Good morning, my name is Devin and I will be your conference operator today. I would like to welcome everyone to the TD SYNNEX Fourth 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 future fiscal periods. 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. This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission. I will now turn the call over to Rich. Rich?

Thank you, Liz. Good morning, everyone, and thanks for joining us for our first earnings call of the new calendar year. We are pleased with our strong fiscal Q4 results, closing out what was truly a phenomenal year for TD SYNNEX. We began the year with a lot on our to-do list relative to the merger and integration activities and ended the year having met or exceeded our objectives. As I've mentioned along the way, this merger has gone very well. Today, TD SYNNEX is a $62 billion company with over 23,000 co-workers, serving 150,000 customers across 100 countries. I judge the success of this merger from a few different perspectives. First, from the point of view of our customers and vendor partners, our teams continued to provide consistent and uninterrupted service to our partners post-merger. And the financial results we delivered are confirmation of the strong value proposition that we are delivering to the market. Next, from the perspective of our co-workers, we have largely completed our initiatives focused on harmonization of benefits and compensation and recently undertook our first TD SYNNEX global coworkers survey, which indicated a high level of engagement, an accomplishment that can be hard to achieve in the first year of a large merger. Finally, looking at the merger through the lens of our shareholders, we exceeded the fiscal '22 financial targets we set. For fiscal '22, we achieved revenue of $62.3 billion, up 9% year-over-year, adjusting for foreign exchange impacts and merger-related accounting policy alignment, which was above the 6% to 8% range we anticipated. Non-GAAP operating margin was 2.8%, also above the targeted range of 2.5% to 2.7%. And we delivered non-GAAP earnings per share of $11.94, $0.29 above the high-end of our guidance range for FY'22 on our September earnings call and $0.74 above the high-end of the original guidance range provided in January of last year, despite higher-than-forecasted foreign exchange and interest expense headwinds. Finally, we returned $240 million to shareholders via dividends and share repurchases during the fiscal year, representing progress towards our medium-term capital allocation goals. With regard to the merger integration, we set the ambitious goal of achieving $100 million in cost synergies by the end of year one and we overachieved on that goal by 45%, realizing $145 million in fiscal '22. One of the largest integration projects is the consolidation of Tech Data's Americas ERP systems into CIS, the legacy SYNNEX ERP platform. We have made excellent progress on the Canadian migration which we transitioned first and our U.S. transition is well underway having recently completed another major milestone. I'm happy to report that more than 45% of the legacy Tech Data U.S. SAP business has now moved over to CIS and is executing well. We will continue transitioning the remainder of the business throughout the fiscal year and are on track with our plan to largely be complete within two years of the merger close date. Let me now talk about the trends we saw in fiscal Q4 from a market perspective. In short, we experienced a continuation of many of the themes that have played out over the past several quarters. Advanced Solutions continued to experience robust growth in the quarter above expectations, with strength in servers, networking, and infrastructure. Endpoint Solutions gross revenue was modestly down year-over-year as the PC market and related peripherals continued to see a normalization from last year's pandemic-related highs. Several areas of Endpoint Solutions saw solid growth including printers and mobile phones. Our services in specialized solution businesses also experienced solid growth in the quarter. Rounding out our portfolio, our hyperscale infrastructure-focused business Hyve delivered a record quarter with continued outsized robust revenue and profitability growth as we continue to fulfill strong demand from our CSP customers. We also experienced operating profit above expectations from the Hyve business, which Marshall will provide additional color on in a few minutes. From a regional perspective, all three regions delivered strong revenue growth on a constant currency basis, with operating margin expansion on a global basis. We continue to accelerate our revenue in high-growth technologies as the markets we are targeting grew faster than the market projections we provided at our March Investor Day. We achieved greater than a 20% year-over-year growth in gross billings for the quarter and for the full year 2022 in these areas which include cloud, security, data analytics and hyperscale infrastructure. This growth was in excess of our expectation and high-growth technologies represented $16 billion of our total gross billings in fiscal 2022, up from $13 billion in fiscal 2021. We saw improvement in the supply chain during the quarter with a meaningful reduction in our backlog. Despite decreases in both Endpoint Solutions and Advanced Solutions, our total backlog level remains elevated when compared to historical norms. Our customers are living the reality of a more uncertain and volatile macroeconomic environment with inflation, higher interest rates, and a competitive market for talent. This need for talent is particularly relevant in the IT sector, where the increasingly complex technology landscape and ongoing shift to cloud-based multi-vendor solutions require an even greater level of knowledge and experience to serve the needs of the market. For these reasons and others, the value proposition that TD SYNNEX brings to the market resonates with our customers. On the vendor side, our utility has a variable-cost route-to-market also becomes more valuable in times of economic uncertainty when vendors desire to lower their cost. During the quarter, we were privileged to receive further recognition from our partner community, including being named the 2022 North America Partner of the Year by CDW; the 2022 Global Distributor of the Year by Palo Alto Networks; the EMEA Distributor Partner of the Year by AWS and Lenovo; and the Americas Distributor of the Year by Nutanix. We also continued to progress on our ESG journey and expect to publish our first corporate citizenship report this quarter. In addition, we recently received a grade of awareness from the Carbon Disclosure Project, a strong achievement in our first year of combined reporting. We look forward to continuing to share updates on our continued progress in this space. As we think about fiscal 2023, the critical nature of technology as an enabler of customer experiences and co-worker collaboration, keeper of cyber safety and a tool to realize cost optimization and efficiency cannot be underestimated. And for these reasons, we believe IT spending will continue to outpace GDP growth in 2023. We are prepared and well equipped to continue executing on our growth strategy and are targeting above-market growth rates as we leverage our industry-leading portfolio of products and services and broad global footprint to bring world-class service and innovation to the market. We enter fiscal '23 even more confident in our strategy being capable of capitalizing on the trends shaping the IT industry and the opportunities ahead. Lastly, I want to thank our 23,000 plus coworkers around the world for their exceptional efforts in making TD SYNNEX's first fiscal year a great success. I'll now pass it over to Marshall, who will share more details about our performance and outlook.

Thanks, Rich, and thanks to everyone for joining us today. Our financial accomplishments in fiscal 2022 were significant, with adjusted year-over-year revenue growth of 9%, surpassing the high end of 6% to 8% target we provided earlier this year. Our operating margin performance also came in above the high end of our expectations at 2.8% for the fiscal year, representing a 14% improvement over the prior year and above our 2.5% to 2.7% target. These results demonstrate the power and reach of our business model and the strong value proposition that TD SYNNEX is bringing to the market. Please note that comparisons versus the prior year full-fiscal year are on an as-combined basis, which assumes the merger occurred at the beginning of the period. Moving now to our fiscal fourth-quarter results. Worldwide revenue for fiscal Q4 was a record $16.2 billion, up 4% year-over-year and up 11% in constant currency. When normalized for the revenue recognition policy alignment relating to the merger of $500 million, the year-over-year growth was 14%. Currency impacts, primarily driven by the Euro devaluation, accounted for approximately $1 billion headwind year-over-year in fiscal Q4. Revenue was at or above expectations across all regions and in both Endpoint Solutions and Advanced Solutions in fiscal Q4. Additionally, Hyve delivered strong results in Q4 driven by better-than-expected demand and timing-related margin recoveries related to services performed in prior quarters. Non-GAAP gross profit had a record quarter of $1.08 billion, our first quarter greater than $1 billion, and non-GAAP gross margin at 6.63%, up 44 basis points year-over-year. The improvement in gross margin was driven by a mix shift to high-growth technologies as well as the Hyve margin recoveries which approximated 25 basis points. Total adjusted SG&A expense was $582 million, representing 3.6% of revenue. Non-GAAP operating income was $496 million, up $88 million or 21.5% year-over-year, and non-GAAP operating margin was 3.05%, up 44 basis points year-over-year, driven by revenue growth, Hyve performance, the aforementioned margin recovery, cost discipline, and merger synergy execution. On a constant currency basis, non-GAAP operating income increased 26% year-over-year. Excluding margin recovery in Hyve, the year-over-year increase was 16%. Q4 non-GAAP interest expense and finance charges were $78 million, $18 million above our outlook due to higher borrowings and interest rates. For fiscal Q4, the non-GAAP effective tax rate was approximately 21%, below the forecasted 24% rate due to the mix of locations where earnings were achieved. Total non-GAAP net income was $330 million, and non-GAAP diluted EPS was $3.44, above our prior guidance of $2.70 to $3.10. Note that the previously mentioned Hyve margin recoveries contributed approximately $0.33 per share of non-GAAP diluted EPS for the quarter. Removing these, non-GAAP EPS would have been $3.11, slightly above the high end of our prior guidance range, despite headwinds from elevated interest expense. Now turning to the balance sheet. We ended the quarter with cash and cash equivalents of $523 million and debt of $4.1 billion. Our gross leverage ratio was 2.3 times and net leverage was 2 times, in line with our investment-grade profile and approaching our previously communicated target of 2 times gross leverage ratio. Accounts receivable totaled $9.4 billion, up from $8.1 billion in the prior quarter, and inventories totaled $9.1 billion, down $689 million or 7% from the prior quarter. Net working capital at the end of the fourth quarter was $3.8 billion, a decrease of approximately $35 million from Q3. The cash conversion cycle for the fourth quarter was 23 days, flat from Q3, and cash from operations in the quarter was $302 million. From a shareholder return perspective for the current quarter, our Board of Directors has approved a cash dividend of $0.35 per common share, which represents a 70% increase from the prior quarter. The dividend is payable on January 27, 2023, to stockholders of record as of the close of business on January 20, 2023. For the full fiscal year 2022, we returned $115 million to shareholders via dividends, reflecting a 1.2% dividend yield. We also continued executing on our share repurchase program in the quarter, repurchasing $42 million of our stock and approximately $125 million in total during fiscal '22, which exceeded our $100 million target for the year. Earlier today, we announced that our Board of Directors approved a new $1 billion share repurchase authorization, which expires in January 2026 and replaces our prior authorization. We expect to increase our share repurchases year-over-year in fiscal '23 as we progress towards our medium-term capital allocation target. Before I move to discussing our financial outlook for Q1, I wanted to provide an update on our merger-related cost synergies. As Rich had mentioned, the teams did a phenomenal job of identifying, tracking and realizing synergy opportunities in 2022, allowing us to achieve our year-one target more quickly than anticipated. We achieved $145 million in cost synergies through fiscal Q4 and continue to expect to achieve an additional $35 million in fiscal '23, with much of the savings coming from the completion of our ERP system migration, which is on track for the second half of 2023. Once we are fully integrated on one ERP system for the Americas, we expect to continue to find optimization opportunities and generate revenue synergies. Now moving to our outlook for fiscal Q1. We expect total revenue to be in the range of $15.2 billion to $16.2 billion, which equates to year-over-year growth of around 5% on a constant-currency basis at the midpoint. This outlook reflects the impact of year-over-year foreign exchange headwinds of approximately $500 million and interest rate movements of $33 million. Our guidance is based on a Euro-to-Dollar exchange of 1.05. Non-GAAP net income is expected to be in the range of $248 million to $287 million and non-GAAP diluted EPS is expected to be in the range of $2.60 to $3.00 per diluted share. Based on weighted-average shares outstanding of approximately 94.8 million. Interest expense for Q1 is expected to be approximately $73 million and we expect the tax rate to be approximately 24%. As we enter 2023, I wanted to provide a few modeling points to assist you. As Rich mentioned, we believe IT spending will continue to outpace GDP growth in 2023 and estimate our revenue growth to be 3% to 5% on a reported basis. From an operating margin perspective for the year, we expect a range of 2.6% to 2.8%, with improvements in distribution margins, offset by lower year-over-year contribution from Hyve. Hyve working capital is expected to improve throughout the year, which is expected to reduce the recovery of carrying costs associated with these programs. While it is a challenge to forecast interest expense with precision in the current rate environment, we would anticipate trending toward our guidance for fiscal Q1 at $73 million per quarter, at least through the first half of fiscal year, and then slightly declining in the second half. We expect our non-GAAP corporate tax rate to be approximately 24%. From a cash flow perspective, we continue to expect to generate in excess of $1 billion in free cash flow in fiscal '23 and anticipate working capital to be a source of cash this year despite topline growth and supply chain constraints continuing to ease throughout the year and our inventory position improves. We are committed to progressing towards a medium-term capital allocation framework, targeting approximately 50% of free cash flow returned to shareholders via dividends and share repurchases, as best demonstrated by today's announcement with the other 50% targeted to reinvestment in our business and M&A. In closing, I'd like to thank all our co-workers for their focus and hard work in fiscal 2022, helping to build a cohesive company dedicated to providing best-in-class support and partnership to our customers and vendors. I will now turn the call back over to the operator to begin the Q&A session.

Hi, thanks for taking my questions and congrats on the strong quarter. Rich, the PC OEMs have talked about elevated channel inventory levels. Can you talk about how you see PC channel inventory trending both commercial as well as consumer, and when do you think that gets worked off? Are you seeing additional promotional activity and rebates from vendors? And specifically, what have you factored in for TD SYNNEX PC revenue growth in fiscal '23?

Well, good morning, Ruplu, and thank you for your question and Happy New Year to all of you. So first, I'll comment that when we think about our inventory, it might be marginally ahead of our profile, but nothing out of the bandwidth of what I would call the norm. When we look at the backlog for the PC ecosystem category, I would say that it's generally at profile, so consistent with the serviceability requirements that we had seen in the presort of COVID time. Yes, there is some traditional activity, pre-COVID activity in terms of promotions and rebates, etc., that are underway, but I kind of think about it as returning to sort of the pre-COVID, if you will, sort of ebb and flow of the business.

Okay, thanks for that. For my next question, maybe I'll ask a question on regional performance. It looks like in 4Q on a constant currency basis you saw the strongest growth in Asia, followed by Europe and then Americas. As we look to fiscal 1Q, should we expect a different relative performance by region, given we have the Chinese New Year holidays coming up? And when I look at Europe, margins are the lowest amongst the three regions. Is there something structural that causes Europe margins to be lower and what can you do to improve margins there?

Hi, Ruplu, this is Marshall. So your question regarding Q1, even though we're not forecasting on a regional basis, we still expect to see on a constant currency basis, modest growth in Q1. And in terms of Europe and the question regarding being structural, we still believe that we're going to have a good quarter for Europe in Q1.

Yes, as it relates to Europe margin profile, if I could, there are two callouts. First, traditionally the margin profile in Europe has been lower, there is more cost of doing business in Europe related to the country complexity. The second thing is the profile of the business, where we, for example, have mobile phone distribution which tends to have a bit of a lower margin profile. However, those areas with lower margins have great working capital attributes. So, the return on invested capital on those businesses that have lower margin profiles is attractive.

Okay, thanks for all the details there. If I can just squeeze one more in. I think for fiscal '23 you suggested a 3% to 5% reported revenue growth. As we look at your high-growth technologies and specifically cloud, how levered is that to overall cloud CapEx spend? So if cloud CapEx is still strong, but lower in fiscal '23 versus '22, do you think that TD SYNNEX cloud revenues can still grow mid-teens as you've done in the past? So any thoughts on cloud revenues would be great. Thank you so much.

Yes, I'll start Ruplu and then Rich can chime in. We still feel that the high-growth technology, cloud space industry growth will be mid-teens. And that's an industry comment. I think the various services and products within that segment. We will reflect that as I said in my prepared remarks in the Hyve area, we'll see more modest growth in fiscal '23, but in terms of our overall longer-term thoughts on hyper-technologies in cloud, we think it's going to be meaningfully above we'll call it the average growth rate for the business. Just speaking about your question regarding CapEx, just as a reminder, CapEx is one correlation, but it's not the only correlation to the services that we provide to our hyperscale customers.

Thanks for all the detail. Thank you.

Good morning, everyone, and thank you for the questions. My first question is regarding your partner OEMs who have mentioned that decision-making is taking longer and that there are tighter budgets among end-customers, leading to caution in the IT spending environment. Are you observing a similar situation with your end-customers? If so, what factors contribute to your optimism about the IT spending outlook and your growth expectations for fiscal '23? I also have a follow-up. Thank you.

Sure, Joe, this is Rich. Let me address that. Reflecting on the latter half of last year, our reported growth rates for both the third and fourth quarters, when adjusted for constant currency and accounting differences from the merger, were in the mid-teens, double-digit range. In contrast, Marshall's comments suggest our preliminary thoughts for the upcoming year are around a 3% to 5% growth. Therefore, there seems to be a significant shift in that overall trajectory. We analyze various sources when planning our business, and the one that has historically correlated best with our performance is GDP. Our business is primarily focused in the Americas and Europe, where GDP is nearly flat—having seen slight increases in the Americas but slight decreases in Europe. Over the past 15 years, we've outpaced GDP growth by about three points. This perspective helps us consider possible outcomes for our business in the upcoming year, and we continually monitor market signals related to GDP. It's been somewhat volatile, so we keep an eye on that as broader macroeconomic conditions develop.

Got it. I appreciate the information. For my second question, looking at your revenue guidance for the February quarter, it aligns with what you expected for the November quarter, but the earnings guidance is slightly weaker. From your comments, it seems this is mainly due to interest rate challenges and some foreign exchange impacts. I just want to confirm that you aren't facing any other significant pressures in areas like gross margins. Specifically, are you anticipating gross margins to improve in the next quarter as you continue to benefit from the mix shift observed this quarter?

Hi, Joe. So as you think about '22, there was some benefit to the pricing environment, we call that out 5 to 10 basis points on gross margin. I would expect that to abate or normalize in '23 and I think the other influencing factor about Q1, it's just the mix-shift as we talked about earlier. Distribution, we expect to continue to grow well, hyper technologies, specific to the hyperscale Hyve business will decline slightly. So the mix itself is probably the last piece of trying to triangulate the margin profile for Q1.

Yes, if I could just add on to the comments. You know, the fundamentals of the execution of our businesses are quite good. And so I kind of think of three buckets relating to I think you called the softer guide from an earnings perspective. Three points, number one is interest, by far the biggest, a year-to-year. Then second is, there is some currency overhang. Presuming a more stable Euro, that sort of a base as we move into the future. You know that exchange discussions. And then the third is the mix in particular, lesser growth in Hyve in that overall three to five guide and it's those three factors. But we're very, very pleased with the fundamentals and the profiles of our businesses.

Hi, this is Sameer Kalucha calling in for Ashish Sabadra. Thanks for taking my question. I was wondering if you can provide some more color on the inventory normalization. Do you think there is any pull forward of demand over here or is it just supply-chain normalization happening as I've heard from partners? And when do you expect the supply chain on the Advanced Solutions side to normalize?

Yes, Sameer. Thank you for your question. So a couple of things, number one is, hopefully, I'm going to answer your questions here, but number one is, certainly, you know, the reduction of the backlog benefited our overall sales growth, that 14% when normalized for constant currency as well as the accounting adjustment. When we think about the backlog, to give you a little bit more insight as I said earlier, the backlog for the PC ecosystem businesses generally are at profile and serviceability levels that we had seen pre-COVID. We're still elevated in Advanced Solutions and my crystal ball says with maybe some minor exceptions that by the time we get to the mid-year point that we should probably make our way near profile and have sort of pre-COVID serviceability for the majority of the Advanced Solutions categories. So I do see in Q1 and Q2 a bit more of a backlog run-off in that Advanced Solutions category and hopefully by the mid of the year will be at profile.

Got it, thank you. And just a quick follow-up. We all hear from partners and industry players saying cloud spending is being more rationalized and companies are looking at their spends more carefully than they have been in earlier times. How do you see that slowdown in Hyve staying out? Do you think it's a very short-term in one or two quarters kind of thing? Or do you think it's a little bit something more structural to look at in the mid-term, when companies try to re-architect their applications, which will likely take longer. So any thoughts you can provide on that?

Sure, Sameer. I'll start first. We're used to pencil sharpening. I mean it's part of the business of always trying to create an event ways of providing more value. So, whether it's distribution, whether it's high growth, those areas over time will feel pressure from just the competitive environment from a pricing environment, but I think the majority of what we're seeing in fiscal '23 as it relates to cloud service providers and their thoughts is, how can we continue to provide more end-to-end solutions beyond just data center fulfillment. But we're seeing that breadth of portfolio play out. And it's upon us to continue to create new value that creates more premium and ultimately more margin for us. Rich, I think, anything else you want to add to that?

Yes, just two thoughts and I want to break this between core distribution and Hyve. First, on core distribution, remember that our client base is more towards small, medium-sized clients overall. When new technology gets deployed, like cloud, it's very, very much enterprise first and then makes its way down through the rest of the customer as offerings become more efficiently packaged. So, my guess is that if we look at the customer segmentation around cloud, you'll see that the growth rates are more robust in the SMB space because of the evolution of technology, maybe versus the enterprise. So that, that sort of relative to the total picture should be beneficial for us. As it relates to Hyve and that business as you know it services the Cloud Service Providers. I'd share two thoughts with you. Number one is I do believe that the long-term view for hyperscale will grow at mid-teens, if you will. And then just recall within our portfolio, we have the opportunity for customer expansion. And we're feeling good about our customer prospects, if you will, as we move through time and really taking advantage, if you will, of expanding our customer portfolio.

Got it. Thank you.

Thank you. Can you go over a little more detail about the Hyve profitability changes, and was it purchasing timing, true-up? And why is it sustainable? Or just why the volatility there and the profitability? Thank you.

Hi, Jim, it's Marshall. Yes, as we disclosed or discussed in our prepared comments, quite often within Hyve, and we do this in distribution as well, we have programs that we performed throughout any given cycle or year for which once we perform the service, the cost plus margin gets recovered. And when we close those out or do the refinement review, we tend to get some final settlements or final margin associated with those programs. So we wanted to call that out because it was meaningful in Q4. It happens in distribution as well as we're working with partners and customers and refining and making sure that the margins that we agreed to receive are achieved and recognized. So it just isn't as visible. We wanted to demonstrate that that was part of the strength in Q4. It wasn't the only reason why we outperformed, but it was one of those. And then, Jim, as I think about '23, Hyve, we expect will continue to perform well. The strong '22 is just a tough compare and the margin profile itself was very, very exceptional for '22.

Yes, Jim, I would like to provide more clarity. When considering the overperformance relative to the midpoint of our guidance, there are a few points to highlight. First, there are two components to Hyve: the margin recovery, which Marshall previously discussed, and the overall strong performance of the base business. We often mention the variability within our Hyve business. Additionally, we exceeded our expectations in core distribution. Finally, factors such as the significant overperformance in Hyve, the recovery of Hyve margins, and the reduction in interest expenses contributed to our results.

Okay. Earlier during the Q&A, you mentioned the PC market. I'm curious about the mobile phone market, particularly regarding any supply disruptions. How would you assess the demand for mobile phones and the supply available in the channels based on your observations?

Yes. So to make sure everybody understands, we have mobile phone distribution in Europe only. The channel dynamics of Europe are different than they are within North America. So it's sort of in that theater. We saw very good demand for mobile phones. I would say that, yes, we tactically have seen some issues relative to the volatility out of some of the Asian markets, but we fully anticipate that supply to catch up really rapidly.

Thank you. As you look at 2023, could you discuss the main areas of growth you anticipate? I'm interested in your thoughts on both end demand and backlog fulfillment. You mentioned strength in printers during the call, which I suspect is partly due to catching up on backlog from the pandemic. Could you provide details on specific product categories that we should monitor as we look into 2023? Thank you.

Thank you, Shannon. I want to elaborate further. Last year, we indicated our expectation for a moderating PC market in the first half of the year and a strong data center market in the second half. The year unfolded as we anticipated from a category perspective. In the first half of this year, we expect that the PC segment will continue to face challenges, as projected by most vendors, with an anticipated recovery in the latter half. You're likely aware of the dynamics in the PC market, including shifts in operating systems, the demand for more premium devices due to changes in work profiles, and a decrease in the useful life of laptops compared to desktops. All these factors seem to align with our expectations. Therefore, we anticipate a slow PC market in the first half, with potential opportunities emerging later in the year. Additionally, we expect to manage backlog in our Advanced Solutions segment in the first half, with a more moderate performance in the second half. These are the key themes we foresee for this year. However, we'll need to adjust based on economic conditions as the year progresses.

Thank you. Can you discuss the shift from transactional models to devices and service infrastructure as a service? It seems that soon no one will own anything, and there's a transition from purchasing capital expenditures to operating expenditures. How are you observing this change? Do you think it's more driven by the company or by customer demand? Additionally, how should we consider its impact on your profit and loss over time? Thank you.

Sure. Let me start by discussing infrastructure as a service. We view it as significant in terms of development. We have the traditional Infrastructure as a Service and Platform as a Service, which are essential components of our business. Additionally, we recognize the growth potential in on-prem as a service and infrastructure, and we are currently involved in numerous contracts in that area. I see this sector continuing to develop and expand. While we also offer Device-as-a-Service, discussions about that started around five years ago, and we haven't seen the expected growth or monetization from it. Currently, we are engaging in more niche activities related to that. We are collaborating with vendors to see if the potential will be realized, but I must say that right now, the infrastructure segment shows more momentum compared to Device-as-a-Service.

Great. And then my last question is on cash flow. Is there anything, maybe Marshall, that you can do regarding working capital for 2023 besides reducing inventory levels to generate additional cash flow?

Shannon, if we think about '23 and the comments we made around cash flow being at $1 billion plus, we certainly understand that earnings itself will be a big component of that. We certainly expect that the inventory decline due to supply chain constraints will be a benefit. And then the last piece is we do also expect us to become more efficient in our working capital management. One of the things just to remind everyone is that in many parts of the U.S., we still have duplicative warehouse systems. And so with that comes some inefficiencies that as we integrate into one ERP, some of that goodness will be felt in these working capital efficiency comments I made.

Yes, Shannon, I see the inventory situation as a major focus. If we apply the 80-20 or 90-10 principle, we can interpret it that way. There are additional opportunities for working capital efficiency, but the inventory remains the primary concern.

Good morning, guys. Just circling back to Hyve, I just want to make sure I understand the margin benefit you got in the fourth quarter. Is this really just more of a timing difference, that recovery from the third quarter, which had probably a lower margin on Hyve business than we expected, just kind of offsetting, but for the full year, you're exactly where you'd expect it to be?

Yes, Keith, it's more timing within the year. But the first piece was the strong outperformance on Hyve in Q4. So revenue was better than expected and from that came better expected margins.

Great. Appreciate that. Great. Appreciate that. And then, Marshall, interest rates, I believe, obviously, are still continuing to go up, especially if you listen to the Fed. How are you thinking in terms of the interest rate for the entire year? I'm assuming your guidance here is based on where interest rates are today. But assuming they go up, does that change, I guess, your target for your leverage and how you think about prioritizing the payment of down of debt?

Yes, Keith. We are anticipating another 50 basis points increase in Q1. We hope that estimate turns out to be too high and that it will be lower, but we included that in our guidance of $73 million for Q1. I believe it will remain around that level for Q2. However, due to the cash flow benefits and working capital efficiencies we discussed, I expect it to decrease somewhat in the second half of the year. It will still be elevated and present a year-on-year challenge.

Okay. I appreciate that. And then if I can sneak one more in here. Obviously, the working down the backlog has been a benefit here for you. But as you're thinking about the first quarter, it sounds like order flow is exactly where you'd expect it to be for where we're at today, and that gives you confidence you have in your guidance?

Yes. There's nothing that's materially different than the order flow than what we were anticipating with the guidance. Obviously, it's early in the quarter, but that's sort of our view.

Can you hear me?

Yes, we can hear you now.

Okay. Yes. First one, I wanted to just clarify with Marshall, on the fiscal '23 revenue guidance, you said 3% to 5% reported. What is that in FX and accounting adjustments of the adjusted growth?

Yes, Adam, at least for Q1, it's as adjusted, constant currency about 5%. It's difficult to figure out where we think FX will go. Right now, it's probably going to end up being somewhat of a push because we're lapping a declining euro year-on-year. So as we progress through this year at $105 million, I think it will end up being somewhat flat, plus or minus $200 million or $300 million in quarter two, three and four.

Yes. And then the adjustments are completely behind us now.

All right. Good to know, Rich. On that Q1 outlook, that 5% growth in constant currency. I looked at the last year, I think that like-for-like comparison was about 6%. So looking at a similar growth rate at this time last year, but the environment seems a lot worse from a PC perspective, in particular. Maybe you could just give us any confidence that you have, especially talk about how you're feeling here relative to that plan based on what you're seeing here on January 10.

Okay. A few points to consider. First, regarding Q4, our Endpoint Solutions segment experienced a slight year-on-year decline. As we look toward the first quarter, I want to share some insights. Our forecasting process is built from the ground up, moving from country to region to global levels, which gives us clear visibility. Typically, our teams have a good understanding of the local situations. However, the current environment is more volatile than usual, and we are certainly paying attention to that. As of January 10, I would summarize our outlook as a slight decline in the PC segment and our Endpoint Solutions segment, alongside growth in the Advanced Solutions segment and contributions from specialized businesses.

Got it. And just the last one, Rich. You mentioned revenue synergy upon completion of Americas ERP. Just an early look at any sort of timing, ballpark quantification of this do you think that's going to come from vendors or customers? What do we have to look forward to in terms of revenue synergy when that materializes?

Yes. So first of all, in our prepared comments, we talked about moving over 45% of legacy Tech Data SAP onto CIS. So in the rounding, roughly two-thirds to 70% of our business now is on the strategic CIS platform in the Americas. So it's a good chunk that's now in there. We have begun Adam to see some of the vendors which were complementary to one side or the other start to take off in those sales lanes, if you will. We think of it as sort of a build, which will grow and grow as we move throughout the year. But we aren't prepared to comment relative to what the quantification of that is. And we're in a way to past a couple more metrics and/or milestones before we provide that visibility. But right now, I kind of view it as the sales teams, as I said, we see real transactions occurring, are getting up to speed with regard to product details, sales plans, etc. And we'll see how that goes moving forward.

Thank you for taking the questions. Happy New Year. I have a couple of inquiries. What is the outlook for the mix this year? To put it simply, the revenue guidance for Q1 aligns well with expectations, while the EPS guidance is slightly lower. Marshall, it seems that interest rates play a part in that. What are the other factors, or do you think expectations were just set too high?

When you compare Q1 to Q1 for us, it's $33 million higher for interest expense. And then the FX impact is about $500 million, which is $0.10 to $0.12. So those two largely contribute to, at least the compare and the discussion year-on-year. And then when we think about our thoughts on mix outlook for '23, distribution, we expect will continue to show momentum. And we think that the majority of high-growth technology will continue to show momentum with the commentary we had around the hyperscale infrastructure/Hyve, just having a real tough compare to '22. But still, we expect Hyve to grow. But when you take those into consideration, the mix plays out the way we guided for Q1.

All right. That's super helpful. And then are you guys thinking about getting active on M&A again? And I guess where an M&A kind of in the stack would you get active like tuck-in versus sort of medium-sized? I'm assuming you wouldn't do anything big because of the debt and we are in the integration with each other. But where in M&A will you get active this year?

Yes. Ananda, thanks for the question. As you had stated a transaction that the size of the merger of the company is not necessarily on the radar or something that I would forecast. But as is usually the case, we're always prospecting and have a pipeline around M&A and predominantly looking to targets that would allow us to accelerate our strategy. And so they come in sort of two categories. The first one being the traditional one, so I won't spend a lot of time explaining that. Then we also are very interested in accelerating the capabilities in our cloud platform. And if we find the right IP investment that would allow us to accomplish that, we would consider that along the way. And then as it relates to our interest strategically, obviously, Europe is less consolidated. Asia Pacific is even less consolidated. So something were to appear in those theaters, they would be of interest. So that's how we think about the M&A, pretty consistent with what we talked about previously.

Thanks, and good morning, everyone. Just a couple of questions for me. One, just on the pricing environment. Last year, we saw price increases across all your hardware product categories, including Advanced Solutions and PCs. We're hearing about pricing pressure on PCs, particularly as memory and other component costs come through. What's your take there? And how does that flow through in terms of your top line or any impact on your business?

Yes, Matt, thanks for the question. So with the overall supply chain profile sort of returning to pre-COVID levels for the PC ecosystem, I would suggest that we're going to see those dynamics in pricing sort of return to pre-COVID levels. As someone had mentioned earlier, I believe that there's ample supply in PC. And to the extent there's shorts, some longs, that's going to dictate what will happen in the overall pricing environment for that PC ecosystem category, if you will, going forward. My view is that there may be some, but a bit more limited pricing activity within Advanced Solutions when compared to last year. But I would suspect that by the time we get to the mid of the year that those dynamics would return to normal. Just one last point of note. In Q4, on a year-to-year basis, we had commented that the Endpoint Solutions segment was marginally down. I would say that with the backdrop of that, actually, ASPs were up in both the Americas as well as Europe, even in Q4. But I think there's a point in time where that will lapse and then we are kind of over it. I would speculate that maybe there's still some stability in ASP in the first quarter, but we get back to traditional dynamics after that would be my crystal ball.

Okay, thank you. That's correct. The ERP is expected to complete in the second half. And then with that comes two elements. One is the system-related costs that should go away. And then two is the duplicative costs around supporting two systems, and that efficiency should also play through primarily in the second half of '23.

Okay. Thank you.

There are no further questions at this time, which concludes today's call. You may now disconnect.