price stability or increases in average selling prices. Historically, we have seen fluctuations in these trends over time, and while we cannot predict exactly when they will change, I believe prices will eventually either stabilize or start to decrease. If prices begin to decline, we have the chance to maintain our margin profile because we acquire inventory at the rates that lenders provide us through forward contracts, which typically allows us to sustain our overall margin. Marshall mentioned that in previous rising price environments, we have seen an approximate benefit of around 10 basis points; however, this growth is beginning to slow as activity decreases, indicating a bit of stabilization. As we look ahead, we anticipate that our business's margin profile will remain fairly stable, regardless of whether prices go up or down.

Thank you for that. As a quick follow-up, can you share your insights on which key product areas might be experiencing softness or strength, and could you provide some information by geography as well?

So, I'll start with this. I mean, we in Q3 had seen uniform strength across all of our major product categories, basically in every region. So there wasn't anything that surprised, if you will to the downside, which frankly, it might be a bit unusual. And as we had I think commented earlier, if you think about our adjusted revenue of 15% in Q3 and the midpoint of our guide in Q4 being sort of 8.5-ish overall, there isn't anything that's really falling out, but rather, I think it's a fairly uniform view of revenue growing in each of the categories going forward. Maybe a little bit less growth in the Hyve business unit, but the other ones are pretty good. I mean, high-single digits is pretty good in my book. So, there isn't a particular area that I would say that we would report in Q3 as being weak.

Awesome. Thanks for that.

Thank you so much. We know that from the past, the Hyve business has had some big builds and then some inventory digestion or some unpredictable linearity in it. As you sit here now, running your company and look at the demand from it, is that business at an equilibrium point or I know it was just a big quarter, is there some inventory digestion that has to occur from where you sit and see things?

It continues to be somewhat inconsistent, but if we look at it from a broader perspective, both revenue and operating income have been growing on a trailing 12-month basis or year-on-year. We previously mentioned that our hyperscale data center customers are facing some capacity constraints, as their demand exceeds their ability to absorb it. To address this, we keep our customized racks for these customers in a ready-to-go position, which means they are held as inventory on our books until accepted, at which point it translates into revenue. This has accumulated over the first three quarters of this fiscal year. As normalcy returns in 2023, we might observe that this inventory starts to decrease. And just to finish that thought, the nature of the business is that the inventory for the hyperscale customers is profitable for us to hold, and it generates revenue once they are ready to utilize it.

Okay. That makes sense. And then switching gears to the next topic.

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