Q3 2023 TD SYNNEX Corporation Earnings Call

Okay.

Speaker 1: Good morning, my name is Jayil and I will be your conference operator.

Good morning, My name is Joe and I will be your conference operator today I would like to welcome everyone to the T. <unk> third quarter fiscal 2023 earnings call. Today's call is being ordered 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.

Speaker 1: I would like to welcome everyone to the TD-SINEX third quarter fiscal 2023 earnings call. Today's call is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

Speaker 1: At this time, for opening remarks, I would like to pass the call over to Liz Morale, head of investor relations. Liz, you may begin.

At this time for opening remarks, I would like to pass the call over to Liz Morelli head of Investor Relations you may begin.

Speaker 2: 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 .

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 .

Speaker 2: 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 demand, cash flow, and shareholder return, as well as our expectations for future fiscal periods.

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 demand cash flow and shareholder returns as well as our expectations for <unk>.

Your fiscal periods.

Speaker 2: 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 8K we filed today, and in the risk factors section of our Form 10K and our other reports and filings with the SEC. We do not intend to update

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.

Speaker 2: 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 8K available on our Investor Relations website ir.tdsynx.com.

So during this call we will reference certain non-GAAP financial information reconciliations.

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, IR Dot T D S and X dot com.

Speaker 2: This conference call is the property of TD Synix and may not be recorded or rebroadcast without our permission. I will now turn the call over to.

This conference call is the property of TD snacks, and may not be recorded or rebroadcast without our permission.

I will now turn the call over to rich rich.

Speaker 3: Thank you, Liz. Good morning, everyone. And thank you for joining us today.

Thank you Liz good morning, everyone and thank you for joining us today.

Speaker 3: The strength of our business model and our relentless focus on execution were evident in our fiscal third quarter results.

Strength of our business model and our relentless focus on execution were evident in our fiscal third quarter results.

Speaker 3: Our strategy is working and our expansive portfolio of products, services, and solutions have enabled us to navigate the fluctuations in the post-pandemic IT spending environment.

Our strategy is working and our expansive portfolio of products services and solutions have enabled us to navigate the fluctuations in the post pandemic IC spending environment.

Speaker 3: For another consecutive quarter, a greater portion of our business was generated from high-growth technology categories. And we saw improving performance in endpoint solutions.

For another consecutive quarter, a greater portion of our business was generated from high growth technology categories.

We saw improving performance and endpoint solutions.

Speaker 3: The business mix helped us to expand margins, deliver earnings per share above our guidance, generate strong free cash flow, and increase capital return to our shareholders in the court.

The business mix helped us to expand margins deliver earnings per share above our guidance generate strong free cash flow and increase capital return to our shareholders in the quarter.

Speaker 3: We were encouraged to see signs of stability in our endpoint.

We were encouraged to see signs of stability in our endpoint business.

Speaker 3: as the Americas experienced reduced year-on-year declines and grew quarter over quarter. In advanced solutions, the Americas saw decelerating growth but also grew quarter over quarter.

As the Americas experienced reduced year on year declines and grew quarter over quarter.

And advanced solutions, the Americas saw decelerating growth, but also grew quarter over quarter.

Speaker 3: In Europe , however, we began to see the impacts from the macroeconomic backdrop, which led to a more challenging quarter.

Jail: Good morning, my name is Jail, and I will be your conference operator today. I would like to welcome everyone to the TEE SYNNEX 3rd quarter fiscal 2023 earnings call. Today's call is being ordered and all lines have been placed on mute to prevent any background noise.

In Europe . However, we began to see the impacts from the macro economic backdrop, which led to a more challenging quarter.

Speaker 3: Asia Pacific Japan grew in the quarter, driven by strength in advanced solutions, high growth technologies, and momentum in India and the Australia-New Zealand region.

Asia Pacific Japan grew in the quarter driven by strength in advanced solutions high growth technologies and momentum in India, and the Australia, New Zealand region.

Jail: After the speakers remarks, there will be a question and answer session.

Liz Morali: 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 Rick Hume, CEO, and Marshall Witt, TFO. 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 demand, cash flow, and shareholder return, as well as our expectations for future fiscal periods.

Speaker 3: In addition, the industry supply chain continues to be healthy with backlogs back to normal historical levels.

In addition, the industry supply chain continues to be healthy with backlogs back to normal historical levels.

Speaker 3: This has allowed us to strategically reduce our inventory position, leading to significantly improved working capital and strong free cash flow generation for the quarter.

This has allowed us to strategically reduce our inventory position leading to significantly improved working capital and strong free cash flow generation for the quarter.

Speaker 3: Last quarter, we announced our goal to pursue an additional $50 million in cost optimization over the next few quarters.

Last quarter, we announced our goal to pursue an additional 50 million in cost optimization over the next few quarters, we achieved our target for fiscal Q3 and are on track to capture the remainder by fiscal Q1 of 'twenty four.

Speaker 3: We achieved our target for fiscal Q3 and our on track to capture the remainder by fiscal Q1 of 24.

Liz Morali: 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 8K we filed today, and in the risk factors section of our form 10K, 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-gap financial information, reconciliation, reconciliation of gap to non-gap results, are included in our earnings press release, and the related form 8K, available on our investor relations website, ir.tvcinex.com.

Speaker 3: Our ERP systems migration efforts have proceeded well, and we are now largely complete with significant milestones successfully achieved.

Our ERP systems migration efforts have proceeded well and we are now largely complete with significant milestones successfully achieve their.

Speaker 3: There remain a few pieces to migrate, primarily within our advanced solutions business. And we anticipate that this will be concluded in the first half of fiscal 24.

There remain a few pieces to migrate primarily within our advanced solutions business and we anticipate that this will be concluded in the first half of fiscal 'twenty four.

Speaker 3: We remain focused on ensuring a seamless customer and vendor experience and will proceed accordingly.

We remain focused on ensuring a seamless customer and vendor experience and we'll proceed accordingly.

Speaker 3: As a company, we remain focused on partnering with our customers to maximize the value of their end users IT investments by demonstrating business outcomes and unlocking growth opportunities through low cost and efficient delivery capabilities.

As a company we remain focused on partnering with our customers to maximize the value of their end users I T investments by demonstrating business outcomes and unlocking growth opportunities through low cost and efficient delivery capabilities.

Jail: This conference call is the property of TVCinex, and may not be recorded or rebroadcast without our permission.

Rick Hume: I will now turn the call over to Rich. Rich? Thank you, Liz.

Rick Hume: Good morning, everyone, and thank you for joining us today. The strength of our business model and our relentless focus on execution were evident in our fiscal third quarter results. Our strategy is working, and our expansive portfolio of products, services, and solutions have enabled us to navigate the fluctuations in the post-pandemic IT spending environment. For another consecutive quarter, a greater portion of our business was generated from high-growth technology categories, and we saw improving performance in endpoint solutions.

Speaker 3: This quarter, we launched two new solutions aimed at doing just that.

This quarter, we launched two new solutions aimed at doing just that one.

Speaker 3: One is partner health and fitness tool, which utilizes a custom algorithm to analyze a reseller's offerings across advanced solutions and high-growth technology.

One is partner health and fitness tool, which utilizes a custom algorithms to analyze our resellers offerings.

Across the advanced solution and high growth technologies, enabling.

Speaker 3: enabling partners to understand where they stand in comparison to the broader TD Synix partner lens.

Enabling partners to understand where they stand in comparison to the broader TD cynics partner landscape user.

Speaker 3: Using the data to provide this type of actionable insight is one way we are providing distinctive value for our customers.

Using the data to provide this type of actionable insight is one way we are providing distinctive value for our customers helping to guide their decision, making regarding portfolio diversification to capture growth.

Speaker 3: helping to guide their decision making regarding portfolio diversification to capture growth.

Rick Hume: The business mix helped us to expand margins, deliver earnings per share above our guidance, generate strong free cash flow, and increase capital return to our shareholders in the quarter. We were encouraged to see signs of stability in our endpoint business as the America's experience reduced year on year declines and grew quarter over quarter. In advanced solutions, the America saw decelerating growth, but also grew quarter over quarter.

Speaker 3: The second solution we launched is destination AI, a comprehensive aggregation of resources to equip resellers with knowledge and connections to capture opportunities across AI, machine learning, and advanced analytics.

The second solution, we launched is destination AI.

Comprehensive aggregation of resources to equip resellers with knowledge and connections to capture opportunities across AI machine learning and advanced analytics.

Speaker 3: As this marketplace rapidly evolves, TD Synics is working with more than 40 vendors across the AI space, including AI-enabled independent software vendors, AI accelerators.

As this marketplace rapidly evolves TD cynics is working with more than 40 vendors across the AI space, including AI enabled independent software vendors AI accelerators.

Rick Hume: In Europe, however, we began to see the impacts from the macroeconomic backdrop, which led to a more challenging quarter. Asia-Pacific Japan grew in the quarter, driven by strength in advanced solutions, high-growth technologies, and momentum in India and the Australia New Zealand region. In addition, the industry supply chain continues to be healthy with backlogs back to normal historical levels. This has allowed us to strategically reduce our inventory position, leading to significantly improve working capital and strong free cash flow generation for the quarter.

Speaker 3: or AI software platform providers and AI infrastructure firms.

Core AI software platform providers, and AI infrastructure firms, our catalog of pre validated ready to deploy solutions combined with our ability to provide multi vendor offerings aggregating best of breed services software and hardware and edge.

Speaker 3: Our catalog of prevalidated, ready to deploy solutions, combined with our ability to provide multi-vendor offerings, aggregating best-to-breed services, software and hardware, and edge devices places us in a unique position with the business partner ecosystem to add value to our customers.

Mrs Places us in a unique position with the business partner ecosystem to add value to our customers.

Speaker 3: Next week, we will be hosting two of our marquee ecosystem events, bringing together thousands of our customers and vendor partners to network and collaborate, gaining critical knowledge and insights to further grow their business.

Next week, we will be hosting two of our marquee ecosystem events.

Bringing together thousands of our customers and vendor partners to network and collaborate gaining critical knowledge and insights to further grow their businesses.

Rick Hume: Last quarter, we announced our goal to pursue an additional 50 million in cost optimization over the next few quarters. We achieved our target for fiscal Q3 and our on track to capture the remainder by fiscal Q1 of 24. Our ERP systems migration efforts have proceeded well, and we are now largely complete with significant milestones successfully achieved. There remain a few pieces to migrate primarily within our advanced solutions business, and we anticipate that this will be concluded in the first half of fiscal 24.

Speaker 3: ahead of those events, we recently completed an expansive survey of our B2B channel partners from over 60 countries asking them about their expectations over the next year in the off.

Ahead of those events. We recently completed an extensive survey of our B to B channel partners from over 60 countries asking them about their expectations over the next year and beyond.

Speaker 3: Channel partners told us that they are remaining agile in this environment, adapting their business models to focus on emerging technologies.

Channel partners told us that they are remaining agile in this environment adapting their business models to focus on emerging technologies.

Speaker 3: and rebalancing their priorities and offerings to meet the evolving needs of their end use.

And rebalancing their priorities and offerings to meet the evolving needs of their end users.

Speaker 3: There were many interesting findings in the survey, but most clear was the continued importance of the channel in helping partners to navigate the rapidly changing technology lens.

There were many interesting findings in this survey, but most clear was the continued importance of the channel and helping partners to navigate the rapidly changing technology landscape, providing technical expertise and helping to fill gaps in the talent pipeline.

Rick Hume: We remain focused on ensuring a seamless customer and vendor experience, and will proceed accordingly. As a company, we remain focused on partnering with our customers to maximize the value of their end users IT investments by demonstrating business outcomes and unlocking growth opportunities through low cost and efficient delivery capabilities.

Speaker 3: providing technical expertise and helping to fill gaps in the talent pipe.

Speaker 3: During the quarter, we were honored to be recognized with a silver medal by EcoVatus, a leading provider of business sustainability ratings and an improvement from our prior year score of a bronze medal. Importantly, this place is TD Synics in the top 25% of companies assessed by EcoVatus.

During the quarter, we were honored to be recognized with a silver metal by <unk>, a leading provider of business sustainability ratings and an improvement from our prior year's score of a bronze medal importantly, this places <unk> in the top 25% of.

Rick Hume: This quarter, we launched two new solutions aimed at doing just that. One is partner health and fitness tool, which utilizes a custom algorithm to analyze a reseller's offerings across the advanced solution and high growth technologies, enabling partners to understand where they stand in comparison to the broader TD SYNNEX partner landscape. Using the data to provide this type of actionable insight is one way we are providing distinctive value for our customers, helping to guide their decision making regarding portfolio diversification to capture growth.

Companies assessed by ego values are.

Speaker 3: Our European business was also awarded an environmental sustainability specialization by Cisco, providing a framework for technology recycling and circular economy initiatives.

Our European business was also awarded an environmental sustainability specialization by Cisco, providing a framework for technology recycling and circular economy initiatives.

Speaker 3: We are proud of these achievements and of the progress that we have made on our environmental, social, and governance goals.

We are proud of these achievements and the progress that we have made on our environmental social and governance goals.

Speaker 3: As we begin the final quarter of the fiscal year, we believe that we have seen the trough of our endpoint solutions business and that we will continue to see smaller declines moving forward.

As we begin the final quarter of the fiscal year, we believe that we have seen the trough of our endpoint solutions business and that we will continue to see smaller declines moving forward.

Rick Hume: The second solution we launched is destination AI, a comprehensive aggregation of resources to equip resellers with knowledge and connections to capture opportunities across AI, machine learning, and advanced analytics. As this marketplace rapidly evolves, TD SYNNEX is working with more than 40 vendors across the AI space, including AI-enabled independent software vendors, AI accelerators, core AI software platform providers, and AI infrastructure firms. Our catalog of prevalidated, ready to deploy solutions combined with our ability to provide multi vendor offerings, aggregating best of breed services, software and hardware, and edge devices places us in a unique position with the business partner ecosystem to add value to our customers.

Speaker 3: It is an exciting time to be in the IT industry. And we believe that in the long term, IT spending will continue to outpace GDP growth. We see a variety of drivers on the horizon, including AI enablement, which we believe we will see across the majority of our offering set, as vendors bring these features and functionality to their products and services over time.

It is an exciting time to be in the it industry and we believe that in the long term spending will continue to outpace GDP growth, we see a variety of drivers on the horizon, including AI enablement, which we believe we will see across the majority of our offering set as vendors.

Bringing these features and functionality to their products and services over time.

Speaker 3: I will now turn the call over to Marshall for some additional comments about Q3 and our Q4 outlook. Marshall, over to you. Thanks Rich and good morning to-

I will now turn the call over to Marshall for some additional comments about Q3, and our Q4 outlook Marshall over to you.

Thanks, Rich and good morning to everyone on today's call.

Speaker 4: As Rich mentioned, our Q3 results illustrate the progress we have made on our business strategy.

As rich mentioned, our Q3 results illustrate the progress we have made on our business strategy.

Speaker 4: Revenue in the strategic focus areas of cloud security and data analytics grew in the low double digits on a year-rear basis. And we saw smaller declines.

Revenue in the strategic focus areas of cloud security and data analytics grew in the low double digits on a year over year basis, and we saw smaller declines and endpoint solutions.

Rick Hume: Next week, we will be hosting two of our marquee ecosystem events, bringing together thousands of our customers and vendor partners to network and collaborate, gaining critical knowledge and insights to further grow their business. I had of those events we recently completed an expansive survey of our B2B channel partners from over 60 countries asking them about their expectations over the next year and beyond. Channel partners told us that they are remaining agile in this environment, adapting their business models to focus on emerging technologies and rebalancing their priorities and offerings to meet the evolving needs of their end users.

Speaker 4: As a result, we expanded margins and grew non-gap earnings per share, while our counter-cyclical model enabled us to generate significant pre-cash flow, leading us to increase our share repurchases in the quarter.

As a result, we expanded margins and grew non-GAAP earnings per share.

While our countercyclical model enabled us to generate significant free cash flow, leading us to increase our share repurchases in the quarter.

Speaker 4: For fiscal Q3, total gross billings were 18.6 billion, and net revenue was 14 million, both consistent with expectation.

For fiscal Q3 total gross billings were $18 6 million and net revenue was $14 million, both consistent with expectations.

Rick Hume: There were many interesting findings in the survey, but most clear was the continued importance of the channel in helping partners to navigate the rapidly changing technology landscape, providing technical expertise and helping to fill gaps in the talent pipeline.

Speaker 4: As Rich highlighted, although revenue decline year over year in the Americas, we thought finds stabilization.

As rich highlighted although revenue declined year over year in the Americas, we saw signs of stabilization.

Speaker 4: Europe sought to client during the quarter as we began to see impacts related to the challenging macroeconomic environment.

Europe saw a decline during the quarter as we began to see impacts related to the challenging macroeconomic environment.

Speaker 4: An Asia Pacific Japan grew revenue by 10% year over year. Driven by high-growth technologies and strength and some emerging markets.

In Asia Pacific, Japan grew revenue by 10% year over year drew.

Driven by high growth technologies and strength in some emerging markets.

Speaker 4: High performed better than expected in the quarter. Despite a tough year of year comparison due to the record revenue realized in Q3 of SSCO 22.

Hi performed better than expected in the quarter. Despite a tough year over year comparison due to the record revenue realized in Q3 of fiscal 'twenty two.

Speaker 4: Non-Gap Gross Profit was $974 million, up 3% year-over-year, and Non-Gap Gross Margin was a record 7% of 84 basis points year-over-year.

non-GAAP gross profit was $974 million up 3% year over year and non-GAAP gross margin was a record 7% up 84 basis points year over year.

Rick Hume: During the quarter, we were honored to be recognized with a silver medal by EcoVatus, a leading provider of business sustainability ratings and an improvement from our prior year score of a bronze medal. Importantly, this place is TD SYNNEX in the top 25% of companies assessed by EcoVatus. Our European business was also awarded an environmental sustainability specialization by Cisco, providing a framework for technology recycling and circular economy initiatives. We are proud of these achievements and of the progress that we have made on our environmental, social and governance goals.

Speaker 4: The significant improvement in gross margin was driven by the continued mix shift to advanced solutions and high growth technologies as well as margin expansion and high growth technology.

The significant improvement in gross margin was driven by the continued mix shift to advanced solutions and high growth technologies as well as margin expansion in high growth technologies.

Speaker 4: Total adjusted SGNA expense was 577 million, down 16 million from the park quarter, and representing 4.1% of net revenue, and 3.1% of gross billing.

Total adjusted SG&A expense was $577 million down $16 million from the prior quarter and representing four 1% of net revenue and three 1% of gross billings.

Speaker 4: As Rich discussed, we are proceeding well on the 50 million cost savings program. We announced last quarter and exceeded the $10 million target for fiscal Q3.

As rich discussed we are proceeding well under $50 million cost savings program, we announced last quarter and exceeded the $10 million target for fiscal Q3.

Speaker 4: We are well positioned to achieve our full target by early next year and expect S-GNA as percentage of gross buildings to remain in the 2.75 to 3.25 percent range that we have seen historic.

We are well positioned to achieve our full target by early next year and expect SG&A as a percentage of gross billings to remain in the 275% to three 5% range that we have seen historically.

Rick Hume: As we begin the final quarter of the fiscal year, we believe that we have seen the trough of our endpoint solutions business and that we will continue to see smaller declines moving forward. It is an exciting time to be in the IT industry, and we believe that in the long term, IT spending will continue to outpace GDP growth. We see a variety of drivers on the horizon, including AI enablement, which we believe we will see across the majority of our offering set, as vendors bring these features and functionality to their products and services over time.

Speaker 4: Going forward, we will be citing SGNA as a percentage of growth buildings, given the increased impact from growth to net adjustments as a greater proportion of our portfolio is in advanced solutions and high growth technology.

Going forward, we will be citing SG&A as a percentage of the <unk>.

Gross billings given the increased impact from gross to net adjustments as a greater proportion of our portfolio is in advanced solutions in high growth technologies.

Speaker 4: Non-gap operating income was $379 million, approximately flat year over year, and non-gap operating margin was 2.8% of 25 basis points year over year.

non-GAAP operating income was $379 million approximately flat year over year and non-GAAP operating margin was two 8% up 25 basis points year over year.

Speaker 4: Q3 non-gap interest expense and finance charges were 65 million, 7 million better than our outlook due to working capital efficiencies, which resulted in less borrowing.

Q3, non-GAAP interest expense and finance charges were $65 million 7 million better than our outlook due to working capital efficiencies, which resulted in less borrowing.

Marshall Witt: I will now turn the call over to Marshall for some additional comments about Q3 and our Q4 outlook. Marshall, over to you. Thanks Rich and good morning to everyone on today's call. As Rich mentioned, our Q3 results illustrate the progress we have made on our business strategy, revenue in the strategic focus areas of cloud, security and data analytics grew in the low double digits on a year-to-year basis, and we saw smaller declines in endpoint solutions.

Speaker 4: The non-gap effect of tax rate was approximately 21%.

The non-GAAP effective tax rate was approximately 21%.

Speaker 4: Better than our forecast to 24%, primarily due to our ability to utilize tax credits earned in certain jurisdictions.

Better than our forecast of 24%.

Primarily due to our ability to utilize tax credits earned in certain jurisdictions.

Marshall Witt: As a result, we expanded margins and grew non-gap earnings per share, while our counter-cyclical model enabled us to generate significant pre-cash flow, leading us to increase our share repurchases in the quarter. For fiscal Q3, total growth billings were 18.6 million, and net revenue was 14 million, both consistent with expectations. As Rich highlighted, although revenue declined year-over-year in the Americas, we saw fine-estabilization. Europe saw a decline during the quarter as we began to see impacts related to the challenging macroeconomic environment.

Speaker 4: Total non-gap net income was 260 million and non-gap diluted EPS was $2.78.

Total non-GAAP net income was $260 million and non-GAAP diluted EPS was $2 78.

Speaker 4: 8 cents above the high end of our guidance range and up 1.5% you're over year.

<unk> <unk> above the high end of our guidance range and up one 5% year over year.

Speaker 4: Now, turn into the balance sheet. We ended the quarter with cash and cash equivalence of 1.25 billion and debt of 4.1 billion. Our gross leverage ratio was 2.2 times and net leverage was 1.6 times in line with our investment grade credit rating and approaching our target of two times gross leverage ratio.

Now turning to the balance sheet, we ended the quarter with cash and cash equivalents of one 5 billion and debt of $4 1 billion. Our gross leverage ratio was two two times and net leverage was one six times in line with our investment grade credit rating and approaching our target of two times gross leverage ratio.

Speaker 4: The counts receivable totaled 8.9 billion, up from 8.4 billion in the per-quarter, and inventory's totaled 7.5 billion, down from 7.8 billion in the per-quarter. Networking capital at the end of the third quarter was 3.3 billion, down from 3.8 billion in quarter two, primarily due to declines in inventory, and increased accounts payable.

Accounts receivable totaled $8 9 billion up from $8 4 billion in the prior quarter and inventories totaled seven 5 billion down from $7 8 billion in the prior quarter.

Net working capital at the end of the third quarter was $3 3 billion down from $3 8 million in quarter, two primarily due to declines in inventory and increased accounts payable.

Marshall Witt: An Asia Pacific Japan grew revenue by 10% year over year, driven by high growth technologies and strength and some emerging markets. High performed better than expected in the quarter, despite a tough year of year comparison due to the record revenue realized in Q3 of fiscal 22. 774 million, up 3% year over year, and non-gap growth margin was a record 7% of 84 basis points year over year. The significant improvement in growth margin was driven by the continued mix shift to advanced solutions and high growth technologies, as well as margin expansion and high growth technologies.

Speaker 4: The cash conversion cycle for the third quarter was 23 days, a one-day improvement from quarter two, primarily due to improvements in our inventory profile, given the healthier supply chain environment.

Cash conversion cycle for the third quarter was 23 days, a one day improvement from quarter, two primarily due to improvements in our inventory profile given the healthier supply chain environment.

Speaker 4: Cash from operations in the quarter was $592 million, and pre-cash flow was $552 million. We have generated approximately $1.1 billion in pre-cash flow year today.

Cash from operations in the quarter was $592 million and free cash flow was $552 million, we have generated approximately $1 1 billion in free cash flow year to date.

Speaker 4: We continue to prioritize showhold of returns during the quarter, returning 103 million via share repurchases, and 33 million.

We continue to prioritize shareholder returns during the quarter, returning $103 million via share repurchases and $33 million through dividend payments.

Speaker 4: You today, we now have repurchased 278 million and have approximately 740 million remaining under our current share repurchase.

Year to date, we now have repurchased $278 million and have approximately $740 million remaining under our current share repurchase authorization for the current quarter. Our board of directors has approved a cash dividend of 35 per common share payable on October 27 of 2023 to stockholders of record.

Marshall Witt: Total adjusted SGNA expense was 577 million, down 16 million from the prior quarter, and representing 4.1% of net revenue and 3.1% of gross billings. As Rich discussed, we are proceeding well on the 50 million cost savings program, we announced last quarter, and exceeded the $10 million target for fiscal Q3. We are well positioned to achieve our full target by early next year and expect SGNA as percentage of gross billings to remain in the 2.75 to 3.25% range that we have seen historically.

Speaker 4: For the current quarter, our board of directors has approved the cash dividend of $0.35 for a common share, cable on October 27th of 2023, two stockholders of records as of the close of business on October 13th, 2023.

As of the close of business on October 13th 2023.

Speaker 4: Moving now to our outlet for fiscal for quarter, we expect gross billions of 18.5 billion to 19.7 billion representing a 3% sequential improvement from quarter three and a decline of 9% on a year of your basis at the mid.

Moving now to our outlook for our fiscal fourth quarter, we expect gross billings of $18 5 billion to $19 7 billion, representing a 3% sequential improvement from quarter, three and a decline of 9% on a year over year basis at the midpoint we.

Speaker 4: We expect total revenue to be the range of 14 billion to 15 billion, which equates to a 4% sequential improvement from quarter three, and a decline of 11% on a year-rear basis at the mid-

We expect total revenue to be the range of 14 billion to $15 billion, which equates to a 4% sequential improvement from quarter, three and a decline of 11% on a year over year basis at the midpoint.

Marshall Witt: Going forward, we will be citing SGNA as a percentage of gross billings given increased impact from growth to net adjustments as a greater proportion of our portfolio is in advanced solutions and high growth technologies. Non-gap operating income was 379 million approximately flat year over year, and non-gap operating margin was 2.8% of 25 basis points year over year. Q3 non-gap interest expense and finance charges were 65 million, 7 million better than our outlook due to working capital efficiencies, which resulted in less borrowing.

Speaker 4: The expectant sequential improvement from quarter three is slightly below our historical compare.

<unk> sequential improvement from quarter three is slightly below our historical compares.

Speaker 4: and is primarily driven by the market challenges in Europe , partially offset by improvements in the Americans.

And is primarily driven by the market challenges in Europe , partially offset by improvements in the Americas for.

Speaker 4: For the PC segment, as we discussed in June , we believe we have seen the low point for you over your declines and expect the recovery to continue in Q4.

For the PC segment as we discussed in June we believe we have seen the low point for year over year declines and expect the recovery to continue in Q4.

Speaker 4: with smaller Euro-rear declines. Our guidance is based on a Euro to Dollar exchange at 1.0.

With smaller year over year declines our guidance is based on a euro to dollar exchange of one eight.

Marshall Witt: The non-gap effect of tax rate was approximately 21%, better than our forecast of 24%, primarily due to our ability to utilize tax credits earned in certain jurisdictions. Total non-gap net income was 260 million, and non-gap diluted EPS was $2.78, 8 cents above the high end of our guidance range, and up 1.5% year over year. Now, turning to the balance sheet, we ended the quarter with cash and cash equivalence of 1.25 billion and debt of 4.1 billion.

Speaker 4: Non-Gap Net Income is expected to be in the range of 223 million to 269 million. And non-Gap Deluted DPS is expected to be in the range of $2.40.

non-GAAP net income is expected to be in the range of $223 million to 269 million and non-GAAP diluted EPS is expected to be in the range of $2 40.

Speaker 4: $2.90 per diluted share based on weighted average shares outstanding of approximately 91.9 million. Non-GAP interest expense expected to be approximately 70 million and we expect the non-GAP tax rate to be approximately 24.

To $2 90 per diluted share based on weighted average shares outstanding of approximately $91 $9 million non-GAAP interest expense is expected to be approximately $70 million and we expect the non-GAAP tax rate to be approximately 24%.

Speaker 4: Lastly, on shareholder returns, we have generated 1.1 billion of free cash flow year to date and have returned 377 million to shareholders who share repurchases and dividends.

Lastly on shareholder returns, we have generated $1 1 billion of free cash flow year to date and have returned $377 million to shareholders through share repurchases and dividends, putting us on track to reach the full year target discussed in June of $580 million. We are now expecting to generate approximately $1 3 billion.

Marshall Witt: Our gross leverage ratio was 2.2 times and net leverage was 1.6 times in line with our investment grade credit rating and approaching our target of 2 times gross leverage ratio. Accounts receivable totaled 8.9 billion, up from 8.4 billion in the par quarter, and inventory is totaled 7.5 billion, down from 7.8 billion in the par quarter. Networking capital at the end of the third quarter was 3.3 billion, down from 3.8 billion in quarter two, primarily due to declines in inventory and increased accounts payable.

Speaker 4: Putting us on track to reach the full your target discussed in June of 580 million. We are now expecting to generate approximately 1.3 billion of free cash flow for the year. Outperform our original target of 1 billion for fiscal 23.

Our free cash flow for the year outperform our original target of 1 billion for fiscal 'twenty three.

Speaker 4: We will continue to be opportunistic regarding shared repurchases while adhering to the general framework. We have previously communicated to the Mark.

We will continue to be opportunistic regarding share repurchases, while adhering to the general framework, we have previously communicated to the market.

Speaker 4: In closing, we remain confident in our ability to successfully navigate fluctuations in the demand environment as customers react to rapidly changing technology needs. And we'll continue to lean on our strategic priorities to expand and hydro technologies, while also optimizing our core business as we return to a more normalized spending environment. With that, we are now ready to take your questions. Operator.

In closing, we remain confident in our ability to successfully navigate fluctuations in the demand environment.

Marshall Witt: The cash conversion cycle for the third quarter was 23 days, a one-day improvement from quarter two, primarily due to improvements in our inventory profile given the healthier supply chain environment. Cash from operations in the quarter was $592 million, and pre-cash flow was $552 million. We have generated approximately $1.1 billion in pre-cash flow year to date. We continue to prioritize showhold returns during the quarter, returning $103 million via share repurchases, and $33 million through dividend payments.

As customers react to rapidly changing technology needs and we'll continue to lean on our strategic priorities to expand and hydro technologies, while also optimizing our core business as we return to a more normalized spending environment with that we are now ready to take your questions operator.

Speaker 1: Thank you. If you have a question, please press star one on your telephone keypad. If you wish to remove yourself from Q, simply press star one again. We request that you limit yourself to one question to allow time for other participants to ask their questions.

Thank you.

You have a question. Please press star one on your telephone keypad, if you wish to remove yourself from Q simply press star one again.

Request that you limit yourself to one question to allow time for other participants to ask their questions.

Marshall Witt: Year to date, we now have repurchased $278 million and have approximately $740 million remaining under our current share repurchase authorization. For the current quarter, our Board of Directors has approved the cash dividend of $0.35 for a common share, payable on October 27 of 2023 to stockholders of records as of the close of business on October 13, 2023.

Speaker 1: If there are as many time, you are welcome to re-intercute with additional questions. One moment please for your first question.

If there is room anytime you are welcome to reenter queue with additional questions. One moment. Please for your first question.

Okay.

Your first question comes from the line of.

Baruah of loop capital your line is open.

Speaker 5: Hey, thanks guys, good morning. Yeah, appreciate it. Appreciate taking the question and all the detail. I guess, let me make my question follow.

Hey, Thanks, guys good morning.

Marshall Witt: Moving now to our outlet for fiscal fourth quarter, we expect gross billings of $18.5 billion to $19.7 billion, representing a 3% sequential improvement from quarter three, and a decline of 9% on a year-rear basis at the midpoint. We expect total revenue to be the range of $14 billion to $15 billion, which equates to a 4% sequential improvement from quarter three, and a decline of 11% on a year-rear basis at the midpoint.

Yes, I appreciate I appreciate taking the question and all the detail.

Yes.

Let me make my question following <unk>.

Speaker 5: You guys have an easy view on the likelihood that you could have now be at the bottom in $1 run rate.

You guys you guys have any view on the likelihood that you could have you could now be at the bottom.

And dollar run rate.

Speaker 5: And I guess I'd love any context. I'm sure I'm not the only one, just sort of how you're viewing the European softness, you know, in the context of a rep dollar, a rep rate going forward. Thanks a lot. I appreciate it.

And I guess I'd love any context shall not be I'll, just sort of how youre viewing the European softness.

Marshall Witt: The expected sequential improvement from quarter three is slightly below our historical compares, and is primarily driven by the market challenges in Europe, partially offset by improvements in the Americas. For the PC segment, as we discussed in June, we believe we have seen the low point for year-over-year declines and expected recovery to continue in Q4, with smaller year-over-year declines. Our guidance is based on a year-to-dollar exchange of 1.08. Non-gap net income is expected to be in the range of 223 million to 269 million, and non-gap diluted DPS is expected to be in the range of $2.40 to $2.90 per diluted share, based on weighted average shares outstanding of approximately 91.9 million.

In the context of Rev. Dollar run rate going forward. Thanks, a lot appreciate it.

Speaker 3: Good morning and on that I hope you're doing well. Thanks for the question.

Good morning, and I hope Youre doing well thanks for the question.

Speaker 3: So let's take it by region first, and then we'll talk about the major product areas and what the dynamics that we're seeing. So first.

So.

Let's take it by.

By region first and then we'll talk about.

The major product areas and the dynamics that we're seeing so.

So first.

Speaker 3: You all might recall as we came through the first half of the year we had talked about Europe being stronger than anticipated. We all knew the headwinds of that face in Europe and Europe was performing better in the top line than the Americas.

You all might recall as we came through the first half of the year, we had talked about Europe being stronger than anticipated.

We all knew of the headwinds.

Based in Europe and Europe .

It was performing better than the top line than the Americas.

Speaker 3: We had seen a change in that cycle, if you will, in the third quarter, where Europe began to look a lot like the Americas looked like in the first half. And from memory here, their overall top-line performance was reasonably consistent between the two and Q3.

We had seen.

The change in that cycle, if you will in the third quarter, where Europe .

Marshall Witt: Non-gap interest expense is expected to be approximately 70 million, and we expect the non-gap tax rate to be approximately 24%. Lastly, on shareholder returns, we have generated 1.1 billion of free cash low year-to-date, and have returned 377 million to shareholders to share repurchases and dividends, putting a thunt rack to reach the full-year target discussed in June of 580 million. We are now expecting to generate approximately 1.3 billion of free cash flow for the year, outperform our original target of 1 billion for fiscal 23. We will continue to be opportunistic regarding share repurchases while adhering to the general framework we have previously communicated to the market.

We began to look a lot like the Americas looked like in the first half.

From memory here.

Overall top line performance was reasonably consistent between the two in Q3.

Speaker 3: So, you know, that was something that had emerged as new.

So that.

That was something that had emerged as new.

Speaker 3: At the same time, you know, the Americas, as we were talking about in our prior call, had seen a declining...

At the same time.

Americas.

As we were talking about in our prior call.

I had seen a declining.

Speaker 3: dynamic in the in the end point business and had strength in advanced solutions.

The dynamic in the in the endpoint business and had strength in advanced solutions.

Speaker 3: So as we move through time here, and as we continue forward, our anticipation is we continue to see the trend of declining endpoint, you know, lesser declines, if you will, over time. And then a moderation of the growth within advanced solutions.

So as we move through time here and as we continue forward our anticipation as we continue to see that the trend of declining endpoint.

Marshall Witt: In closing, we remain confident in our ability to successfully navigate fluctuations in the demand environment as customers react to rapidly changing technology needs and will continue to lean on our strategic priorities to expand and high-growth technologies while also optimizing our core business as we return to a more normalized spending environment.

Lesser declines if you will over time, and then a moderation of the growth within <unk>.

Advanced solutions.

Speaker 3: You know, based on the fact that those backlogs have been pretty well run down and the prior quarters for the industry as well as ourselves had benefited from the advanced solutions, a backlog runoff, sort of a late pre-COVID emergence of, you know, strengthen that advanced solutions.

Based on the fact that.

Those backlogs have been pretty well run down in the prior quarters for the industry as well as ourselves had benefited from the advanced solutions.

Jail: With that, we are now ready to take your questions. Operator? Thank you. If you have a question, please press star one on your telephone keypad. If you wish to remove yourself from Q, simply press star one again. We request that you limit yourself to one question to allow tone for other participants to ask their questions. If there is room any time, you are welcome to re-intercute with additional questions. One moment please for your first question.

Log run off sort of.

Sure.

Elite pre COVID-19 emergence of.

The strength of net advanced solutions business.

Speaker 3: So, you know, as it relates to looking forward, you know, we'll address next year when we get to it. The trends are consistent with what we were stating for the last couple of quarters in terms of the PC dynamics and the AS dynamics, but we'll reserve, you know, a view as to whether or not we're at the bottom or for the next call when we get into our Q1 guidance.

So.

As it relates to looking forward.

We'll address next year, when we get through it.

Trends are consistent with what we were.

Stating for the last couple of quarters in terms of the PC dynamic and the ASP dynamic.

Ananda Baruah: Your first question comes from the line of Ananda Baruah of Luke Capital. Your line is open. Hey, thanks guys, good morning. Yeah, appreciate taking the question in all the detail. I guess let me make my question following you guys you guys have any view on the likelihood that you could have now you could now be at the bottom in red dollar run rate. And I guess I'd love any context. I'm sure I'm not the only one just sort of how you're viewing the European softness. You know, in the context of a red dollar run rate going forward. Thanks a lot.

But we'll reserve.

Rick Hume: Appreciate it.

Our view as to whether or not we're at the bottom.

<unk> for the next call when we get into our Q1 guidance.

Speaker 5: The hard sounds great. We really appreciate it. Thanks a lot for the context.

Alright sounds great really appreciate it thanks for that.

Right.

Yeah.

Speaker 1: Your next question comes from a line of Mike in of Goldman Sachs, your line is

Your next question comes from the line of Mike <unk> of Goldman Sachs. Your line is open.

Speaker 6: Hey, good afternoon. Good morning. Thank you for the question. I just had one on PCs. It was encouraging to hear about the trough and endpoint solutions, smaller clients going forward. I was just wondering if you could just give a little bit more commentary to support that view. What are you seeing in terms of channel inventory, green shoots, and demand levels on PCs and handsets?

Hey, good afternoon. Good morning. Thank you for the question I just have one on Pcs. It was encouraging to hear about the trough and endpoint solutions smaller clients going forward.

Was just wondering if you could just give a little bit more commentary to support that view.

Ananda Baruah: Good morning, Ananda. I hope you're doing well. Thanks for the question. So let's take it by by region first and then we'll talk about, you know, the major product areas and what the dynamics that we're seeing. So first, you all might recall is we came through the first half of the year we had had talked about Europe being stronger than anticipated. We all knew the headwinds that they had faced in Europe and Europe was performing better in the top line than the Americas.

What are you seeing in terms of channel inventory green shoots in demand levels on Pcs and handsets.

Ananda Baruah: And we had seen a change in that cycle, if you will, in the third quarter where Europe began to look a lot like the Americas looked like in the first half. And, you know, from memory here, they're overall top line performance was reasonably consistent between the two and Q three. So, you know, that that was something that had emerged as new. At the same time, you know, the Americas, as we were talking about in our prior call, had seen a declining dynamic in the in the end point business and had strength in advanced solutions.

Speaker 6: and anything that you would call out this quarter as a relate to performance by vertical. I know it's a big education quarter, thank you.

And anything that you would call out this quarter as it relates to performance by vertical I know, it's a big education quarter. Thank you.

Yes so.

Speaker 3: A couple of thoughts. So first of all, in our prior quarter, we had said that two and three Q should be the trough for the PC business.

A couple of thoughts so first of all.

In our prior quarter, we had said that <unk> should be the trough for the PC business on a global basis. In fact, we saw that trend. If you will lesser declines moving through time, we would anticipate that Q4 would provide sort of the same dynamic of <unk>.

Speaker 3: On a global basis, in fact, we saw that trend of, if you will, lesser declines moving through time. We would anticipate that 2-4 would provide sort of the same dynamic of lesser declines moving through time.

Or declines moving through time.

Speaker 3: What I would also comment that globally, although there were lesser declines, PC as a category was a little bit weaker than what we had thought, and the advanced solutions was a little bit stronger. As you know,

What I would also comment that.

Globally, although there were lesser decline PC as a category was a little bit weaker than we had thought and.

The advanced solutions was a little bit stronger as you know the the overall revenue came in at the midpoint of the guide. So there was some mix shift happening there.

Speaker 3: The overall revenue came in at the midpoint of the guide. So there was some mixed shift happening there, but the trend held lesser the clients in PCs. But again, PC software, you know, relative to some of our forecast details offset, you know, by advanced solutions.

But the trend held lesser declines in Pcs, but again.

PC softer.

Relative to some of our forecast the detail offset.

Ananda Baruah: So, as we move through time here and as we continue forward our anticipation as we continue to see the trend of declining end point, you know, lesser declines, if you will, over time. And then a moderation of the growth within advanced solutions, you know, based on the fact that those backlogs have been pretty well run down and the prior quarters for the industry, as well as our self had benefited from the advanced solutions of backlog runoff, sort of a late pre COVID emergence of, you know, strengthen that advanced solutions business.

By advanced solutions from a vertical perspective, the only one that I'd point out that.

Speaker 3: From a vertical perspective, you know, the only one that I'd point out that, you know, had showed some strength is federal. And in addition to that, yeah, the education piece got a bit of a boost because, you know, the Chrome category last year was very weak. And, you know, we started to see Chrome emerge a bit within the education domain.

Had showed some strength is federal and in addition to that the education piece got a bit of a boost because the chrome category last year was very weak and we started to see chrome emerge a bit within the education.

Domain.

Speaker 3: in the prior corridor or there actually are reported quarters, sorry about that.

And the end of the prior quarter or actually our reported quarter sorry about that.

Excellent. Thank you very much I appreciate the thoughts.

Speaker 1: Your next question comes from the line of Adam Tindall of Raymond James. Your line is open.

Your next question comes from the line of Adam Tindle of Raymond James Your line is open.

Ananda Baruah: So, you know, as it relates to looking forward, you know, world will address next year when we get to it. The trends are consistent with what we were stating for the last couple of quarters in terms of the PC dynamics and the AS dynamic. But we'll reserve, you know, a view as to whether or not we're at the bottom, worth for the next call when we get into our Q1 guidance. Hi, it sounds great. We really appreciate it. Thanks for the contact.

Speaker 5: Okay, thanks. Good morning. I just wanted to start on guidance for Q4, particularly on an EPS basis. Understand last year had that 33 cent benefit from the high recovery, but you still grew sequentially from Q3 to Q4 last year. X that.

Okay. Thanks, Good morning, I just wanted to start on guidance for Q4, particularly on an EPS basis understand last year had that 33 benefit from the high recovery, but you still grew sequentially from Q3 to Q4 of last year.

Speaker 5: And this year, if I look at the guidance, you are calling for sequential revenue growth from Q3 to Q4, but earnings appear to be down at the midpoint.

Ex that.

This year, if I look at the guidance you are calling for sequential revenue growth from Q3 to Q4, but earnings appear to be down at the midpoint youre accelerating share repurchases based on the commentary. So it just implies a lot of margin erosion and I'm, hoping for a little bit more color I understand EMEA as a region, but.

Speaker 5: You're accelerating share repurchase based on the commentary. So it just implies a lot of margin erosion. And I'm hoping for a little bit more color. I understand Anea as a region, but what is driving the sequential margin erosion and why would ETSB down despite typically seasonally?

Mike Aime: Your next question comes from the line of Mike Aime of Goldman Sachs. Your line is open. Hey, good afternoon. Good morning. Thank you for the question. I just have one on PC. It was encouraging to hear about the trough and endpoint solutions, smaller clients going forward. I was just wondering if you could just give a little bit more commentary to support that view. What are you seeing in terms of channel inventory, green shoots, and demand levels on PCs and handsets, and anything that you would call out this quarter as a relate to performance by vertical. I know it's a big education quarter. Thank you.

What is driving that sequential margin erosion and why would the EPS beat.

Despite typically seasonally.

Speaker 4: Hey, Adam. This is Marcel. Thanks for the question. Your rights to quenchally between Q3 and Q4. We typically see about a 8% growth plus or minus.

Up.

Hey, Adam this is mark so thanks for the question.

Youre right sequentially between Q3, and Q4, we typically see about an 8% growth plus or minus 2% on either side as you saw and heard from our prepared remarks. It is now about 3% to 4%. So the majority of.

Speaker 4: I need your side as you found heard from our prepared market. It's now about three to four percent. So the majority of the margin decline is primarily a tribunal to the reduction in revenue and typically the fall through in normal quarter fours. We do see quite a bit of fall through on the incremental revenue that takes place between the two quarters.

The margin decline is primarily attributable to the.

The reduction in revenue and typically the fall through.

Rick Hume: Yeah, so a couple of thoughts. So, first of all, in our prior quarter, we had said that two and three Q should be the trough for the PC business. On a global basis, in fact, we saw that trend of, if you will, lesser declines moving through time. We would anticipate that Q4 would provide sort of the same dynamic of lesser declines moving through time. What I would also comment that globally, although there were lesser declines, PC as a category was a little bit weaker than what that we had thought.

Normal quarter for us, we do see quite a bit of fall through on incremental revenue that takes place between the two quarters.

Speaker 4: That's the majority of the overall margin decline from what we have seen historically. You're right, we had that one time call out for high last year that we wanted to make sure people were aware of.

The majority of the overall margin decline from what we've seen historically, you're right. We had that onetime callout for high of last year that we wanted to make sure people are aware of.

Speaker 4: And then you commented about Europe because of the softening we're seeing there in the portfolio, their direct costs are still a little bit out of line in regards to where we needed to be, but expect that that will correct us so far for time. And then maybe a little bit more softer underneath that.

And then you commented about Europe because of the softening we're seeing there in the portfolio. There are direct costs are still a little bit out of line in regards to where we needed to be.

But expect that that will correct itself over time, and then maybe a little bit more softer underneath that.

Speaker 4: In Asian America, although good progress is being made on the optimization.

In Asia and Americas, although good progress is being made on the optimization that we called out last quarter that plays out over Q3, four and Q and Q1, there is still a little bit of direct costs in relationship to gross revenue that will continue to correct itself in the coming quarters.

Speaker 4: that we called that last quarter that plays out over Q3, 4, and Q1. There still is a little bit of direct cost in relation to gross revenue that will continue to correct itself in the coming.

Rick Hume: And the advanced solutions was a little bit stronger. As you know, the overall revenue came in at the midpoint of the guide, so there was some mixed shift happening there. But the trend held lesser declines in PCs. But again, PC softer relative to some of our forecasts, the detail offset by advanced solutions.

Speaker 3: Yeah, the only thing that I would add, Adam, and it's a bit repetitive. You know, we're on last quarter, we talked about a sequential at 8%, and as Marshall says, it's now 3 to 4%. If you go to do the math and look at the flow through, if you will, that sequential being lower than anticipated, you'd find out that it's sort of most of the shortfall, you know, relative to our comments and the prior call.

Yes, the only thing that I would add Adam and it's a bit repetitive.

And last quarter, we talked about a sequential at 8% and as Marshall says, it's down 3% to 4%. If you go to do the math and look at the flow through of if you will that that sequential being lower than anticipated.

Rick Hume: From a vertical perspective, the only one that I'd point out that had showed some strength is federal. And in addition to that, yeah, the education piece got a bit of a boost because the Chrome category last year was very weak. And we started to see Chrome emerge a bit within the education domain in the prior quarter. Or there actually are reported quarters. Sorry about that. Excellent. Thank you very much. I appreciate the thoughts. Yep.

You'll find out that it's sort of most of the shortfall.

Relative to our comments in the prior call.

Speaker 3: Is there any way for us to kind of understand where that shortfall is coming from? It sounds like troughing endpoint solutions. That's, you know, things are getting better there. What is the product category or vertical that's causing that shortfall? Always lots of moving parts out of them, but if I were to give you the big headlight, it would be a softer Europe relative to 90 days earlier.

Is there any way for us to kind of.

I understand where that shortfall is coming from it sounds like <unk> endpoint solution, that's things are getting better there.

Does the product category or vertical that's causing that shortfall.

Always lots of moving parts, Adam, but if I were to give you the big headlight it would be a softer Europe relative to 90 days earlier.

Adam Tindle: Your next question comes from the line of Adam Tindle of Raman James. Your line is open. Okay. Thanks. Good morning.

Speaker 5: Okay, because all the other we think about on that business is being a little bit unique from the mobility piece, is that maybe fairer that characterised.

Okay, because all the way to think about that business as being a little bit unique from the mobility piece of that may be fair to characterize.

Marshall Witt: I just wanted to start on guidance for Q4, particularly on an EPS basis. Understand last year had that 33 cent benefit from the high recovery. But you still grew sequentially from Q3 to Q4 last year. X that. And this year, if I look at the guidance, you are calling for sequential revenue growth from Q3 to Q4. But earnings appear to be down at the midpoint. You're accelerating share repurchase based on the commentary.

Speaker 3: So what I would tell you is I would think about it as more broad-based than just one segment. It's across the majority of the portfolio right now. Okay, just last one.

So what I would tell you is I would think about it as.

More broad based than than just one segment.

It's across the majority of.

The portfolio right now.

Okay, just last one Marshall.

Speaker 5: Congrats on the cash flow here today. You had, I think previously talked about an annual goal of a billion in cash flow, obviously you're already there. So wondering if that's still the right way to think about it. I think Q4 is normally a positive for your cash flow quarter, but I know it can be volatile.

Congrats on the cash flow year to date.

I think previously you talked about an annual goal of $1 billion in cash flow, obviously, you're already there. So wondering if that's still the right way to think about it I think Q4 is normally a positive free cash flow quarter, but I know it can be volatile and looking forward as you are.

Marshall Witt: So it just implies a lot of margin erosion. And I'm hoping for a little bit more color. I understand Ania as a region. But what is driving the sequential margin erosion? And why would EPS be down despite typically seasonally? Hey, Adam, this is Marshall. Thanks for the question. You're right sequentially between Q3 and Q4. We typically see about an 8% growth plus or minus 2% on either side as you found heard from our prepared market.

Speaker 5: And looking forward, you know, as you reflect on this year's cashflow performance, you know, are there any pieces of this that might be a little bit more temporary, you know, working capital benefits that don't repeat itself, or do you think this is sort of a baseline to build up?

Reflect on this year's cash flow performance are there any pieces of this that might be a little bit more temporary working capital benefits that don't repeat itself or do you think this is sort of a baseline to build off of.

Speaker 4: Yeah, thanks for the question, Adam. For the year-to-date cash flow of 1.1 billion, we did see about a half to billion of working capital on wine. We expected that as we spoke to, as we finished last year, and had inventory elevations, we knew those would unwind. So 500 million or so of that 1.1 billion is working capital on wine.

Yes, thanks for the question Adam.

For the year to date cash flow of $1 1 billion. We did see about a <unk> 5 billion of working capital unwind, we expected that as we spoke to as we finished last year.

Marshall Witt: It's now about 3 to 4%. So the majority of the the margin decline is primarily a tribunal to the reduction in revenue and typically the fall through in normal quarter fours. If we do see quite a bit of fall through on the incremental revenue that takes place between the two quarters, that's the majority of the overall margin decline from what we have seen historically. You're right. We had that one time call out for high last year that we wanted to make sure people were aware of.

And had inventory elevations, we knew those would unwind, so 500 million or so of that $1 1 billion as working capital unwind.

Speaker 4: We're still fairly confident about hitting a $1.3 billion dollar target for this year. And then if I think about cash conversion and how that progresses over the medium term, we still feel confident about achieving that $1.5 billion over that medium term, which we're calling fiscal 25 for 20.

We're still fairly confident about hitting a $1 $3 billion target for this year and then if I think about cash conversion and how that progresses over the medium term, we still feel confident about achieving that $1 5 billion over that medium term, which we're calling fiscal 'twenty five 'twenty six.

Marshall Witt: And then you commented about Europe because of the softening we're seeing there in the portfolio, their direct costs are still a little bit out of line in regards to where we needed to be. But expect that that will correct us so far for time. And then maybe a little bit more softer underneath that in Asian America, although good progress is being made on the optimization that we called that last quarter that plays out over Q3, 4 and Q1.

Speaker 1: Thank you. Your next question comes from a line of Keith Housam of North Coast Research. Your line is open.

Thank you. Your next question comes from the line of.

Keith Hussam of Northcoast Research your line is open.

Speaker 5: Good morning guys, you know, Marshall, with the interest rates where they are today, and perhaps, you know, only one more at CZL, how are you guys thinking about get paid down versus increasing your capital allocation toward which we're trying to share, hold it.

Good morning, guys Marshall with interest rates, where they are today and perhaps.

Only one more increase to go are you guys thinking about debt paydown versus increasing your capital allocation toward returning to shareholders.

Speaker 4: Yes, thanks for the question that keeps interest rates are high. The variable aspects right now is running it around 7%.

Yes. Thanks for the question keep interest rates are high now the variable aspects right now is running at around 7%.

Marshall Witt: There still is a little bit of direct costs in relation to gross revenue that will continue to correct itself in the coming quarters. Yeah, the only thing that I would add Adam and it's a bit repetitive. You know, we're on last quarter, we talked about a sequential at 8% and as Marshall says, it's now 3 to 4%. If you go to do the math and look at the flow through if you will, that sequential being lower than anticipated, you find out that it's sort of most of the shortfall relative to our comments and the prior call.

Speaker 4: So we'll remain fairly balanced in our outlook about where we are with our leverage. We're at the 2.2 times gross and 1.6 net. That might go up a little bit in Q4, primarily just due to the trailing four to five quarters of the eva d'â. But other than tenor, we're not anticipating making any other incremental paydowns and debt. But being mindful of cash flow and how best to redeploy that within the options.

So we'll remain fairly balanced in our outlook about where we are with our leverage we're at two two times gross and $1 six net that might go up a little bit in Q4, primarily just due to the trailing four to five quarters of EBITDA, but rather than tenor we're not anticipating making any other income.

That'll pay downs in that but being mindful of cash flow and how best to redeploy that within the options that we have.

Speaker 5: Great. And then if I look at the last four point you guys had in your range it just makes it sound like you guys will be increasing your share repartuses in the fourth quarter. Is that the part related to read that?

Great and then if I look at the last four point you guys had your earnings release, which does make it sound like you guys will be increasing your share repurchases in the fourth quarter is that correct rate reductions.

Marshall Witt: Is there any way for us to kind of understand where that shortfall is coming from? It sounds like troughing endpoint solutions, that's, you know, things are getting better there. What is the product category or vertical that's causing that shortfall? Always lots of moving parts, Adam. But if I were to give you the big headlight, it would be a softer Europe relative to 90 days earlier. Okay, because all that we think about on that business is being a little bit unique from the mobility piece, is that maybe fairer to characterize? So what I would tell you is I would think about it as more broad based than than just one segment, you know, it's across the majority of the portfolio right now.

Speaker 4: It is, in my prepare to march, we commented about where we were at for the year to date, 3Q3 and all in for the for the full year at 580. That puts us in a repurchase expectation of about 170 million for the quarter. So that's where we do see some acceleration to show repurchases. And given the strength in our cash flow, we're going to remain opportunistic as well and play that based on price and overall completion of the quarter.

It is in my prepared remarks, we commented about where we're at for the for year to date through Q3 and all in for the for the full year at $5 80 that puts us in a repurchase expectation of about $170 million for the quarter. So that's where we do see some acceleration of share repurchases and given the strengthen and our cash.

We're going to remain opportunistic as well.

And play that based on price and overall.

Completion of the quarter.

Speaker 5: Great. And then one more if I can get it in here. I know it's a lot too small, but the Asia Pacific and Japan area, and I know a good quarter broke there in a solid evanculation in India and Australia driving that. But if that sustainable growth, and maybe you guys, are you guys able to sustain that growth going forward in that region?

Great and then one more if I can get them going here and also a relatively small, but the Asia Pacific and Japan area and good quarter growth there.

We've got solutions in India, and Australia is driving that is that sustainable growth and maybe you guys are you guys able to sustain that growth going forward in that region.

Marshall Witt: Okay, this last one, Marshall, congrats on the cash flow you're today. I think previously talked about an annual goal of a billion in cash flow, obviously you're already there. So wondering if that's still the right way to think about it. I think Q4 is normally a positive three cash flow quarter, but I know it can be volatile. And looking forward, you know, as you reflect on this year's cash flow performance, are there any pieces of this that might be a little bit more temporary?

Speaker 3: So Keith, you know, I think you have to break it down a bit. I think that the region right now that seems to have, you know, outsized opportunity is India. You know, obviously there's a lot going on there relative to major vendors of resourcing supply chains, et cetera.

So Keith.

Think you have to break it down a bit I think that the.

The region right now that seems to have.

Outsized opportunity is India.

Obviously, there is a lot going on there relative to major vendors resourcing supply chain et cetera. So.

Marshall Witt: You know, working capital benefits that don't repeat itself, or do you think this is sort of a baseline to build off of? Yeah, thanks for the question, Adam, for the year-to-date cash flow of 1.1 billion, we did see about a half billion of working capital online. We expected that as we spoke to as we finished last year and had inventory elevations, we knew those would unwind. So 500 million or so of that 1.1 billion is working capital online.

Speaker 3: So, you know, my view is that maybe they're a little bit insulated from the economic cycles, but the rest of the region, I think, kind of, has a dynamic of the rest of the world, and, you know, will have been flow based on, on, you know, that macro, you know, that would be my view.

My view is that maybe they are little bit insulated from the economic cycles, but the rest of the region I think kind of.

The dynamic of the rest of the world.

And we will ebb and flow based on on.

That macro.

That would be my view.

Speaker 1: Your next question comes from a line of Joseph Cardoso, of JP Morgan. Your line is open.

Your next question comes from the line of Joseph Cardoso of Jpmorgan. Your line is open.

Marshall Witt: We're still fairly confident about hitting a 1.3 billion dollar target for this year. And then if I think about cash conversion and how that progresses over the medium term, we still feel confident about achieving that 1.5 billion over that medium term, which we're calling fiscal 25 for 20. Thank you.

Speaker 6: Hey, good morning, everyone. Thanks for the question. Yeah, the one question from me, can you just touch on the better trends that you're seeing in North America? Curious, the better trends that you're seeing in the region are weighted towards any particular customer verticals like public sector, or you're seeing the recovery in the region more broadly. And has that recovery been linear through the quarter? Because I remember last quarter, you suggested that there was choppin' as you kind of looking at it from a month by month base. It's curious if you can test on that. Thanks.

Hey, good morning, everyone. Thanks for the question.

Yes. One question from me can you just touch on the better trends that Youre seeing in North America curious a bit better trends that youre seeing in the region are weighted towards any particular customer verticals like public sector or are you seeing the recovery in the region more broadly and that recovery than linear through the quarter because I remember last quarter you suggested that there was <unk>.

Keith Housum: Your next question comes from a line of Keith Housum of North Coast Research. Your line is open.

<unk> as you kind of looking at it from a month by month basis curious if you could touch on that thanks.

Marshall Witt: Good morning, guys. You know, Marshall, with the interest rates where they are today, perhaps, you know, only one more at CZL, how are you guys thinking about that paydown versus increasing your capital allocation toward returning to shareholders? Yes, thanks for the question, Keith, interest rates are high. The variable aspects right now is running at around 7%. So we'll remain fairly balanced in our outlook about where we are with our leverage. We're at the 2.2 times gross and 1.6 net that might go up a little bit in Q4 primarily just due to the trailing four to five quarters of the eva da.

Speaker 3: Yes, so, you know, the stronger performers have been...

Yes so.

The stronger performers.

Ben.

Speaker 3: You know, I'm mixing offering sets here with verticals, but the stronger performers have been advanced solutions and that has been pretty consistent throughout the year.

Yes.

Mixing offering sets here with.

With the verticals, but stronger performers have been.

Advanced solutions and that has been pretty consistent throughout the year.

Speaker 3: You know, pretty, pretty robust growth rates in that business.

Pretty pretty robust growth rates in that business.

Speaker 3: At the same time from a vertical perspective as stated earlier, the federal has been a stronger vertical overall.

At the same time from a vertical perspective as stated earlier the federal has been a strong stronger vertical overall.

Speaker 3: And then, you know, the benefit, if you will, moving through time of lesser declines in the endpoint. And again, we believe that that trend will continue as we move forward. Those would be the big changes. And I think Marshall has something to add. Yeah, Joe, just to your question around linearity and volatility, we're still seeing a little bit about month to month.

And then the benefit if you will moving through time of <unk>.

Marshall Witt: But other than tenor, we're not anticipating making any other incremental paydowns and debt, but being mindful of cash flow and how best to redeploy that within the options that we have. Great, and then if I look at the last four point you guys had in your range, it just makes me feel like you guys will be increasing your share of purchases in the fourth quarter. Is that the calculated read that? It is, in my prepare remarks, we commented about where we were at for the year-to-date 3Q3 and all in for the full year at 580.

<unk> declines and the endpoint.

And again, we believe that that trend will continue as we move forward. So those would be the big changes and I think Marshall has something to add yes, Joe just to your question around linearity.

The volatility we are still seeing a little bit about month to month.

Speaker 4: I'll call it a good month, a stock month, a good month, and so that necessarily hasn't gone away. The generally said is rich said for America's both AS still showing growth, ES showing declining or improvement of the declines on a year-to-year basis.

Call. It a good month, a soft month, a good month, and so that necessarily hasn't gone away.

But generally said as rich said for Americas, both Aaas.

Marshall Witt: That puts us in a repurchase expectation of about 170 million for the quarter. So that's where we do see some acceleration to share repurchases. And given the strength in our cash flow, we're going to remain opportunistic as well and play that based on price and overall completion of the quarter.

Showing growth es, showing declining our improvement of the declines on a year over year basis.

Keith Housum: Great, and then one more if I can get it in here.

Speaker 4: And then we can't forget about our high growth technology services. Those continue to perform well as we said cloud security, IoT data analytics grew more than 10%. And that's a that's a comment beyond America's, but it certainly did help America.

And then we can't forget about our high growth technology.

<unk> those continue to perform well as we said cloud security Iot data analytics grew more than 10%.

And that's a that's a comment beyond America's but it certainly did help Americas.

Keith Housum: I know it's small, but the Asia Pacific and Japan area and our good quarter growth there. That's how the acceleration in India and Australia are driving that.

Thanks, guys I appreciate the color.

Yeah.

Speaker 1: Your next question comes from line of Matt Sheeran of Steeple. Your line is open.

Your next question comes from the line of Matt Sheerin of Stifel. Your line is open.

Rick Hume: Is that sustainable growth? Are you guys able to sustain that growth going forward in that region? So Keith, I think you have to break it down a bit. I think that the region right now that seems to have, you know, outsized opportunity is India. Obviously, there's a lot going on there relative to major vendors of resourcing supply chains, et cetera. So, you know, my view is that maybe they're a little bit insulated from the economic cycles, but the rest of the region I think kind of has a dynamic of the rest of the world. And, you know, we'll ebb and flow based on, you know, that macro, you know, that would be my view.

Yes, Thank you and good morning, everyone.

Speaker 7: I had another question just regarding your commentary on advanced solutions, which has been strong.

I had another question just regarding your commentary on advanced solutions, which has been strong.

Speaker 7: But Rich, you mentioned that backlog has been coming down. Could you give us more details on what the backlog levels are and drill down by product area, servers, storage, networking. And as you go forward in that growth slows and endpoint solution starts to have favorable year-to-year comms.

But rich you mentioned that backlog has been coming down could you give us more details on what the backlog levels are and drill down by by product area servers storage networking and as you go forward in that growth slows and endpoint solution starts to have faith.

Verbal year over year comps I would think that that could pressure gross margin. So how should we think about sort of drop through in that mix shift and what the operating margins might what might look like.

Speaker 7: I would think that that could pressure close margins. So how should we think about sort of draw through in that mid shift and what the operating margins might look?

Speaker 3: Thank you Matt. Good morning. I'll handle the first part of the questions and I'll turn it to Marshall for the back half of the question.

Thank you Matt Good morning, I'll handle the first part of the question then I'll turn it to Marshall for the back half of the question.

Speaker 3: So, you know, I think we had started to make the statement in our last quarter that the backlog is beginning to near profile.

Joseph Cardoso: Your next question comes from a line of Joseph Cardoso of JP Morgan. Your line is open. Hey, good morning, everyone. Thanks for the question. Yeah, the one question for me. Can you just touch on the better trends that you're seeing in North America? Curious that the better trends that you're seeing in the region are weighted towards any particular customer verticals like public sector, or you seem to recovery in the region more broadly.

So.

I think we had started to make the statement in our last quarter that the backlog is beginning to near profile.

Speaker 3: And, you know, I think that if we were to represent where we are today, that's exactly what we'd say is we're near profile. Sort of a...

In.

If we were to represent where we are today, that's exactly what we'd say is we're near profile.

Speaker 3: A side comment here, you know, we've been talking over many quarters here about, you know, our inventory being higher than normal because of the serviceability of the supply chain.

<unk>.

Hey.

Besides comments here, we've been talking over many quarters here about our inventory being higher than normal because of the service ability of the supply chain and now you see with the.

Joseph Cardoso: And has that recovery been linear through the quarter because I remember last quarter you suggested that there was chopiness as you're kind of looking at it from a month by month base. This curious if you can touch on that. Thanks. Yeah, so, you know, the stronger performers have been, you know, I'm mixing offering sets here with with verticals, but the stronger performers have been advanced solutions and that that has been pretty consistent throughout the year.

Speaker 3: And now you see with the reductions in inventory and inventory sort of nearing historical profiles that the serviceability of the

Reductions in inventory and inventory sort of nearing historical profiles that the service ability of.

Speaker 3: the overall business is becoming quite good. So, I would say that almost across the board right now, products that wise.

The overall business is becoming quite good so I would say that almost across the board right now product set wise.

Speaker 3: We're at profile and serviceability has been restored. If there were one category that I'd call out that might have had some.

We're we're at profile and serviceability is has been restored if there were one category that I'd call out that might have had some.

Joseph Cardoso: You know, pretty, pretty robust growth rates in that business. At the same time from the vertical perspective as stated earlier, the federal has been a strong, stronger vertical overall. And then, you know, the benefit, if you will, moving through time of lesser declines in the end point. And again, we believe that that trend will continue as we move forward. Those would be the big changes.

Speaker 3: a benefit in the quarter in terms of getting more closely aligned to profile being that working.

The benefit in the quarter in terms of getting.

More closely aligns the profile being networking.

Speaker 3: So, you know, that one would stand out, but the rest of them sort of kind of business is usual profiles at this point.

<unk>.

That one would stand out, but the rest of them sort of kind of business as usual profiles at this point.

Speaker 4: And Matt, just commenting about the question on what the margin profile looks like. If I think about pricing, it remains competitive, but not irrational. So I don't think that's really changed. I know from quarter to quarter, that can change a little bit based on just the competitive landscape.

And Matt I'll, just commenting about the question on what the margin profile looks like if I think about pricing it remains competitive.

Marshall Witt: And I think Marshall has something to add. Yeah, Joe, just to your question around linearity and volatility, we're still seeing a little bit about month to month. We'll call it a good month, a soft month, a good month. And so that necessarily hasn't gone away. The generally said is rich said for America's both AF still showing growth, yes, showing declining or improvement of the declines on a year of your basis. And then we can't forget about our high growth technology services, those continue to perform well as we said cloud security, IOT, data analytics grew more than 10%. And that's a comment beyond America's, but it certainly did help America. Thank you. Thanks guys. Appreciate the color.

But not irrational.

Don't think Thats really changed I know from quarter to quarter that can change a little bit based on just the competitive landscape from an overall rebate and program perspective, again competitive, but we continue to earn our fair share of backend margins. So op margins structurally found for US we think that there is.

Speaker 4: From an overall rebate and program perspective, again, competitive, but we continued to earn our fair share of back-end margins. So, out margins structurally found for us, we think that there's a good upside as we think about being on two or platforms, specifically within the Americas, as we move forward into 24, and that should help with operating more.

Good upside as we think about being on fewer platforms, specifically within the Americas as we move forward into 'twenty, four and that should help with operating margins as well.

Speaker 7: Okay, just as a follow up though, if the mid shift changes and client devices end point solutions grows at a faster pace, would you see some gross margin pressure? And I guess my point is on the operating line, would you be able to make that up with lower expenses or other things?

Okay.

Follow up though.

If the mix shift changes in client devices endpoint solutions grows at a faster pace.

Would you see some gross margin pressure and I guess my point is on the operating line would you be able to make that up with lower expenses or other things.

Matt Sheerin: Your next question comes from a line of Matt Sheerin of Steeple. Your line is open. Yes, thank you and good morning everyone. I had another question just regarding your commentary on advanced solutions, which has been strong, but Rich, you mentioned that backlog has been coming down. Could you give us more detail on what the backlog levels are and drill down by Platycaria, server storage, networking. As you go forward in that growth slows and end-point solution starts to have favorable year-to-year comms.

Speaker 4: Yeah, I think if you typically in Q4, we have a normal balance. EES plays a little bit heavier, so we see the gross margin profile come down more towards the call of the six and a half.

Yes, I think typically.

Typically in Q4, we have a normal balanced es plays a little bit heavier so we see the gross margin profile.

Come down more towards the call it a six 5%.

Speaker 4: But Matt, you're correct. We tend to see less SGNA required for that endpoint solution as AS. So the operating margin profile still kind of holds in check. And it's a regional...

But Matt Youre correct, we tend to see less SG&A required for that endpoint solution is <unk>.

The operating margin profile still kind of hold in check and its a regional.

Matt Sheerin: I would think that that could pressure close margins, so how should we think about sort of drop-through in that mix shift and what the operating margins might look like? Thank you, Matt. Good morning. I'll handle the first part of the questions and I'll turn it to Marshal for the back half of the question. I think we had started to make the statement in our last quarter that the backlog is beginning to near-profile.

Speaker 4: Americans have a different overall operating margin, pro-former performance for AFN, ESN, Europe . So it does kind of depend on the region itself.

Difference America's have a different overall operating margin profile.

Our pro forma performance for <unk> in Europe . So it does kind of dependent on the region itself.

Speaker 4: But I don't think that that necessarily plays to a decrease or structural decline in the operating margins based on the mixtures.

But I don't think that that necessarily place two a decrease for a structural decline in the operating margins based on the mix shift.

Understood. Thanks, a lot.

Matt Sheerin: I think that if we were to represent where we are today, that's exactly what we'd say is we're near-profile. Sort of a side comment here. We've been talking over many quarters here about our inventory being higher than normal because of the serviceability of the supply chain, and now you see with the reductions in inventory and inventory sort of narrowing historical profiles, that the serviceability of the overall business is becoming quite good.

Okay.

Speaker 1: Your next question comes from Line of Rupel, but a cherry of Bank of America, your land is open. Hi, good morning, thanks for taking my questions. Can you talk about the pricing environment in both advanced solutions and endpoint solutions? If the macro is weak in a deflationary commodity cost environment, do you think pricing sustains? And as part of that, are you seeing any benefit from AI based higher configurations in either PCs or servers? If you can touch on that.

Your next question comes from the line of <unk>, but a carrier of Bank of America. Your line is open hi.

Hey, good morning, Thanks for taking my questions.

Can you talk about the pricing environment in both.

<unk> solutions and endpoint solutions, if the macro is weak in a deflationary commodity cost environment do you think pricing sustains and as part of that are you seeing any benefit from AI based higher configurations, and either Pcs or servers.

If you can touch on that.

Yes so.

Speaker 3: Rupert Blu, what I would tell you is, you know, as Marshall stated earlier,

<unk> I would tell you is.

As Marshall stated earlier.

Speaker 3: There's nothing that would say that there's a major trend in pricing within the market. If I were to maybe point to one area where we cite a bit more of aggression is within Europe perhaps because of the fact that the pie is smaller. So as everybody fights for the smaller pie, it gets a bit more aggressive. And I would state that that would be within the endpoint segment. You

There is nothing.

That would say that there is a major trend and pricing within the market if I were to.

Matt Sheerin: I would say that almost across the board right now, product set-wise, we're at profile and serviceability has been restored. If there were one category that I'd call out that might have had some benefit in the quarter in terms of getting more closely aligned to profiles being that working. That one would stand out, but the rest of them sort of business is usual profiles at this point. Matt, just commenting about the question on what the margin profile looks like.

Maybe point to one area where.

You cited a bit more of aggression is within Europe , perhaps because of the fact that.

The pie is smaller so as everybody fights for the smaller pie get tend to get a bit more aggressive than I would I would state that that would be within the <unk> segment.

Speaker 3: you know, and sort of isolated, if you will, to a couple of markets over there. From an advanced solutions perspective, really nothing to report feels like, you know, as usual, competitive pricing, but business is normal. And then, as it relates, that business is going to do like in low demand, ok, your politicians say, during the

And sort of isolated if you will to a couple of markets over there from an advanced solutions perspective, really nothing to report feels like as usual competitive pricing but.

Matt Sheerin: If I think about pricing, it remains competitive, but not irrational. I don't think that's really changed. I know from quarter to quarter, that can change a little bit based on just the competitive landscape. From an overall rebate and program perspective, again, competitive, but we continued to earn our fair share of back-end margins. So up margins structurally found, for us, we think that there's good upside as we think about being on two or platforms, specifically within the Americas, as we move forward into 24 and that should help with operating margins as well.

It's business as normal.

And then.

As it relates to AI.

Speaker 3: You know, my view is in order to have a material impact, it's way early in the game. We really haven't seen, you know, on the endpoint side AI enabled offerings that make up any meaningful percentage of the shipments.

My view is in order to have a material impact.

It's way early in the game, we really haven't seen on the endpoint side AI enabled offerings that make up.

Any meaningful percentage of the shipments.

Speaker 3: And I think that as we think about the data center category,

And I think that as we think.

Think about the data center category.

Matt Sheerin: Okay, just as a follow-up, though, if the midship changes and client devices end-point solutions grows at a faster pace, would you see some gross margin pressure? And I guess my point is on the operating line, would you be able to make that up with lower expenses or other things? Yeah, I think if you, typically in Q4, we have a normal balance. ES plays a little bit heavier, so we see the gross margin profile come down more towards a call to six and a half percent.

Speaker 3: Well, maybe, maybe this is just…

Maybe maybe this is just.

Speaker 3: my point of view, but obviously AI has been around for a long time. The hype is sort of peak with chat GPP.

But my point of view, but obviously AI has been around for a long time the hype is.

Sort of peaked with chat GPT.

Speaker 3: So I'm sure that many of the vendors have the opportunity of sort of classifying now AI machines, which are being shipped.

Sure that many of the vendors have the opportunity of sort of classifying now AI.

Machines, which are being shipped.

Speaker 3: you know, maybe even classifying some of what has historically been in the in the sales motion because you know, it's a not a new category. Many, many years worth of machine learning, shipments, etc.

And.

Maybe even classifying some of what has historically been in the <unk> and the sales motion because.

Matt Sheerin: But Matt, you're correct. We tend to see less SGNA required for that end-point solution as AS. So the operating margin profile still kind of holds in check. And it's a regional difference. Americas have a different overall operating margin pro-former performance for ASNES and Europe. So it does kind of depend on the region itself, but I don't think that that necessarily plays to a decrease or structural decline in the operating margins based on the mix.

It's not a new category. Many many years' worth of machine learning shipments et cetera. So therefore, I would say that.

Speaker 3: So therefore I would say that the opportunity for AI remains in front of us as opposed to emerging in the existing quarter. You know, maybe if you get into very, very large enterprises, there's sort of first of a kind, but that falls outside of our segment and the customer set we serve.

The opportunity for AI remains in front of us as opposed to emerging in the existing quarter.

Maybe if you get into very very large enterprises. There is sort of first of a kind, but that falls outside of our segment and the customers that we serve.

Speaker 1: Okay, thanks for all the details there, Rich. For a follow-up, can I ask about the ERP integration? So since it's complete in North America, are you now seeing a meaningful revenue synergies? And if you look back in history, Synex had significant revenue synergies and in fact, acquisitions a couple of years into them. I know Europe is not going through an ERP integration, but do you think there could be revenue synergies there? What would drive that? And how should we think about these revenue synergies progressing in the fourth quarter and beyond?

Okay. Thanks for all the details there rich.

For a follow up can I ask about the ERP integration. So since it's complete in North America are you now seeing a meaningful revenue synergies.

And if you look back in history.

<unk> had significant revenue synergies in its acquisitions, a couple of years into them.

Europe is not going through an ERP integration, but do you think there could be revenue synergies there what would drive that and how should we think about these revenue synergies progressing in the fourth quarter and beyond thank you.

Speaker 8: Thank you.

Speaker 3: So first, you are correct. The major milestones of our ERP implementation have been achieved. As I had commented on previous calls, there's a low percent of the business, which is a longer tail, which will proceed carefully with it really doesn't create any material cost overhang to have that line down occurring.

Yes, so first.

You are correct.

Major milestones of our E. R. The implementation have been achieved.

As I had commented on previous calls there is a low percentage of the business, which has a longer tail, which will we will proceed carefully with it really doesn't create.

Any any.

Material cost overhang to have that wind down occurring.

Speaker 3: Interesting that you talked about revenue synergies with Europe . In fact, we do believe that the merger have had a positive effect on our global business, even outside of the Americas. We had the opportunity of seeing some signings bringing on some vendors in Europe that had taken place that we believe were supplemented or complemented by the merge occurring. And then, you know, as it relates...

Interesting that you talked about revenue synergies with Europe in fact.

We do believe that the merger have had a.

Positive effect on <unk>.

Our global business, even outside of the Americas.

Had the opportunity of seeing.

Some signings, bringing on some vendors in Europe that had taken place that we believe were supplement that are complemented by the merged occurring and then.

As it relates to.

Speaker 3: The America is in the revenue synergies. We absolutely know that we are selling, you know, Alameda use legacy tech data, line card into Seneca accounts and the reverse is true. You know, it's starting to ramp, but it's not to the point where it's meaningful. I suspect we'll start to measure it more carefully, you know, moving forward. And then of course,

The Americas and the revenue synergies, we absolutely know that we are selling.

Allow me to use legacy type data line card into <unk> accounts and the reverse is true.

It's starting to ramp, but it's not to the point, where it's meaningful.

Suspect, we will start to measure it more carefully.

Moving forward and then of course.

Speaker 3: You know, when the market is a little bit soft as it is today, it's a little bit harder to, you know, see it in the totals, you know, giving the overlying market environment. So, you know, we'll start too, as I said, I think be more focused on that moving forward.

When the market is a little bit soft as it is today, it's a little bit harder to.

See it in the totals.

Giving given the overlying market environment. So.

Well, we will start to as I said I think be more focused on that moving forward.

Speaker 9: Your next question comes from a line of George Wong of Barclays. Your line is open.

Your next question comes from the line of George Wang of Barclays. Your line is open.

Speaker 10: Hey guys, thanks again for taking my question. I just have a question on the hive. Maybe you can double click on the hive. You talk about performance better than expected. Just versus last quote, you talk about the revenue declining due to tougher year-old wear compared. So it can give more color just in terms of the year-old wear growth rate you are seeing right now. And so how do you think this effect been going forward?

Hey, guys. Thanks again for taking my question I just have a question on the high <unk>, maybe you can double click on the highest you'd have performed better than expected.

Versus last quarter, you talked about with a revenue.

Declining due to how far youll be a compare so can you give more color just in terms of that year over year.

Growth rate you are seeing right now.

So how do you think of it as that segment going forward.

Speaker 4: Hi, George. It's Marshall. Thanks for the question. Yeah, we did speak to the top compare that Hive presented itself given the strong H2 of 22 and that's still the case.

Hi, George its mark so thanks for the question, Yes, we did speak to the tough compare that hive presented itself given the strong <unk> of 22% and that's still the case.

Speaker 4: The comments around Q3 doing better was that it was better than what we expected, but still high of

The comments around Q3 doing better was that it was better than what we had expected but still high.

Speaker 4: was down for quarter three, and we expected to be down for quarter four. The actual revenue attribute, the...

Was down for quarter, three and we expect it to be down per quarter for the actual revenue attribute.

<unk>.

Speaker 4: The revenue profiles and where we're getting, the revenue from continues to be well-balanced.

The revenue profile and where we are getting.

The revenue from continues to be well balanced.

Speaker 4: The margin profile is structurally found.

The margin profile is structurally sound.

Speaker 4: And what I'd say is that we're really optimistic about where Hive is going as an organization. There's a new customer that we're ramping in Q4 that we've been building.

And what I'd say is that we're really optimistic about where hive is going as an organization. There's a new customer that we're ramping in Q4 that we've been building for.

Matt Sheerin: . Thank you. Yes, so first, you are correct. The major milestones of our ERP implementation have been achieved. As I had commented on previous calls, there's a low percent of the business, which is a longer tail, which will proceed carefully with it really doesn't create any material cost overhang to have that line down occurring. So, revenue synergies with Europe. In fact, we do believe that the merger have had a positive effect on our global business, even outside of the Americas.

Speaker 4: for quite some time, so excited about that. And then going into 24, we would expect to see some expanded or new product lines of the existing customer. So, well, set as we exit 24 from or 23 from an expectation for Hive, but year and year still down and just given the strong compare or the tough compare we have from Prairie.

For quite some time, so excited about that and then going into 'twenty four we would expect to see some expanded or new product lines with existing customers. So.

Well set as we exit 'twenty four from our 23 from an expectation for high but year on year still down just given the strong compare or the tough compare we had from prior year.

Speaker 10: Okay, great. Just a quick follow up on the hive. You guys put out a pressure, so they added some manufacturing capacity in the US in the west coast. Just curious, any thoughts on the capacity ramp globally versus utilization trends?

Okay, Great just a quick a follow up on the highest.

You guys put out a press release when they added some manufacturing capacity in the U S.

In the West Coast, just curious any thoughts on the capacity ramp globally, but that's kind of utilization trends.

Speaker 3: Yeah, obviously that market segment is a market segment that has

Matt Sheerin: We had the opportunity of seeing some signings, bringing on some vendors in Europe that had taken place that we believe were supplemented or complemented by the merge occurring. And then, as it relates to the Americas and the revenue synergies, we absolutely know that we are selling, you know, allow me to use legacy tech data, line card into SYNNEX accounts and the reverse is true. It's starting to ramp, but it's not to the point where it's meaningful.

Yes, obviously.

That market segment as a market segment that has.

Speaker 3: Growth-asher reasonably strong growth-asher abuse projected. So, you know, we're positioning ourselves to take advantage of that market.

Growth.

Reasonably strong growth attributes projected so we're positioning ourselves to take advantage of that.

Market.

Speaker 3: It's a big one and it's going to continue to go pretty quickly. And then, you know, secure supply chain is important aspects for our customers and, you know, allowing ourselves to, or actually having ourselves build that capability is a real value ad for them. So we see it as if you will, an expansion of our assets with the anticipation that the market over time will continue to grow. Ok,iendo.

It's a big one and it's going to continue to go pretty quickly and then secure supply chain is an important aspect for our customers.

Allowing ourselves to actually having ourselves build that capability is a real value add for them. So we see it as a.

Matt Sheerin: I suspect we'll start to measure it more carefully moving forward. And then, of course, when the market is a little bit soft as it is today, it's a little bit harder to see it in the totals, giving the overlying market environment. So, you know, we'll start to, as I said, I think be more focused on that moving forward.

If you will and expansion of our asset with the anticipation that the market over time will continue to grow.

Okay, great. Thanks, and I will go back to the queue.

Thank you George.

Speaker 9: Your last question comes from the line of a sheesh sabbadra, a BBC capital markets. Your line is open.

Your last question comes from the line of Ashish Sabedra RBC capital markets. Your line is open.

Speaker 6: Hi, this is Patrick Jackson on from RBC. Thank you for taking the questions. For the last two quarters, the company grew overall market share in North America and Europe , despite some of the industry's softest in Europe , has that shared dynamics still continued this quarter? And has anything changed in the competitive environment? And secondly, in the prepare remarks you mentioned a launch of the partner health and fitness tool. I wanted to ask if you could share any details on the initial response to that rollout and how you're thinking about the cross-sell opportunity from this. Thank you.

Hi, This is patrik Jackson on from RBC. Thank you for taking the questions for the last two quarters. The company grew overall market share in North America and Europe . Despite some of the industry softness in Europe has that share dynamics still continued this quarter and has anything changed in the competitive environment.

Matt Sheerin: Your next question comes from a line of George Wong of Barclays. Your line is open. Hey, guys, thanks again for taking my question. I just have a question on the hive. Maybe you can double click on the hive. You talk about perform better than expected. Just, you know, versus last quote, you talk about the revenue declining due to tougher year of the compare. So, can you give more color just in terms of the year, the growth rate you are seeing right now. And, you know, how do you, you know, think this side been going forward?

And secondly in the prepared remarks, you mentioned the launch of the partner Health Exchange tool I wanted to ask if you could share any details on the initial response to that rollout and how youre thinking about the cross sell opportunity from this thank you.

Speaker 3: Sure, thanks for the question.

Sure. Thanks for the question.

Speaker 3: You know, right now our reports would say that we've maintained our share position in the Americas.

Right now our reports would say that we've maintained our share position in the Americas and Europe .

Marshall Witt: Hi, George. It's Marshall. Thanks for the question. Yeah, we, we did speak to the, the top compare that hive presented itself given the strong H2 of 22. And that's still the case. The comments around Q3 doing better was that it was better than what we expected, but still hive was down for quarter three. And we expected to be down for quarter four. The actual revenue attribute, the revenue profiles and where we're getting the revenue from continues to be well balanced.

Speaker 3: In Europe , we lost a couple of tens of points. So think about that in the rounding. And then when we get a little bit deeper in Europe , it would be within the end point area that had occurred.

<unk> lost a couple of tenths of point so.

Think about that in the rounding.

And then when we get a little bit deeper in Europe , it would be within the endpoint area that that had occurred and.

Speaker 3: You know, it was a matter, I spoke earlier about a bit more of aggressive pricing environment. So, you know, we've elected to sort of balance our financials along with our market position.

It was a matter.

<unk> earlier about a bit more of aggressive pricing environment. So we've elected to sort of balance our financials, along with our market position.

Marshall Witt: The margin profile is structurally found. And what I'd say is that we're really optimistic about where hive is going as an organization. There's a new customer that we're ramping in Q4 that we've been building for quite some time. So excited about that. And then going into 24, we would expect to see some expanded or new product lines of existing customers. So, well, set as we exit 24 from our 23 from an expectation for hive, but year and year still down and just given the strong compare or the top compare we have from parry, here. Okay, great.

Speaker 3: but nothing to be alarming or concerned about as I said it was just a couple of tens of 1%. So you know that's the overall

But nothing nothing to be alarming or concerned about as I said it was just a couple of tenths of 1% so.

That's the overall <unk>.

Speaker 3: share point of view. You know, as it relates to our new tools, thanks for that question. And that's an essence we allow our partners to run custom algorithms to take a look at their portfolios versus the portfolios of folks who profile like them across the entirety of the channel. And it allows them to think about areas of expansion.

Share point of view as.

As it relates to our new tools.

Thanks for that question.

In essence, we allow our partners to run custom algorithms to take a look at their portfolios versus the portfolio.

<unk> of folks who profile like them across the entirety of the channel.

And it allows them to think about areas of expansion.

Speaker 3: And yes, we had some really...

Marshall Witt: Just a quick follow up on the hive, you know, you guys put out a pressure, so they added some manufacturing capacity in the US, in the kind of, you know, West Coast, just curious, you know, any thoughts on the capacity ramp globally versus kind of utilization trends? Yeah, obviously, that market segment is a market segment that has, uh, growth adds to reasonably strong growth attributes projected, so, you know, we're positioning ourselves to take advantage of that market.

And yes, we had some really.

Speaker 3: really great engagement with partners on the tool. In fact, we released it in the North America. And just days later, we were getting lots of questions from other markets throughout the world wondering when that tool will be enabled in their market. So there seems to be some pretty good of fields relative to our customers wanting to get those insights.

Really great.

<unk> with partners on the tool in fact, we released it in North America.

<unk>.

Just days later, we were getting lots of questions from other markets throughout the world wondering when that tool will be enabled in their market. So there seems to be.

Some pretty good appeal relative to <unk>.

Our customers wanting to get those insights.

Speaker 3: Okay, well, thank you very much for attending our call today in closing. I want to thank our co-workers around the world for their persistence and can-do attitude in staying focused on our success regardless of the market environment. We're very pleased as to what we've accomplished and we really look forward to our future and we appreciate your interest in TD Synics. Thanks. Have a great day.

Okay, well. Thank you very much for attending our call today in closing I want to thank our coworkers around the world for their persistence and can do attitude and staying focused on our success.

Marshall Witt: It's a big one, and it's going to continue to go pretty quickly. And then, you know, secure supply chain is important aspect for our customers, and, you know, allowing ourselves to, or actually having ourselves build that capability is a real value add for them, so we see it as, uh, if you will, an expansion of our assets with the anticipation that the market over time will continue to grow. Okay, great. Thank you. I'll go back to the queue. Thank you, George.

Regardless of the market environment.

We're very pleased as to what we've accomplished and we really look forward to our future and we appreciate your interest in TD cynic. Thanks have a great day.

Speaker 9: That concludes today's conference call. You may now disconnect. Have a nice day.

That concludes today's conference call you may now disconnect have a nice day.

Okay.

Yeah.

Ashish Sabadra: Your last question comes from the line of Ashish Sabadra, ABC Capital Markets. Your line is open. Hi, this is for taking the questions.

Yeah.

Ashish Sabadra: For the last two quarters, the company grew overall market share in North America and Europe, you know, despite some of the industry's softest in Europe, has that shared dynamics still continued this quarter? And has anything changed in the competitive environment?

Okay.

Yeah.

Yeah.

Rick Hume: And secondly, in the prepared remarks, you mentioned the launch of the partner health and fitness tool. I wanted to ask if you could share any details on the initial response to that rollout, and how you're thinking about the cross sell opportunity from this. Thank you. Sure. Thanks for the question. You know, right now our reports would say that we've maintained our share position in the Americas. In Europe, we lost a couple of tens of points.

Rick Hume: So, you know, think that, think about that in the rounding. And then when we get a little bit deeper in Europe, it would be within the end point area that that had occurred. And, you know, it was a matter, I spoke earlier about a bit more of aggressive pricing environment. So, you know, we've elected to sort of balance our financials along with our market position. But nothing to be alarming or concerned about, as I said, it was just a couple of tens of 1%. So, you know, that's the overall share point of view.

Rick Hume: As it relates to our new tools, thanks for that question. In essence, we allow our partners to run custom algorithms to take a look at their portfolios versus the portfolios of folks who profile like them across the entirety of the channel. And it allows them to think about areas of expansion. And, yes, we had some really, really great engagement with partners on the tool. In fact, we released it in the North America.

Rick Hume: And just days later, we were getting lots of questions from other markets throughout the world, wondering when that tool will be enabled in their market. So, there seems to be, you know, some pretty good of feels relative to our customers wanting to get those insights.

Rick Hume: Okay, well thank you very much for attending our call today in closing. I want to thank our co-workers around the world for their persistence and can-do attitude in staying focused on our success regardless of the market environment. We're very pleased as to what we've accomplished and we really look forward to our future and we appreciate your interest in TD SYNNEX.

Jail: Thanks, have a great day.

Jail: That concludes today's conference call. You may now disconnect.

Jail: Have a nice day.