Q2 2022 TD Synnex Corp Earnings Call
Published the very impressive results.
In March at our Investor Day, we were able to share with you our vision of the evolving distribution landscape and the opportunities to grow and deliver enhanced financial performance over the coming years.
We presented our four pillar strategic framework, along with key medium and long term financial objectives.
Focused on investing in high growth technologies like hybrid cloud security data analytics, and Hyperscale infrastructure, while strengthening our portfolio expanding our global footprint and digitally transforming our business.
This strategy is underpinned by our role in the center of the technology partner ecosystem as a leading solutions aggregator.
And from this vantage point.
And with the strong support of our best in class network of over 500 vendor partners. We are well positioned to continue delivering unrivaled technology solutions to our more than 150000 customers.
Our performance in fiscal Q2 further demonstrates the success, we're having in the market given our strong value proposition and industry leading portfolio.
In Q2, we grew revenue by 4% year over year, assuming the merger occurred in the prior year, if adjusted for FX and revenue policy alignment.
This strong result was driven by robust demand for technology products and solutions to enable hybrid work foster collaboration enhanced security.
And advanced multi cloud adoption.
This is an exciting time to serve the technology ecosystem as the pace of change intensifies and our vendors continue developing products and services that enable companies and individuals to improve their agility productivity security and profitability.
We continued to see healthy demand for both endpoint and advanced solutions with revenue increasing year over year.
In Pcs, the double digit growth rates seen during the pandemic continued to moderate.
As expected the supply constrained environment that we've spoken about the past several quarters continued and was in line with our expectation.
From a regional perspective, our Americas distribution business experienced strong year over year top line growth.
On a year over year basis, our hyperscale infrastructure business declined given tough prior year compares but grew on an LTM basis consistent with our expectations.
Our European business also grew year over year in constant currency, albeit at a more measured pace given the current economic and geopolitical conditions in the region.
Before I pass it over to Marshall to further elaborate on our Q2 results I wanted to provide an update on our merger integration activities.
We continue to make excellent progress on harmonizing processes benefits and systems across <unk> as well as our optimization programs and synergy attainment.
From an ERP systems perspective, I shared with you last quarter that the April may timeframe would be important as we migrated a large portion of our Canadian business to the new system.
I am happy to report that the migration went extremely well and we are on track with our project plans to transition our U S business.
As we enter the back half of this fiscal year. We are extremely pleased with the progress we've made and the momentum we are experiencing in the market.
I will now pass it over to Marshall, who will provide some further color on our Q2 financial performance.
Marshall Thanks.
Thanks, Rich and thanks for joining us today for our call and fiscal Q2, we delivered another strong performance with year over year revenue growth on a constant currency basis.
Gross margin expansion healthy earnings per share and strong cash flow from operations.
This consistency in performance is a testament to the dedicated efforts of our global team and our agile entrepreneurial and resilient business model.
Total worldwide revenue for.
For fiscal Q2 was $15 3 billion up 4% when adjusted for constant currency and the revenue policy alignment related to the merger.
This is a stronger result than the 3% year over year adjusted growth rate at the midpoint of the Q2 outlook, we provided last quarter.
The growth was driven by strong performance in both core and high growth portions of the business.
Euro devaluation accounted for approximately $500 million of headwind versus the prior year, and an approximate $200 million incremental headwind versus our prior guidance.
Our distribution business experienced growth across all regions, excluding the impact of one large government project in a P. J in the prior year.
Gross profit was $966 million and gross margin was six 3%.
Compared to five 8% for the prior year.
Reflecting a favorable product mix, a strong pricing environment and solid execution.
FX had a $31 million negative impact on gross profit compared to the prior year, primarily due to the devaluation of the euro relative to the U S dollar.
Total adjusted SG&A expense was $585 million, representing three 8% of revenue and in line with our expectations.
non-GAAP operating income was $398 million up 18% versus the prior year and non-GAAP operating margin was two 6% up from two 2% in the prior year period.
All three regions experienced improved profitability compared to the prior year.
<unk> had a $10 million negative impact on non-GAAP operating income compared to the prior year, primarily due to the euro devaluation versus the U S dollar.
non-GAAP interest expense and finance charges were $46 million and non-GAAP effective tax rate was approximately 24% total non-GAAP net income was 262 million and non-GAAP diluted EPS was $2 72.
Now turning to the balance sheet.
We ended the quarter with cash and cash equivalents of 522 million and debt of $4 1 billion. Our gross leverage ratio was two four times and net leverage was two one times.
Accounts receivable totaled $7 9 billion and inventories totaled $8 4 billion, our net working capital at the end of the second quarter was $3 6 billion.
A decrease of 800 million from $4 4 billion in Q1.
Our cash conversion cycle for the second quarter was 21 days down three days from Q1 of 'twenty two.
Cash from operations was approximately $1 4 billion in the quarter. This was partially due to some unwinding of the Q1 increase the net working capital to support revenue growth and strategic inventory purchases.
From a shareholder return perspective for the current quarter. Our board of directors has approved a cash dividend of <unk> 30 per common share the dividend.
As expected to be paid on July 29, 2022 to stockholders of record as of the close of business on July 15 2022.
We also continued to repurchase shares and through the first two quarters of fiscal 'twenty. Two we have repurchased approximately $53 million of our stock at a weighted average price of approximately $103 <unk>.
In line with our target of $100 million of share repurchases for the year.
We have $347 million remaining on our three year stock repurchase authorization, which expires in July of 2023.
Before I discuss our outlook for the third quarter I wanted to take a moment to provide an update on our merger synergies as rich mentioned, our integration efforts are going well and we continued to make good progress on realizing our merger cost synergies. We are ahead of schedule and remain committed to achieving our targeted $200 million of merger.
Cost synergies as.
As I've mentioned previously these opportunities span a variety of areas, including optimization and efficiency improvements via the legacy Tech data GPO program.
As well as traditional deal related synergies across the spectrum of it systems.
Cost facilities rationalization taxes and interest.
Now moving to our outlook for fiscal quarter three.
We expect total revenue to be in the range of $14 5 billion to $15 5 billion, which when adjusted for currency impact of approximately $500 million and revenue policy alignment relating to the merger of approximately $300 million equates to a growth of around 10% at the midpoint on a year over year basis, assuming the merger had occurred.
In the prior year.
non-GAAP net income is expected to be in the range of 241 million to 279 million and non-GAAP diluted EPS is expected to be in the range of $2 50.
Two $2 90 per diluted share.
That's based on a weighted average shares outstanding of approximately $95 5 million interest expense is expected to be approximately $45 million and we expect the tax rate to be approximately 24% for the full fiscal year 'twenty. Two we continue to expect non-GAAP diluted EPS of $11 15.
To $11 65 per diluted share we are reaffirming the full year outlook, despite an incremental <unk> <unk> headwind from the devaluation of the Euro since March the total FX headwind for fiscal 'twenty two versus the prior year is now approximately 32.
We will now take your questions.
Later.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
We request you limit yourself to one question and one follow up.
Your first question comes from the line of Matt Sheerin from Stifel. Your line is open.
Yes, thank you very much and good morning, everyone.
My first question Rich just with regarding your commentary on the overall demand environment.
You still town I'm fairly bullish, but could you give us a little bit more color on the PC is quote unquote moderation that youre seeing.
Are you continuing to see that we can.
So it sounds like supply is starting to open up there and then.
Relative to the comments you've made in previous quarters about expectation for.
On Prem infrastructure projects coming back and accelerating in the second half are you still seeing that and hearing that from your customers.
Yes, Matt. Thanks. Thank you for your question. So first when we look back at <unk> on a constant currency basis, we talk about the advanced solutions and endpoint segment and we talked about.
Growth in both of those segments. In addition to that I think we had a separate schedule and for everybody to have a look at Tcs.
How they fit within our portfolio and profile.
And to kind of move on to your second point.
I would say is the story remains consistent in the PC wellness, what we had articulated previously at least from our Crystal ball and that is that.
The commercial Pcs have some pretty pretty good.
Demand associated with them the weakness.
I think in the overall scheme of the PC.
Category would be in the chromebook as well as the consumer piece at least for the foreseeable future and as yet.
Would have noticed from that schedule that we had.
Incorporated in there.
We're heavier weight to the commercial piece and when you get down to the consumer.
Segment and think about it in the Grand scheme of our entire portfolio.
It's a single digit number mid single digit number estimated.
No.
I think that that that the sentiment of the market.
<unk>.
PC providers of sort of articulated that point of view and we would reaffirm that that's the way we see it.
As it relates to advanced solutions, certainly the growth rates there have been higher than.
Then the endpoints segment.
And we do continue to see good demand.
In that segment that I do believe as we had talked for a while since the beginning of the year.
Through the pandemic, you had Pcs launching with high demand the advanced solutions.
Deferring and now you are coming around to the moderation of PC and pretty good demand strength. If you will within the advanced solutions segment. So.
That's how we see it.
Okay. Thanks, so much for that and then as my follow up.
Just regarding the inventory build that you had again in the quarter up about $700 million sequentially, but you're guiding essentially well down.
Slightly sequentially for the August quarter.
Could you just explain that.
Is any of that related to your Hyperscale business, where.
Where you typically stage inventory or products ahead of any lamps.
Hi, Matt This is Marshall and thanks for the question, it's an equal balance between distribution and high but yes. Its the same.
Demand forecast that we build up.
<unk>, we experienced in Q2, some of the higher margins and solid return of some of that build up at the end of Q1 for high and we expect that same thing for the second half.
Okay, great. Thanks, a lot.
The one comment that I would make is as we as we look at quarter quarter quarter, the supply chains continue to be volatile.
Usually accomplish what we need to in the quarter. So we will see ebbs and flows and working capital I think for the the tactical frame.
And then we're pretty comfortable with what we articulated in our Investor Day financial model for working capital once once we move to sort of stable or ground. If you will but we do see these bumps in the road here and there that are typically a bit unusual if we were to be in a stable environment.
Got it okay. Thanks a lot.
Thank you Matt have a good day.
Yes.
Your next question comes from the line of route <unk> Bhattacharya from Bank of America. Your line is open.
Hi, Good morning, Thank you for taking my questions.
It looks like FX is an incremental $850 to $900 million negative impact on the top line and about 14% on the on the EPS.
Can you give us.
Your thoughts on that and what is giving you confidence to keep the EPS guide for fiscal 2002 unchanged and what drives the operating margin improvement in fiscal <unk>.
Good question look we think this is Marshall so yes, we feel really confident clearly the 14th as a headwind as we think about our investor day profile and looking at what we thought overall adjusted net revenues would be we gave a guidance of 6% to 8% we still feel good about that and then we also gave our operating margin.
Profile range of two 5% to $2 seven same thing there we feel really good about that so the execution of the business or our belief that the second half of the year, we'll still have.
Decent to good IP spend growth that we're going to benefit from the synergies that we spoke to that are also in the investor presentation gives.
Give us that confidence that we can offset those FX headwinds.
Okay. Thanks, Thanks for that.
Could you talk about the pricing environment are you seeing vendors continue to raise prices and can you also talk about wage inflation and impact to your margins from that.
Sure.
So first in the pricing environment certainly.
Over the last year to year and a half there has been.
Consistent price changes basically across the board.
Based on all of the factors that we're familiar with right and I would I would speculate that we're going to continue to see that.
Price changes as we move forward until sort of the inflationary.
Impacts sort of calmed down.
And.
And.
I think that they will ultimately start to abate, but for the tactical frame.
I would suggest that that they'll continue.
Now as it relates to labor.
Labor and how it impacts.
Our business so first of all.
Labor.
Inflation is part of the overall inflation that yet.
Sort of translated into price across the entire supply chain.
We carefully manage our our compensation to make sure that we maintain competitive within the market competitiveness within the market at the same time.
We will pass through those increments.
Consider them.
Sort of marginal.
If you will incremental impact to our overall pricing to end users, but they are there and we move reasonably quickly to make sure we get them pass through.
And <unk> just to remind you our merit cycle is it falls into Q2, so you'll probably see a little bit higher SG&A relative to revenue.
The range for US is still in that three 5% to 4% range on SG&A and back to what Rick said over time, we do find ways of offsetting them.
Okay. Thanks for all the details there I appreciate it maybe for the last one rich if I can actually a higher level question. So investors are concerned about the possibility.
Question in the U S or a slowdown in Europe have you seen any slowdown anywhere in any region and can you talk about your visibility has it improved any since 90 days ago and if you can also talk about the backlog how that is trending and your expectations for that for the rest of the year. Thank you.
No.
<unk>.
Here's what we see.
We take it from there.
The Global Channel Guide, which is the most up to date information, we see the Idc's in context information of the World and if you go and you take a look at those publications, which youll find out is that the Americas market.
As is.
More robust if you will than the European market.
Read the Americas market to have been.
Over the.
The recent past.
Call it.
Higher single digit mid to high single digit and in Europe actually has been bumping bumping around flat overall.
Overall, so I think you could speculate to see youre seeing the impacts of some of the.
Geopolitical issues in Europe potentially.
And then Asia Pacific.
We don't have up to date information on but our speculation would be sort of a mid single digit.
Guests market right now so.
That's sort of the backdrop of sort of the growth rates that we see in sort of the segment that we operated one when we think about.
Your next question looking forward, we do feel as if there is good robust demand we feel.
Pretty good about our backlog the backlog is.
Marginally.
Down sequentially.
In total.
But that was sort of our view as to how things would play out.
And as we move forward my Crystal ball would say that as we move through time, hopefully we will see it move marginally down each quarter moving forward.
And then.
We basically create our are our commitments here.
From a bottoms up perspective, where we hear from each region with a particular emphasis on the coming quarter and then a view for the remainder of the year and that really informs.
Our guidance if you will.
So thats the process that you go through <unk>.
Thank you.
Your next question comes from the line of Jim Suva from Citigroup. Your line is open.
Thank you and good morning, I had a question you mentioned hyper scaler was down due to difficult comps and I think you said as expected can you remind us since we're now approaching the time period of kind of starting to lap the integration that you had with TD in Phoenix.
As we look ahead for the next quarter or two are those difficult year over year comps for Hyperscale are behind us and what are you kind of seeing for demand in your highest business.
So.
Jim first of all good morning, Thanks for the question.
You might recall in previous broadcast we always talk about <unk> being a lumpy business. We stage. We we then released and stage and released we find ourself into cycles like that.
And we are bullish and confident with the Hyperscale sort of segment over time.
The market data would say that that that category.
Double digit growth rates and we firmly believe that that's the case and sort of the sustaining time.
I would tell you that.
When you think about Q2, and then going into Q3, and then potentially Q4 the business in total.
Has the benefit of some easier compares.
And then I would say that that segment as well sort of falls into that category. So we have.
We have a $1 <unk> for the entire business and in that category that was pretty robust in FY 'twenty.
<unk> 21, and then it sort of slowed in the back half of <unk>.
The second half of the FY 'twenty, one and so the compares get easier for both the total in that segment.
And then my follow up question is on the inventory.
Of course, we had to build this quarter than you had mentioned that youre going to be working it down some for the August quarter, how do we bridge that versus the comments of supply chain challenges still existing today because of the supply chain.
Challenges still exist today, you'd think inventory would be flattish or maybe it's seasonal because otherwise people will say there is some weakening of demand or your backlog there.
Yes, im going to start and then I'm going to turn it over to Marshall, but by starting I want to make sure everybody is focused on the working capital improvement that we had seen in the quarter. They have been or are substantial from my.
My point of view.
Jim when we if I harken back to an earlier comment that I had I said as we sort of continue to March through.
The supply constrained environment.
We're comfortable with our working capital model that we had taken everybody through at Investor day, but until sort of we get stability.
<unk>.
The supply chain.
We're going to have some shorts and long if you will.
It's the proverbial Golden screw discussion and in the.
The core of distribution that has you hanging on especially within the advanced solution segment to inventory longer than you normally would.
And then.
When we think about the hyperscale business, the ebb and flow of Av.
Getting a bit behind on schedule deployments, and then getting back on schedule.
Based on many factors associated with the pandemic sort of.
Cause a bit of a continuity issue, but as I said in the long term.
We sort of get through all the supply things work themselves out and we will have we believe we'll have really good stability as it relates to sort of our working capital profile.
Marshall I don't know if you have anything to add to what Paul said.
Great. Thanks, so much for the details it's appreciated thank.
Yes, Thank you Jim.
Your next question comes from the line of Adam Tindle from Raymond James Your line is open.
Okay. Thanks, Good morning, Rich and you knew I would ask about working capital. If you got to me, but maybe I'll save that for my second question on synergies you talked about tracking ahead.
Would you characterize that as moving faster on your existing roadmap or are you finding new areas of synergy where the total synergy number may end up being higher and I'm asking because you just have that track record of over achieving on your slide I was just wondering if the total synergy number is maybe even tracking higher and if you could talk about the composition of the remaining synergy that.
Helpful.
And thanks for the question this is Marshall.
We're still committed to the $200 million.
<unk>.
Enter into fiscal 'twenty, three and is in our in our prepared remarks, we were at 130 forecasted for the first year no new element to that.
Moving quicker than we had expected throughout it and I would just say if you think about the.
The way that that synergy of current duty breaks down its roughly 60% SG&A and the rest is below the line in taxes and interest.
And then as.
As it relates to additional synergies typically you put a project plan to better together you go in you get Myopically focused on executing that project plan.
We're kind of keeping our head down to make sure we get that accomplished and then subsequent to that.
I am sure other opportunities will present themselves we just.
Don't have a quantitative point of view as to what that might be.
Okay makes sense and maybe just as a follow up Marshall I'll take the working capital question, all the way up to ROIC instead, I realize you've reported a trailing four quarter metric, but its just under 13% in the year ago period was just over 21%.
Maybe if you could talk about your view of where pro forma ROIC should ultimately go do you think you can get back into the Twenty's.
The key drivers to that and timing to get there would be helpful. Thanks.
Thanks for the question, Adam and our pro forma pre merger expectation, we thought that ROIC and adjusted basis would land somewhere around 11% as we continue to March through and integrate the companies and get the full digestion of debt and equity Youll.
Youll see that 12 five.
Land somewhere around that 11%, Adam again, Thats a forecast for the full year and then from there. We believe given all the things we do in terms of capital allocation and reinvesting back in the business and acquisitions and other opportunities.
Should see that step back up and Adam you've heard us say this in the past week.
We always achieve to have a 300 to 400 basis point.
ROIC above our weighted average cost of capital that continues to be the goal that we have in front of it.
Got it thank you.
Thank you.
Your next question comes from the line of Vincent Colicchio from Barrington Research. Your line is open.
Yeah.
Nice quarter guys.
Rich I'm curious.
Are you seeing them generally accretion turnover.
And our stabilization and.
I wanted to turn number looks like for your top hundred leadership.
Executives.
Yes, so if I talk about turnover clearly is elevated.
To be candid with.
Really surprise relative to how successful we've been in our recruiting efforts as well.
So.
I would say that.
Where we're not.
Little bit higher than normal, but very very manageable as it relates to our top 100, we have been very stable there've been no surprises.
That I'm aware of.
We have.
Manage.
Team closely and stayed close to them, especially through the sort of the.
The merger Phase I mean, there is incremental workload that is quite substantial so we're asking people to do a lot more than than the norm, but I feel as if we've got really good stability in our top 100.
And three.
Three quarters into the integration.
Client losses tied to.
Diversification is that.
Sort of inline with your expectations is that a meaningful number.
Good question Vincent this is Marshall.
Better than expected.
As you know we have a highly complementary vendor line card and same with the customer base.
If we think about the integrations we've done so far in the commentary rich has had about the Canadian Cif migration that has gone very smoothly with very little disruption. We expect the same thing to be the case for the for the U S migration.
So very pleased with the overall result, and significant upside as we've mentioned in previous conversations around cross sell once we get onto one platform.
Okay. That's it for me.
Nice quarter. Thank you.
Thank you very much.
Your next question comes from the line of Keith <unk> from Northcoast Research. Your line is open.
Good morning, guys, Hey, rich when we were at the Investor day cost quite a bit about.
T D.
<unk> toward more solutions for your customers and netted down revenue, perhaps talk about progress made over the quarter and the demand for that you saw this quarter.
Yes, so if I could during the Investor day, we talked about high growth technologies, and just to give everybody sort of AR.
<unk> insight there, we're talking about hybrid cloud security analytics and Iot hyper.
Hyperscale infrastructure.
Even within.
The endpoint space <unk> is within there as well.
We had a we have an expectation of sort of an elevated growth rate if you will.
For that that category the core distribution piece of that.
<unk> clearly has been on track to deliver if you will that elevated growth rate, we talked about hive.
Being a little bit lumpy. So we think about <unk>, having that elevated growth rate annualized.
So we're feeling really good Keith about those high growth technologies, and kind of where we're at with.
More more investment if you will to come to make sure that we're bringing continue to bring incremental value to that customer set as it relates to the netting you'll get into.
Those high growth technologies using cloud as an example.
There is.
That category in particular.
As one which gets netted in.
As that becomes a bigger piece of the pie. There is the larger netting that maybe Marshall do you want to comment yes, you are right. So.
Try to reference gross billings, when we think about the hydro technology's sections, and we'll do that going forward.
But.
Early on two quarters in relative to our Investor day profiles than what we thought were very much in line with that.
Alright I appreciate it.
Are your guidance can you sort of puts and takes and what will it take for I guess to come at a lower end of your guidance in terms of revenue or will it take to come to the higher end of your guidance.
The big swing items in your minds.
It would take to actually beat.
And to your guidance.
So I think.
I'll start then maybe Marshall can disc.
Discuss maybe.
Maybe maybe statement of the obvious but if in fact, we see a sudden downturn.
Demand based on the recessionary pressures that that would have us find ourselves probably at the low end of our guidance.
To get to the high end of the guidance what would it take it.
Just one one thing comes to mind right as that is.
A significant release of supply to two.
Be able to sell through a bigger portion of the backlog.
And then obviously.
You think about demand, but if demand is constrained by adding to the incremental demand is constrained by adding to the backlog then that would be a tougher putt.
But I think.
A bigger release of <unk>.
Supply would be helpful to get us to the higher end.
And we don't see anything likely this quarter do it.
It's hard to predict I think.
I was talking earlier about the.
The evolution of.
The PC stuff being at the front end of the pandemic demand wise and then the.
Advanced solution stuff being higher demand.
I think.
Matt had commented earlier I think in his insights that are asked is the PC, becoming a bit more stable it kind of feels like it is.
No.
No.
Never say never but we have a pretty tight relationship with most of our suppliers and we really once we hear from the regions they actually.
If you will cross check with regard to our vendors to make sure that we're supply supported and in fact.
That would be the our our range currently would be our best call but.
If theyre pleasant surprises that would come they would be just that.
And surprises.
Great. Thanks appreciate it.
Your next question comes from the line of Ananda Baruah from loop capital. Your line is open.
Hey, good morning, guys. Thanks for taking my thanks for taking my questions.
I guess I guess I have two if I could.
Rich I don't think I heard you in any of your you answer it.
Guess, what your consumer exposure.
So I would love that and if you did I apologize.
That's a good question.
Yes. So if you take a look at the charts that we had included in the pack we had a special emphasis to our special insight if you will.
So if.
If you think about.
The consumer piece sort of Standalone you could.
About it as being a sort of mid single digit percentage of our total overall portfolio.
Okay.
So it's really small at this point.
Well, yes, I mean, it's mid single digits. So.
I think that the whole PC category to calibrate the pie, it's pretty well calibrated to the reality. So you can think of the whole PC categories being 20% ish and then.
The consumer piece being up.
A percent of that.
Which gets us Brian instead of scope.
Got it and so what about some of the legacy stuff for each company.
Yes legacy Tech data has.
For the handset exposure, primarily in Europe and legacy <unk>.
Hudson meaningful meaningful consumer retail exposure in North America is that is that are those both de minimis at this point.
So really the PC.
So really the consumer exposure is on the P&C side at this point.
None of this is Marshall, yes, we still have legacy Fedex New age electronics.
Great business, performing well and on the legacy Tech data side, we've got.
So call it consumer related mobility in Europe right.
And that's that's performing.
System with expectation as well.
And that's helpful guys and any sense, Richard we serve and why Shouldnt, we stack those two up.
The PC can see where like where that would sort of land for the company.
Kind of what consumer exposure levels overall.
Starting with revenue.
So again.
So you are asking if you were to have included.
Mobility within the PC category would that be I don't have the number right in front of me, but.
Yes.
Wouldn't even comment.
But.
Yes.
Hi.
I wouldn't think it would be super material.
Cool that's helpful Ed.
And then I guess.
Instead of rich.
You're caught your comments about second half second half 'twenty two good it spending environment.
Like what are you guys seeing I guess, what I would.
Lots of different contracts.
People right.
What are you guys.
Maybe your interpretation kind of the overall <unk>.
Uh huh.
Customer behavior right now.
Given.
From a macro macro indicators for everybody.
<unk> the same macro indicators it seems like commercial spending has been very well Paul.
At the same time last year actually went into people who is watching these macro indicators.
Yes.
CFO of <unk>.
What do you think what's the what are you experiencing I guess is the overwriting theme.
And with customer you had one to one situation where commercial demand is clearly very well in fact.
Yes at the same time.
Yes kind of the macro indicators.
Are what they are.
Sure.
And <unk>.
Your conclusion.
So a solid 17 second half of the year so.
Just would love any context there.
Trying to get a sense of.
What it is we think our customers at schools.
As inseparable.
Yes, so maybe I'll go first.
<unk> be a little bit repetitive here, but we see.
A really strong infrastructure the advanced solutions category.
That that area continues to I think the most challenged as it relates to supply and backlog.
And the Pcs.
Or are moderating with a particular.
<unk> of the consumer segment being sort of weaker we see that we sort of articulated that theme. When we started the year. We said the first half we thought that.
That there would be good demand around peak season.
Segment would begin to.
Yes.
If you will.
Accelerate a bit.
And then in the back half, we'd see more moderation in Pcs and that we'd have solid demands around the category.
And I think Thats, what we see playing out.
And the only other thing that I would offer is.
Is the high growth technologies of cloud.
Analytics, and Iot security and Hyperscale as a as a basket.
Those growth rates are strong and they are becoming more and more meaningful part of our business as we move through time.
So.
From our end.
End user demand perspective, certainly.
The high growth technologies, the advanced solution project based business and then PC moderation.
Great that's super helpful.
Alright. Thank you guys appreciate it thank.
Thank you Amanda.
At this time there are no more questions. This concludes today's call have a nice day.
Yes.