Q2 2024 TD SYNNEX Corporation Earnings Call

Operator: Good morning, my name is Brianna, and I will be your conference operator today. I would like to welcome everyone to the TD SYNNEX second quarter fiscal 2024 earnings call. Today's call is being recorded, and all lines have been placed on mute to prevent any background noise.

Good morning, My name is Brianna and I'll be your conference operator today.

I'd like to welcome everyone to the T D <unk> second quarter fiscal 'twenty 'twenty four earnings call.

Today's call is being recorded and all lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session at.

Operator: After the speaker's remarks, there will be a question and answer session. At this time for opening remarks, I would like to pass the call over to Liz Morali, Head of Investor Relations. Liz, you may begin.

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

Liz Morali: Thank you good evening, everyone and thank you for joining us for today's call.

Liz Morali: Thank you. Good morning, everyone, and thank you for joining us on today's call. With me today are Rich Hume, CEO; Patrick Zamet, COO; and Marshall Witt, CFO. Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, including statements about demand, positioning, growth, cash flow, and shareholder return, as well as our expectations for future fiscal periods.

Speaker Change: With me today are rich Hume, CEO, Patrick Zammit C O O and Marshall Witt CFO.

Liz Morali: Actual results may differ materially from those mentioned in these forward-looking statements as a result of the 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.

Speaker Change: 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 positioning growth.

Flow and shareholder return as well as our expectations for future fiscal periods.

Actual results may differ materially from those mentioned in these forward looking statements as a result of risks and uncertainties discussed in today's earnings release in the form 8-K, we filed today and in the risk factors section of our Form 10-K, and our other reports and filings with the SEC.

Speaker Change: We do not intend to update any forward looking statements.

Liz Morali: Also, during this call, we will reference certain non-GAAP financial information, including gross billings. 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.tdsynnex.com. This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission.

Also during this call, we will reference certain non-GAAP financial information, including gross billings.

Speaker Change: 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 Sinex dot com.

Speaker Change: This conference call is the property of <unk> and may not be recorded or rebroadcast without our permission.

Speaker Change: I will now turn the call over to rich rich.

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

Richard T. Hume: Thank you, Liz. Good morning, everyone, and thank you for joining us today. On today's call, I will provide some thoughts regarding the industry and the drivers of our performance in Q2, followed by comments on the planned CEO transition we announced last week. Then Patrick will speak briefly, and we'll close with commentary on our Q2 financial performance and Q3 outlook from Marshall prior to the Q&A session, starting with our Q2 performance. I will focus my comments on three areas.

Richard T. Hume: On today's call I will provide some thoughts regarding the industry and the drivers of our performance in Q2.

Richard T. Hume: Followed by comments on the planned CEO transition, we announced last week.

Speaker Change: Patrick will speak briefly and we'll close with commentary on our Q2 financial performance and Q3 outlook for Marshall prior to the Q and a session.

Speaker Change: Starting with our Q2 performance.

Richard T. Hume: First, our markets have continued to stabilize, and we remain confident in our improving revenue and gross billings growth prospects for the back half of the fiscal year. Second, we delivered strong financial results and robust shareholder returns. And third, we believe AI is a meaningful opportunity for the company over the foreseeable future. The IT spending market continued to improve, and after a prolonged period of challenging market conditions and transformation, which we navigated well, we returned to positive year-on-year gross billings growth in the quarter. Gross fillings were up 3%, coming in at the high end of our guidance range.

Speaker Change: I will focus my comments on three areas first our markets have continued to stabilize and we remain confident in our improving revenue and gross billings growth prospects for the back half of the fiscal year.

Speaker Change: Second we delivered strong financial results and robust shareholder returns and third we believe AI as a meaningful opportunity for the company over the foreseeable future.

Speaker Change: The IC spending market continued to improve and after a prolonged period of challenging market conditions and transformation, which we navigated well we returned to positive year on year gross billings growth in the quarter.

Speaker Change: Gross billings were up 3% coming in at the high end of our guidance range.

Richard T. Hume: This growth came through all areas of our business, including endpoint solutions, advanced solutions, and strategic technologies, which now represent 25% of our total business. And as we enter the second half of the fiscal year, we continue to expect further acceleration in gross billings and revenue growth, fueled by the PC refresh cycle, customer investments in data center and cloud deployment, increased hyperscale capital spending to meet the needs of both traditional and AI-enabled workloads, and continued expansion in software, security, and data analytics.

Speaker Change: This growth came through all areas of our business, including endpoint solutions advanced solutions and strategic technologies, which now represents 25% of our total business.

Speaker Change: And as we enter the second half of the fiscal year. We continue to expect further acceleration in gross billings and revenue growth fueled by PC refresh cycle customer investments in data center and cloud deployment increased hyperscale capital spending to meet the needs of.

Both traditional and AI enabled workloads and continued expansion in software security and data analytics.

Richard T. Hume: Our fiscal results in 2Q were strong, with growth and operating margin expanding, double-digit growth in non-GAAP earnings per share, and robust capital returns to shareholders. Our broad end-to-end technology portfolio enabled us to capture growth in both the core and strategic areas, and we remain disciplined on cost, holding our expense-to-gross-billings ratio flat sequentially. His strength, coupled by our confidence in an improving market environment, allowed us to return over $520 million to shareholders through the first two quarters of this fiscal year, already representing nearly 70% of the total return to shareholders in fiscal 23.

Speaker Change: Our fiscal results in <unk> were strong with growth in operating margin expanding double digit growth in non-GAAP earnings per share and robust capital returns to shareholders.

Speaker Change: Our broad end to end technology portfolio enabled us to capture growth in both the core and strategic areas and we remain disciplined on costs holding our expense to gross billings ratio flat sequentially.

This strength, coupled by our confidence with an improving market environment allowed us to return over $520 million to shareholders through the first two quarters of this fiscal year already representing nearly 70% of the total return to shareholders in fiscal 'twenty three.

Richard T. Hume: As we go forward, we remain committed to our balanced capital return framework. Since our last earnings call in March, the technology industry has continued to unveil a multitude of AI-related products, services, and announcements. As I've mentioned previously, I believe AI will be the next great transformative era for the technology sector.

Speaker Change: As we go forward, we remain committed to our balanced capital return framework.

Speaker Change: Since our last earnings call in March the technology industry has continued to unveil a multitude of AI related product services and announcement.

Speaker Change: As I've mentioned previously I believe AI will be the next great transformative era, where the technology sector.

Richard T. Hume: During my career, I've witnessed the advent and evolution of several other groundbreaking advancements, such as the Internet, mobility, and cloud computing. We are just at the beginning of the AI era, and by industry analyst accounts, the potential associated TAM expansion over time is significant. A portion of that spend will come through the Business Partner Ecosystem, and we expect our business will benefit across components, devices, data center, cloud storage, networking, as well as the related software applications and services. With our deep vendor partnerships, long-tenured customer relationships, and service capabilities, we are well-positioned to participate in this growth as the market evolves and are already seeing momentum and investments from our vendors and increased interest from our customers.

Speaker Change: During my career I've witnessed the advent and evolution of several other groundbreaking advancements such as the Internet mobility and cloud computing.

Speaker Change: We are just at the beginning of the AI era and by industry analysts to cover the potential associated Tam expansion over time is significant.

Speaker Change: A portion of that will come through business partner ecosystem, and we expect our business will benefit across the components devices data center cloud storage and networking as well as the related software applications and services.

Speaker Change: With our deep vendor partnership long tenured customer relationships and service capabilities, we are well positioned to participate in this growth as the market evolves and are already seeing momentum in investments from our vendors and increased interest from our customers.

Richard T. Hume: During the quarter, we launched the IBM Watson X Gold 100 program to accelerate AI opportunities for partners through enablement, training, business planning, sales acceleration, marketing, demand generation, expert services, and pre-sales support. As part of this collaboration, we will establish IBM Watson X Centers of Excellence in four locations around the globe, where partners will be able to experience Watson X proof-of-concept solutions.

Speaker Change: During the quarter, we launched the IBM Watson ex gold 100 program to accelerate AI opportunities for partners through enablement training business planning sales acceleration marketing demand generation expert services and presale support as.

Speaker Change: Part of this collaboration we will establish IBM Watson centers of excellence in four locations around the globe, where partners will be able to experience Watson proof of concept solution.

Richard T. Hume: We are also honored to be named Microsoft's Global Co-Pilot SEACH Champion for the quarter, a testament to the successful co-pilot launch we enabled earlier this year. Lastly, we were pleased to announce our High-Growth Technology Center of Excellence, where partners can learn how to become a partner of the future, integrating AI with cloud, cybersecurity, data analytics, and modern infrastructure. As I mentioned at the start of the call, I would like to make a few comments about the CEO transition we announced last week. First, let me take a moment to congratulate Patrick Zamet, who will succeed me as CEO of TD SYNNEX upon my retirement in September.

Speaker Change: We're also honored to be named Microsoft's Global co pilot seats champion for the quarter, a testament to the successful co pilot launch we enabled earlier this year.

Speaker Change: Lastly, we were pleased to announce our high growth Technology Center of excellence, where partners can learn how to become a partner of the future integrating AI with cloud cyber security data analytics and modern infrastructure.

Speaker Change: As I mentioned at the start of the call.

Richard T. Hume: Patrick has a long track record of success in our industry, having joined Avnet more than three decades ago, and he has been an excellent partner to me since becoming part of the company in 2017. During his tenure, he has excelled at driving growth and operational excellence across the organization. His business acumen and deep industry expertise, coupled with his interest and dedication to building world-class cultures, make him the ideal candidate to lead TD SYNNEX into the future.

Speaker Change: Would like to make a few comments about the CEO transition, we announced last week.

Speaker Change: First let me take a moment to congratulate Patrick Zammit, who will succeed me as CEO of TD Cynic upon my retirement in September.

Speaker Change: Patrick has a long track record of success in our industry, having joined avnet more than three decades ago and he has been an excellent partner to me since becoming part of the company in 2017.

Speaker Change: During his tenure he has excelled at driving growth and operational excellence across the organization.

Speaker Change: His business acumen and deep industry expertise, coupled with his interest and dedication in building World class cultures make him the ideal candidate to lead TD center into the future.

Richard T. Hume: Since becoming our Chief Operating Officer earlier this year, Patrick has already accelerated the progress on our strategic initiatives and has fostered an even greater focus on driving profitable growth while continuing to deliver increased value to our customers, vendors, and coworkers. As I look back on my career and the many accomplishments and milestones along the way, I can safely say that it has been an absolute privilege to lead the company, and I look forward to continuing to work with the team as a member of the Board of Directors. I am incredibly proud of the company's achievements and the culture that we have built over the years. I will now pass it over to Patrick, so he can make a few comments. Patrick?

Speaker Change: Since becoming our chief operating officer earlier this year, Patrick has already accelerated the progress on our strategic initiatives and has fostered an even greater focus on driving profitable growth, while continuing to deliver increased value to our customers vendors and co workers.

Speaker Change: As I look back on my career in the many accomplishments and milestones along the way I can safely say that it has been an absolute privilege to lead the company and I look forward to continuing to work with the team as a member of the board of directors I am incredibly proud of the company's achievements and the culture.

Speaker Change: That we have built over the years.

I will now pass it over to Patrick So he can make a few comments Patrick.

Patrick Zammit: Thank you rich and thank you for your leadership and guidance our CEO.

Patrick Zammit: Thank you, Rich, and thank you for your leadership and guidance as CEO. I am honored to have been selected to lead TD SYNNEX and look forward to continuing the legacy of success and partnership across the channel that you have established, along with cultivating the vibrant and servant-leadership-based culture that we are known for. I am fortunate to inherit a best-in-class team who deeply understands our purpose, mission, vision, and value. TD SYNNEX has an industry-leading set of capabilities and an unmatched ability to deliver value to our most critical stakeholders.

Patrick Zammit: I am honored to have been selected to lead <unk> and look forward to continuing the legacy of success partnership across the channel, but rich is established.

Patrick Zammit: With calculating the vibrant and seventh leadership based culture, but we are known for.

Patrick Zammit: I am fortunate to inherit a best in class team with.

Patrick Zammit: With deeply understands our purpose mission vision and values.

Patrick Zammit: <unk> as an industry leading set of capabilities.

Patrick Zammit: An unmatched ability to deliver value to our most critical stakeholders.

Patrick Zammit: We excel at helping to accelerate broad adoption of technology with our efficient go-to-market strategy, and we constantly look to innovate, challenge the status quo, and increase our value proposition. I look forward to building on the foundation we have established and continuing to accelerate our strategy and digitalization efforts to ensure we are constantly delivering the greatest value to our co-workers, partners, vendors, and shareholders. Thanks, Patrick.

Patrick Zammit: We excel at helping to accelerate broad adoption of technology.

Our efficient go to market motion and we constantly look to innovate challenging the status quo and increasing our value proposition.

Patrick Zammit: I look forward to building on the foundation, we have established and continuing to accelerate our strategy and digitization efforts to ensure we are constantly delivering the greatest value to our coworkers partners vendors and shareholders.

Patrick Zammit: Thanks, Patrick and closing the pace of change across the industry continues to accelerate necessitating partnerships across the channel and we are solidly positioned with the industry's leading and emerging vendors in over 150000 customers.

Marshall W. Witt: In closing, the pace of change across the IT industry continues to accelerate, necessitating partnerships across the channel, and we are solidly positioned with the industry's leading and emerging vendors and over 150,000 customers. This rapid pace of change requires us to stay agile and nimble, anticipating the needs of our partners and constantly increasing the value we deliver to them. We continue to see opportunities for growth across our business and geographic regions and have made solid progress in transforming our portfolio and margin profile with a greater focus on accretive strategic technology.

Richard Hume: This rapid pace of change requires us to stay agile and nimble, anticipating the needs of our partners and constantly increasing the value we deliver to them. We continue to see opportunities for growth across our business and geographic regions, and have made solid progress in transforming our portfolio and margin profile, with greater focus on creative strategic technologies. Our capital structure is healthy, and we are committed to maintaining a balanced approach to capital allocation going forward.

Patrick Zammit: This rapid pace of change requires us to stay agile and nimble anticipating the needs of our partners and constantly increasing the value we deliver to them.

We continue to see opportunities for growth across our business and geographic region and have made solid progress in transforming our portfolio and margin profile with greater focus on accretive strategic technologies.

Marshall W. Witt: Our capital structure is healthy, and we are committed to maintaining a balanced approach to capital allocation going forward. Since this will be my last earnings call, I want to personally thank all of you for your support, ideas, and interest in our great company. I wish all of you a healthy and prosperous future. I will now turn it over to Marshall for additional commentary on Q2 and our Q3 outlook.

Patrick Zammit: Our capital structure is healthy and we are committed to maintaining a balanced approach to capital allocation going forward.

Richard T. Hume: Since this will be my last earnings call, I want to personally thank all of you for your support, ideas, and interest in our great company.

Speaker Change: This will be my last earnings call I want to personally. Thank all of you for your support ideas and interest in our Great company.

Richard Hume: I wish all of you a healthy and prosperous future.

Speaker Change: I wish all of you are healthy and prosperous future I.

Richard Hume: I will now turn it over to Marshall for additional commentary on Q2 and our Q3 outlook.

Speaker Change: I will now turn it over to Marshall for additional commentary on Q2, and our Q3 outlook Marshall.

Marshall Witt: Marshall. Thanks, Rich, and good morning to everyone on today's call. Let me also offer my thanks to Rich for his leadership as CEO and specifically his guidance through the merger, and congratulations to Patrick as he succeeds Rich.

Marshall W. Witt: Thanks, Rich and good morning to everyone on today's call. Let me also offer my thanks to rich for his leadership as CEO and specifically of guidance through the merger and congratulations to Patrick as he succeeds rich.

Marshall W. Witt: Thanks, Rich, and good morning to everyone on today's call. Let me also offer my thanks to Rich for his leadership as CEO and specifically his guidance through the merger. And congratulations to Patrick as he succeeds Rick.

Marshall Witt: Now turning to our results, we have strong performance in fiscal Q2 with results in line with our expectations. Ited by an improving IT spending environment with growth buildings growth and endpoint solutions, advanced solutions and strategic technologies. We were pleased with our continued expansion in both growth and operating margins and strong EPS growth.

Marshall W. Witt: Now turning to our results. We had a strong performance in fiscal Q2, with results in line with our expectations, aided by an improving IT spending environment with growth buildings, growth, and endpoint solutions, advanced solutions, and strategic technology. We were pleased with our continued expansion in both growth and operating margins and strong EPS growth. Importantly, as Rich mentioned, we believe we are well-positioned to benefit from accelerated growth in the back half of the fiscal year as the IT spending market continues to rebound.

Marshall W. Witt: Now turning to our results.

Marshall W. Witt: We had a strong performance in fiscal Q2 with results in line with our expectations.

Marshall W. Witt: By an improving spending environment with gross billings growth and endpoint solutions advanced solutions and strategic technologies.

Marshall W. Witt: We were pleased with our continued expansion in both gross and operating margins and strong EPS growth.

Marshall Witt: Importantly, as Rich mentioned, we believe we are well positioned to benefit from accelerated growth and a back half of the fiscal year, as the IT spending market has continued to revamp. Total growth buildings were 19.3 billion, up 3% year over year, and toward the upper end of our guidance range, driven by a 1% increase in endpoint solutions and a 5% increase in advanced solutions. Importantly, as Rich mentioned, we returned to positive growth, buildings growth following a prolonged period with challenging market conditions. And encouraging proof point, supporting our thesis that the IT spending market is rebounding.

Speaker Change: Importantly, as rich mentioned, we believe we are well positioned to benefit from accelerated growth in the back half of the fiscal year as the it spending market has continued to rebound.

Marshall W. Witt: Total gross billings were $19.3 billion, up 3% year-over-year, and toward the upper end of our guidance range, driven by a 1% increase in endpoint solutions and a 5% increase in advanced solutions. Importantly, as Rich mentioned, we return to positive gross building growth, following a prolonged period with challenging market conditions. An encouraging proof point.

Speaker Change: Total gross billings were $19 3 billion.

Speaker Change: Up 3% year over year.

Speaker Change: And towards the upper end of our guidance range driven by a 1% increase in endpoint solutions.

Speaker Change: And a 5% increase in advanced solutions.

Speaker Change: Importantly, as rich mentioned, we returned to positive gross billings growth following a prolonged period with challenging market conditions.

Speaker Change: An encouraging proof point.

Marshall W. Witt: Reporting our thesis that the IT spending market is rebounding, we have made investments that we believe will position us well to meet the new opportunities that this dynamic market is creating. Net revenue was $13.9 billion, down less than 1% year over year.

Speaker Change: Appointing our thesis that the it spending market is rebounding.

Marshall W. Witt: We have made investments that we believe will position us well to meet the new opportunities that this dynamic market is creating. Net revenue was 13.9 billion, down less than 1% year over year. Growth to net revenue adjustments again increased year over year as software as a service offerings continue to represent a greater portion of our overall business. This dynamic alone negatively impacted our net revenue by 4% on a year-over-year basis, but improved our gross margins by 27 basis points. Given this continued trend in the industry and in our business, we believe the best measure of our top line growth is growth buildings, which is not subject to these apples-to-oranges comparisons.

Speaker Change: We have made investments that we believe will position us well to meet the new opportunities.

Speaker Change: This dynamic market is creating.

Speaker Change: Net revenue was $13 9 billion down less than 1% year over year.

Marshall W. Witt: Gross-to-net revenue adjustments again increased year-over-year as software-as-a-service offerings continue to represent a greater portion of our overall business. This dynamic alone negatively impacted our net revenue by 4% on a year-over-year basis but improved our gross margins by 27 basis points. Given this continued trend in the industry and in our business, we believe the best measure of our top line growth is growth billings, which is not subject to these apples to oranges comparisons. For quarter two, from a technology perspective, approximately 75% of gross billings were from hardware.

Speaker Change: Gross to net revenue adjustments again increased year over year as software as a service offerings continued to represent a greater portion of our overall business.

Speaker Change: This dynamic alone negatively impacted our net revenue by 4% on a year over year basis, but improved our gross margins by 27 basis points.

Speaker Change: Given this continued trend in the industry and in our business. We believe the best measure of our topline growth is gross billings, which is not subject to these apples to oranges comparisons.

Marshall Witt: According to, from a technology perspective, approximately 75% of gross buildings were from hardware, 19% from software, and 6% from service.

For quarter, two from a technology perspective, approximately 75% of gross billings were from hardware.

Marshall W. Witt: 19% from software and 6% from service. This was aligned with our expectations as endpoint solutions, which are primarily represented in hardware, return to growth and comprise a greater proportion of our total business. Strategic technology has experienced year-on-year growth in the mid-teens, with strength across cloud, data center, AI, and security, and with robust hyperscale infrastructure growth driven by the accelerated ramp-up of new business at Hive. Strategic technologies now represent 25% of total gross billings, up from 22% in the year-ago period. Non-Gap Gross Profit was $974 million, and Non-Gap Gross Margin was 7%, up 9 basis points year over year.

Speaker Change: 19% from software and 6% from services.

Speaker Change: This was in line with our expectations as endpoint solutions, which is primarily represented and hardware returned to growth.

Speaker Change: And comprised a greater proportion of our total business.

Speaker Change: Strategic technologies experienced year on year growth in the mid teens with strength across cloud data center, AI and security and with robust hyperscale infrastructure growth driven by the accelerated ramping of new business at highest strategic.

Speaker Change: Strategic technologies now represent 25% of total gross billings up from 22% and a year ago period.

Speaker Change: non-GAAP gross profit was 974 million and non-GAAP gross margin was 7% up nine basis points year over year.

Marshall W. Witt: As expected, our gross margin came down from Q1 levels as endpoint solutions represented a greater portion of the overall business mix. Total non-GAAP SG&A expense was $586 million, down $7 million year-over-year, or 3% of gross billings, as we exhibited good cost discipline while balancing investments in strategic growth areas. Another metric we utilize internally to assess our SG&A investments is SG&A as a percent of

Speaker Change: As expected our gross margin came down from Q1 level as endpoint solutions represented a greater portion of the overall business mix.

Speaker Change: Total non-GAAP SG&A expense was $586 million down $7 million year over year.

Speaker Change: At 3% of gross billings as we exhibited good cost discipline while.

Speaker Change: While balancing investments in strategic growth areas and.

Speaker Change: Another metric, we utilize internally to assess our SG&A investments is SG&A as a percent of gross profit.

Marshall W. Witt: For quarter two, we came in at 60.1%, an improvement from 61.2% in the prior year period. Non-GAAP operating income was $388 million, and non-GAAP operating margin was 2.78%, representing a year-over-year improvement of 11 basis points. Interest expense and finance charges were $77 million, and the non-GAAP effective tax rate was approximately 23%.

Speaker Change: For quarter, two we came in at 61% an improvement from 61, 2% in the prior year period.

Speaker Change: non-GAAP operating income was 388 million and non-GAAP operating margin was 278% representing a year over year improvement of 11 basis points.

Speaker Change: <unk> expense and finance charges were 77 million and non-GAAP effective tax rate was approximately 23%.

Marshall W. Witt: Total non-GAAP net income was $237 million, and non-GAAP diluted EPS was $2.73, approaching the midpoint of our guidance range. Now turning to the balance sheet, we ended the quarter with cash and cash equivalents of approximately $1.2 billion and debt of $4.6 billion.

Speaker Change: Total non-GAAP net income was $237 million and non-GAAP diluted EPS was $2 73.

Speaker Change: Approaching the midpoint of our guidance range now turning to the balance sheet.

Marshall W. Witt: Our growth leverage ratio was 2.6 times and net leverage was two times, elevated from the prior quarter due to the timing of our recent debt issue. We expect to pay off the $700 million of senior notes maturing in August with cash on hand, and we would expect our gross leverage ratio to be around 2.3 times by the end of the fiscal year. Accounts receivable totaled $8.9 billion, and inventories totaled $7.1 billion, both consistent with the prior quarter.

Speaker Change: We ended the quarter with cash and cash equivalents of approximately $1 2 billion and debt of $4 6 billion.

Speaker Change: Our growth leverage ratio was two six times and net leverage was two times elevated from the prior quarter due to the timing of our recent debt issuance.

Speaker Change: We expect to pay off the 700 million of senior notes maturing in August with cash on hand.

Speaker Change: We'd expect our gross leverage ratio to be around two three times by the end of the fiscal year.

Speaker Change: Counts receivable totaled $8 9 billion and inventories totaled $7 $1 billion, both consistent with the prior quarter.

Marshall W. Witt: For the second quarter, net working capital was $3.6 billion, up from $3.2 billion in quarter one, and the cash conversion cycle was 23 days, that's two days from quarter one. Cash used in operations in the quarter was $115 million, as Hive, which is part of our strategic technologies, experienced strong growth. Due to the new business ramp, excluding these additional working capital requirements, our free cash flow generation was approximately $190 million.

Speaker Change: For the second quarter net working capital was $3 6 billion up from $3 2 billion in quarter, one and the cash conversion cycle was 23 days.

Speaker Change: I have two days from quarter, one cash used in operations in the quarter was $115 million as hive, which is part of our strategic technologies experienced strong growth due to new business ramping.

Speaker Change: Excluding these additional working capital requirements, our free cash flow generation was approximately $190 million.

Marshall W. Witt: We returned $288 million to shareholders in Q2, with $254 million of share repurchases and $34 million in dividend payments. For the current quarter, our Board of Directors has approved a dividend of $0.40 per common share, representing a 14% increase on a year-over-year basis, which will be payable on July 26th, 2024 to stockholders of record as of the close of business on July 12th, 2024. Thus far this fiscal year, we have returned over half a billion dollars to shareholders.

Speaker Change: We returned $288 million to shareholders in quarter, two with $254 million of share repurchases and $34 million in dividend payments for.

Speaker Change: For the current quarter, our board of Directors has approved a dividend of <unk> 40 per common share representing a 14% increase on a year over year basis, which will be payable on July 26th 2024 to stockholders of record as of the close of business on July 12 2024.

Speaker Change: Thus far this fiscal year, we have returned over half a billion dollars.

Speaker Change: Shareholders.

Marshall W. Witt: Moving now to our outlook for the fiscal third quarter, we expect non-GAAP gross billings of $18.9 billion to $20.1 billion, representing growth of 5% on a year-over-year basis at the midpoint. We expect total revenue to be in the range of $13.3 billion to $14.9 billion, up 1% on a year-over-year basis at the midpoint. Our guidance is based on a euro to dollar exchange rate of 1.08. Non-GAAP net income is expected to be in the range of $219 million to $261 million, and non-GAAP diluted EPS is expected to be in the range of $2.55 to $3.05 per diluted share, based on weighted average shares outstanding of approximately $85 million. Our non-GAAP tax rate is expected to be approximately 23%, and interest expense is expected to be approximately $75 million.

Speaker Change: Moving now to our outlook for the fiscal third quarter.

We expect non-GAAP gross billings of $18 9 billion to $20 1 billion representing growth of 5% on a year over year basis at the midpoint. We expect total revenue to be in the range of $13 3 billion to $14 9 billion up 1% on a year over year basis at the midpoint.

Speaker Change: Our guidance is based on a euro to dollar exchange rate of one point.

Speaker Change: Yes.

non-GAAP net income is expected to be in the range of $219 million to 261 million and non-GAAP diluted EPS is expected to be in the range of $2 55.

Speaker Change: The $3 <unk> per diluted share based on weighted average shares outstanding of approximately $85 million.

Speaker Change: Our non-GAAP tax rate is expected to be approximately 23%.

Speaker Change: Interest expense is expected to be approximately $75 million.

Marshall W. Witt: As we look to the second half of the fiscal year, we continue to expect gross buildings to grow in the mid to high single-digit range, driven by continued improvement in the market environment. We still expect to generate approximately 1.2 billion of free cash flow for the fiscal year and remain committed to our capital allocation target to return 50% of free cash flow to shareholders both through dividends and share repurchase.

Speaker Change: As we look to the second half of the fiscal year.

We continue to expect gross billings to grow in the mid to high single digit range driven by continued improvement in the market environment, we still expect to generate approximately $1 2 billion of free cash flow for the fiscal year and remain committed to our capital allocation target to return 50% of free cash flow to <unk>.

Speaker Change: Our holders both.

Speaker Change: With dividends and share repurchases.

Marshall W. Witt: In closing, we believe we are in a strong financial position as we head into the second half of our fiscal year, with ample liquidity and an optimized balance sheet to fund the expected growth and investment in strategic technologies while capturing opportunities in our core business. Operator, we are now ready to begin the Q&A portion of the call.

Speaker Change: In closing we believe we are in a strong financial position as we head into the second half of our fiscal year.

Speaker Change: With ample liquidity and an optimized balance sheet to fund the expected growth and investments in strategic technologies, while capturing opportunities in our core business.

We are now ready to begin the Q&A portion of the call operator.

Speaker Change: Thank you we will now open the line for questions.

Operator: Thank you. We will now open the line for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Speaker Change: Have dialed in and we would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

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Speaker Change: We request that you limit yourself to one question to allow time for other participants to ask their questions.

Speaker Change: There is remaining time youre welcome to re queue with additional questions.

Speaker Change: Our first question comes from Michael <unk> with.

Operator: We request that you limit yourself to one question to allow time for other participants to ask their questions. If there is remaining time, you are welcome to requeue with additional questions. Our first question comes from Michael Ng of Goldman Sachs. Please go ahead. Hey, good morning. Thank you very much for the question. I just have one on AI devices and AI PCs.

Goldman Sachs. Please go ahead.

Speaker Change: Yes.

Michael Ng: Hey, good morning. Thank you very much for the question I just have one on AI devices and AI Pcs I was wondering if you could expand a little bit more around some of your comments regarding increased customer interest when do you expect that.

Michael Ng: Flow through do you have any views on.

Michael Ng: AIP fees as a share of total Pcs and.

Michael Ng: Any high level commentary that you may have on AI PC pricing relative to your general PC. Thank you.

Michael Ng: Yeah.

Michael Ng: So good morning, Patrick Zammit Im going to take that question Mike.

Patrick Zammit: I was wondering if you could expand a little bit more on some of your comments regarding increased customer interest. You know, when do you expect that to flow through? You know, do you have any views on AI PCs as a share of total PCs and any high-level commentary that you may have on AI PC pricing relative to your general PC? Thank you. So, good morning, Patrick Zemmett.

Michael Ng: <unk>.

Patrick Zammit: I'm going to take that question, Mike. So, I mean, at the moment, what we see is a ramp-up of AIPCs. I mean, when you refer to the market data, we have market data for distribution for both North America and Europe, you see that it's in the low single digits of the total PC market.

So I mean at the moment, what we see is.

Michael Ng: The ramp up of <unk>.

Michael Ng: When you referred to the market data, we got market data for distribution for both North America, and Europe, I mean, you see that it's.

Michael Ng: In the low single digits.

Michael Ng: Of the total PC market you see also that this is at the moment.

Patrick Zammit: You also see that at the moment, the AI PCs are primarily ARM-based PCs, so they're more high-end PCs. So when you look at, from a pricing standpoint, and again, I'm positioning my remarks. Considering the fact that these are INPCs, I would say that the delta price is between 5 and 10% for the INPCs.

Michael Ng: <unk> are primarily based Pcs, so more npcs, okay. So when you look at from a pricing standpoint, and again I am positioning my remarks.

Michael Ng: With the fact that visa in Pcs I would say that the.

Michael Ng: The delta prices between five and 10%.

For the <unk>.

Patrick Zammit: But again, the expectation going forward is that this is going to accelerate. We are waiting for the PC manufacturers to accelerate the launch of the AI PCs. And so the adoption rate is for sure going to increase. And so we continue to be very confident in the prospects of that segment of the market. Great. Thank you so much for the color and congratulations on the new role.

Michael Ng: But the expectation going forward is that this is going to accelerates we are waiting for the PC manufacturers to accelerate the launch of the <unk> and so the adoption rate is for sure going to increase and so we continue to be very confident on the prospects.

Michael Ng: <unk> of that segment of the market.

Great. Thank you so much for the color and congratulations on the new role.

Michael Ng: Yeah.

Our next question comes from.

Patrick Zammit: Thanks a lot. Our next question comes from Ruplu Bhattacharya with Bank of America. Please go ahead. Hi, thanks for taking my questions. I'd like to congratulate both Rich and Patrick. Rich, on his long, successful career, and Patrick, congratulations on the new assignment. Maybe I'll start with you, Patrick, on a question. Since you're going to take on the new role, can you talk about your top focus areas for the next 12 months?

Speaker Change: <unk> with Bank of America. Please go ahead hi.

Speaker Change: Thanks for taking my questions.

Speaker Change: Like to congratulate both rich and Patrick rich for his long successful career and Patrick Congrats on the new assignment.

Speaker Change: Maybe I'll start with you.

Speaker Change: Patrick a question.

Speaker Change: Since youre going to take on the new role can you talk about your top focus areas for the next 12 months for you is it more important for <unk> to have revenue growth our focus on profitable growth, which is focus on margins.

Patrick Zammit: For you, is it more important for SYNNEX to have revenue growth or focus on profitable growth, which is focused on margins? Yeah, so the focus, of course, is on growth. And I think that when you look at the mix of our business, I mean, that growth is also going to generate more profits. When you look at the coming quarters...

Patrick Zammit: Yeah. So the focus of course is on on growth and I think that when you look at.

Patrick Zammit: The mix of our business I mean that growth is also going to generate more profits.

When you look at the coming quarters.

Patrick Zammit: <unk>.

Patrick Zammit: I believe that the technologies that are going to drive growth will have a positive margin. So the mix should be, going forward, more favorable because of that. Hyde, of course, is going to continue to contribute to that growth.

Patrick Zammit: We believe I believe that the technologies, we're going to drive the growth will have a positive.

Patrick Zammit: Margin so the mix should be going forward more for vulnerable because of that hydro of course is going to continue to contribute to our growth.

Marshall W. Witt: So, again, from a top-line standpoint and from a margin quality standpoint, I think we have some very nice opportunities. Now, if I move to the cost side, I also would like to make a few comments here. So I believe – we just accomplished two major milestones in both North America and Europe. We upgraded our IT platform, which means that we can now focus on process and system efficiency.

Patrick Zammit: So.

Patrick Zammit: The gain from a topline standpoint, and from a margin and quality standpoint.

Patrick Zammit: I think we have some very nice opportunities then if I move to the cost side I also would like to make a few comments here. So I believe so I mean, we just accomplished.

Patrick Zammit: Two major milestones in both North America and Europe.

Patrick Zammit: We upgraded our it platform.

Patrick Zammit: Which means that we can now focus on process and system efficiency.

Marshall W. Witt: And so, what it means is that from a cost management standpoint, it gives us the opportunity to redeploy resources to fuel the growth in the high growth categories but, in total, continue to reduce our cost to GP as we did in Q2. So, in summary, I see very nice prospects for not only growth, but really profitable growth and basically the drop through of the GP increase positively impacting operating income. Okay. Patrick, you mentioned a couple of things. Maybe for my follow-up, if I can ask you, you mentioned Hive.

Patrick Zammit: And so what it means is from a cost management standpoint, it gives us the opportunity to.

Patrick Zammit: Redeploy resources to fuel the growth on the high growth categories.

Patrick Zammit: But.

Patrick Zammit: In total continued to reduce our cost to GP as we did it in Q2 so in summary.

Very nice prospects for not only growth, but really profitable growth and basically the drop through of the GP increase.

Patrick Zammit: Positively impacting the operating income.

Speaker Change: Okay. Patrick you mentioned a couple of things maybe for my follow up if I can ask you you mentioned higher so how should we think about high revenue growth.

Marshall W. Witt: So, how should we think about Hive revenue growth? Since you're ramping a new customer, how should we think about revenues as well as the inventory requirements for that business and potential free cash flow? Patrick, you mentioned a couple of things. Maybe for my, Yeah, Ruplu, I'll step in and help with the hive question.

Speaker Change: Since you're ramping a new customer how should we think about revenues as well as the inventory requirements for that business and potential free cash flow.

Speaker Change: Yes, Rupel, who maybe I'll step in.

Speaker Change: Help with the highest question so.

Marshall W. Witt: So, as we commented in our remarks, we had very robust growth in hives in the quarter. As we look at the tactical frame, we believe that growth will continue. Obviously, there's good demand within the hyperscaler space, but we've talked before about customer number two is now in a very healthy ramp and doing quite well. So, we're really pleased with the performance of our Hive business overall. You bring up a good point, you know; as we get outsized growth within Hive, there'll be working capital needs that get generated.

Speaker Change: As we had commented in our remarks, we had very robust growth in <unk> in the quarter.

Speaker Change: As we look at those tactical frame we belief.

Speaker Change: That growth will continue.

Speaker Change: Obviously, there is good demand within the hyperscale or space, but we've talked before about customer number two is now in a very healthy ramp in and doing quite well.

Speaker Change: So we're really pleased with the performance of our high business overall, you bring a good point.

Speaker Change: As we get outsized growth within high there'll be working capital needs that get generated.

Marshall W. Witt: Those working capital needs manifest themselves in AR as well as inventory, but obviously, good cholesterol here because, you know, we're positioning ourselves for good growth when we see that working capital increment occur. And so, you know, that's the summary. I think that from a cash flow perspective, we have our balance for the year, and we're still committed to 1.2 billion. To the extent we get outsized growth, then, you know, maybe that's impacted a bit. But again, just want to emphasize that that would be a healthy collection. Great, thank you for all the details. Yeah, sorry, go ahead. Ruplu, sorry, this is Marshall. I apologize. I'm recovering from a cold.

Speaker Change: Those working capital needs manifests himself.

<unk> and <unk> as well as inventory.

Speaker Change: But obviously good cholesterol here, because we're positioning ourself for for a good good growth when we see that that working capital increments occur.

Speaker Change: And so that's.

Speaker Change: The summary.

Thanks.

Speaker Change: From a cash flow perspective.

Speaker Change: Our balance for the year, we're still committed to one 2 billion.

Speaker Change: To the extent, we get outsized growth, then maybe thats impacted a bit but again just want to emphasize that that would be healthy cholesterol.

Speaker Change: Great. Thank you told in truth, Yes, sorry go ahead.

Marshall W. Witt: Sorry, this is Marshall.

Marshall W. Witt: And I apologize I'm recovering from a cold just to follow up on Richard's comment about high then.

Marshall W. Witt: Just to follow up on Richard's comment about Hive and the... and the growing business from the new ramp, we did see that that did impact free cash flow in quarter two. As I said in my prepared commentary, we expect that to reverse in quarter three. The other thing that we wanted to call out is that in many cases, when Hive is onboarding new customers, there's quite a bit of investment that we do up front on that.

Marshall W. Witt: And the.

Marshall W. Witt: The growing.

Business from the new ramp we did see that that did impact free cash flow in quarter two.

Speaker Change: I said in my prepared commentary, we expect that to reverse in quarter three the other thing that that we wanted to call out is that in many cases, when hive is onboarding new customers theres quite a bit of investment that we do upfront on that.

Marshall W. Witt: That does serve as a headwind to margin, but over the course of the coming quarters in the second year of the program, that's typically when we make back the margin, and we get returns on the program or the partnership that we've set or established with our customer. And in the case of this one, what typically happens with Hive is, as we grow our businesses, we start to see a more sticky relationship with our customers. That's a great attribute and strength of the Hive teams.

That does serve as a headwind to margin, but over the course of the coming quarters and the second year of the programs. That's typically when we make back the margin.

And we get the returns for the program and the partnership that we've set or established with our customer.

Speaker Change: And with the case with death, one would typically happens with hive as we grow the business as we start to see a more sticky relationship with our customer at the great attribute and strength of the high teens. We expect the same thing with this customer that we're ramping today.

Marshall W. Witt: We expect the same thing with this customer that we're renting. Got it. Thanks for all the details, Rich. I look forward to keeping in touch. And Patrick, I look forward to working with you. Thanks a lot. Thank you, RuPaul, for your kind words.

Speaker Change: Got it thanks for all the details rich.

Speaker Change: Congrats to you and look forward to keeping in touch and Patrick look forward to working with you.

Speaker Change: Thanks, a lot. Thank you <unk> for your kind words.

Speaker Change: Okay.

Operator: Our next question comes from Joseph Cardoso with J.P. Morgan. Please go ahead. Hi, thank you for taking the time. This is MP on behalf of Joe Cardoso.

Speaker Change: Our next question comes from Joseph Cardoso with J P. Morgan. Please go ahead.

Speaker Change: Hi, Thank you for taking this is <unk> on for Joe Cardoso.

Patrick Zammit: I just wanted to ask your thoughts on the magnitude of PC recovery into the second half and how much material that today PCs will be forced outside. Thank you. Yeah, so I'm going to take that question. Again, quarter after quarter, we see sequential improvement in the PC market. I mean, this quarter, we are back to growth, and so we are expecting that growth to continue to improve quarter after quarter. So we are confident about the second half. We believe the PC market should continue to benefit from three tailwinds. The first one is the refresh of the PC board during the pandemic. The second is Windows 11.

Speaker Change: I just wanted to ask your thoughts on the main trough magnitude of PC to carry into the second half and how material a species will be of course, that's right. Thank you.

Speaker Change: Okay.

Speaker Change: Yes, so I'm going to take that question. So.

Speaker Change: Again, we have quarter after quarter, we see.

Speaker Change: The sequential improvement of the PC market.

Speaker Change: This quarter, we were back to growth.

So we are expecting but growth to continue to.

Speaker Change: Improve quarter after quarter. So we are confident for the second half we believe the PC market.

Speaker Change: Should continue to benefit from three tail winds. The first one is the refresh of the FTC. Both during the pandemic. The second is Windows 11, and then as I mentioned before.

Patrick Zammit: And then, as I mentioned before, the AIPCs are ramping up. We will see an acceleration in the second half of the launch of new AIPCs, also at a lower price point. And that should benefit the PC market in the second half. Our next question comes from Adam Tindle with Raymond James. Please go ahead.

Speaker Change: The <unk> are ramping up we would see an acceleration in the second half of.

Speaker Change: The launch of new AIP fees also at lower price points and that should benefit the PC market in the second half.

Speaker Change: Thank you.

Our next question comes from Adam Tindle with Raymond James. Please go ahead.

Patrick Zammit: Okay, thanks. Good morning, and my congratulations to both Rich and Patrick. Patrick, I wonder if we could maybe zoom out and see if you could share a few words on your overall vision for the company, particularly around your capital allocation philosophy. Do you think that there's more near-term opportunity for shareholder return or potential M&A? Speak to sort of the trade-off between those, as I know you've been in the industry for a long time and seen a lot of different capital allocation decisions, so I would love for you to share some of your philosophy.

Adam Tyler Tindle: Okay. Thanks, Good morning, and my congrats to both rich and Patrick Patrick.

Patrick I Wonder if we could maybe zoom out and see if you could share a few words on your overall vision for the company, particularly around your capital allocation philosophy do you think that theres more near term opportunity for shareholder return or potential M&A speak to sort of the tradeoff between those as I know you've been in the industry a long time.

Adam Tyler Tindle: And seen a lot of different capital allocation decisions. So would love for you to share some of your philosophy.

Patrick Zammit: Yes, so so again in terms of.

Patrick Zammit: Yeah, so, again, in terms of overall prospects, I would say prospects. First, one of our big differentiators is that we are positioned on all the critical technologies in the industry. And we know that in the coming years, especially thanks to AI, most of those technology sectors are going to benefit from AI. So end-to-end portfolio, that's a big, big strategic advantage for the future. Second, we are global. And obviously, our position in the various markets differs. We have countries where we have a low share.

Adam Tyler Tindle: Overall.

Patrick Zammit: I would say prospects.

Adam Tyler Tindle: <unk>.

Adam Tyler Tindle: <unk>.

First at one of our Big film shape as we are positioned on all the critical technologies in the industry and we know that for the coming years, especially thanks to AI.

Adam Tyler Tindle: Most of those technology sectors are going to benefit from AI. So.

Adam Tyler Tindle: End to end portfolio.

Adam Tyler Tindle: The big Big strategic advantage for the future second we are global and obviously online.

Adam Tyler Tindle: Position into various markets differ we have countries, where we have a low share so again.

Patrick Zammit: So again, we will continue to invest in those countries where we see nice prospects. A good example would be India, and Accelerate there. And third, it's in services. I mean, we believe that there are opportunities in services again to support our resellers. But I see some positive prospects, which will obviously be accretive. In terms of capital allocation, for the moment, as you know, I mean, we, our plan is to return 50% of cash flow to the shareholders.

Adam Tyler Tindle: We will continue to invest in those countries, where we see nice prospects with example would be India.

Adam Tyler Tindle: <unk> accelerates there and.

Adam Tyler Tindle: And third is in services I mean, we believe that.

Adam Tyler Tindle: There are opportunities in services again to support all of the sellers, but I see some positive prospects, which obviously will be accretive.

Patrick Zammit: So for the moment, I would say I'm very comfortable with it. In terms of M&A, I see M&A as an opportunity to accelerate our growth plan. I mean, we've always been extremely diligent. OK, so we have financial metrics when looking at M&A. But I can see in some geographies, again, particularly in APJ or in Latin America, and to some extent also in Europe.

Adam Tyler Tindle: In terms of capital allocation for the moment as you know I mean, we our plan is to return 50% of cash flow to the shareholders. So for the moment I would say I'm very comfortable with it.

Adam Tyler Tindle: In terms of M&A I see M&A as an opportunity to accelerate our growth plans.

Adam Tyler Tindle: I mean, we've always been extremely diligent.

Adam Tyler Tindle: Diligent okay. So we have.

Adam Tyler Tindle: Financial metrics when looking at M&A, but I mean, I can see in some geographies again in particular in APG or in Latin America to some extent also in Europe and for some specific technologies. They are some M&A opportunities.

Patrick Zammit: And for some specific technologies, there are some M&A opportunities. And clearly, if we can, I mean, work on one of those opportunities, I will be favorable to it. But if you exclude M&A, I think today's 50% capital allocation and return to shareholders is a good start. And, yeah, we will review it in the future based on how the situation evolves. And Adam, this is Marshall, just to add a couple things around our capital allocation framework.

And clearly if we can.

Adam Tyler Tindle: I mean work on one of those opportunities will be final reports with.

Adam Tyler Tindle: But if you exclude M&A I mean, I think today, the 50% capital allocation and return to shareholders.

Adam Tyler Tindle: Is.

As a good start and.

Speaker Change: Yes, we would have we would review it in the future based on how the situation evolves.

Marshall W. Witt: And Adam This is Marshall just to add a couple of things around our capital allocation framework.

Patrick Zammit: For the first half of the year, we had quite a bit of participation in the Apollo Secondaries that elevated our first half share repurchases to about $450 million. When you add the dividends of the first half, we came in around $520 million in return to shareholders. We expect to match the overall expected cash flow for the year of $1.2 billion.

Speaker Change: For the first half of the year, we had quite a bit of a participation in the poll of secondaries.

Speaker Change: At elevated our first half share repurchases to about $450 million when you add the dividends for the first half we came in around $520 million and returned to shareholders. We expect to.

Marshall W. Witt: So there will probably be about $50 to $60 million between dividends and share repurchase by quarter in the second half, putting us right around that 6.10 to 6.30 range for the full year. Got it. That's helpful, Marshall. I hate to pick on you.

Speaker Change: The overall expected cash flow for the year of $1 2 billion.

It will probably be about 60 $50 million to $60 million between dividends and share repurchases by quarter in the second half putting us right around that $6 10 to 630 range for the full year.

Speaker Change: Got it that's helpful. Marshall I hate to pick on you I'm, sorry that I'm not.

Marshall W. Witt: I'm sorry that you're not feeling good right now, but on the HIVE situation here, it was very helpful for you to outline the use of cash in the quarter. I think if I did the math here, it's about a $350 million swing factor related to HIVE. And if I compare that to your typical working capital to revenue ratio, it seems like that could be a pretty meaningful revenue driver going forward from that investment.

Speaker Change: Feeling good right now but.

Speaker Change: Hi situation here. It was very helpful for you to outline that use of cash in the quarter I think if I did the math here, it's about a $350 million swing factor related to hide.

Speaker Change: And if I compare that to your typical working capital to revenue ratio. It seems like that could be a pretty meaningful revenue driver going forward from that investment, it's not quite as evident to us based on the Q3 guide, but I wonder if you might speak to some of the future timing and magnitude of the financial benefit.

Marshall W. Witt: It's not quite as evident to us based on the Q3 guide, but I wonder if you might speak to some of the future timing and magnitude of the financial benefit from the investment that you're making in HIVE right now or have made in the quarter. Sure, so I'll go back to my comments I made a little bit ago about many of our partnerships that we have with onboarding accounts. And, as you know, this is a significantly meaningful opportunity for us.

Speaker Change: From the investment that Youre, making in high up right now or have made in the quarter.

Sure. So I'll go back to my.

Speaker Change: Comments I made a little bit ago about in many of our partnerships that we have with Onboarding accounts and as you know this is significantly <unk>.

Marshall W. Witt: We do make investments that create a little bit of a headwind on the margin profile of the business, but we do expect that to expand as we get into the second year. If I think about the overall growth attributes for Hive, I'm quite surprised in a positive way in terms of what we initially thought. For the quarter, I think we had said that we thought high revenue year on year would be down, and it was up, referencing back to our strategic technology portfolio growth of 15%. The hive was north of that.

Speaker Change: Full opportunity for us, we do make investments that create a little bit of a headwind on the margin profile of the business, but we do expect that to expand as we get into the second year.

Speaker Change: If I think about the overall growth attributes for hive quite surprised in a positive way in terms of what we initially thought for the quarter. I think we had said that we thought high revenue year on year would be down and it was up referencing back to our strategic technology portfolios growth of 15% high with.

Speaker Change: North of that so we really do like the momentum we see that momentum continuing as we enter into the second half of the year.

Marshall W. Witt: So, we really do like the momentum. We see that momentum continuing as we enter into the second half of the year. If I think about the overall profit profile or margin attributions of Hive, they do move around quite a bit. As you know, we have what I call "disty-like" attributes to Hive, but they are quite meaningful to the stickiness of the relationship.

Speaker Change: If I think about the overall profit profile or margin attributions of high it does move around quite a bit as you know we have what I'll call. It 50 like attribute the high but quite meaningful to the stickiness of the relationship.

Marshall W. Witt: We've got our design and our build attributes. We have the customer design in our build, and we have supply, fares, and loot, which is, in essence, a great opportunity to fulfill the needs of our Hyperscale customers. And finally, there's quite a bit of strategic purchases that we do in advance of demand. One of the things that I think we'll continue to see is a requirement for us to buy forward on future needs, much beyond quarter three and into quarter four and into Q1. Historically, we have seen this in the past when there has been growth associated with hyperscale opportunities. So I would say that there is still an overall accretion benefit to the HIVE margin returns.

Speaker Change: We've got our design.

Speaker Change: And our bill.

Speaker Change: We have the customer to Atlanta in our field and we have supply bears and loose which is in essence, a great opportunity that's for fulfill the needs of our of our hyperscale customers and finally, theres quite a bit of Sta.

Speaker Change: Strategic purchases that we do in advance of demand one of the things that I think will continue to see it.

Speaker Change: A requirement for us to buy forward on future needs much beyond quarter, three and into quarter four and into Q1. Historically, we have seen this in the past when there has been growth associated with hyper scale opportunities. So I would say that there is still an overall accretion benefit to the hive.

Speaker Change: And returns there could be some delays in the cash flows as we continued to invest in our partnership with our customers and then finally, we still see quite a bit of diversification of our customer base as you know it well and on ramp at the slow sell process, but we're quite positive about where that's heading as an organization.

Marshall W. Witt: There could be some delays in the cash flows as we continue to invest in our partnership with our customers. And, finally, we still see quite a bit of diversification in our customer base. As you know, it's a slow and on-ramp, it's a slow sell process, but we're quite positive about where that's heading. Do you think that means earnings are going to be flat year-over-year in Q3 based on your guidance? Should we kind of continue to expect sort of that flat year-over-year trend into Q4 and Q1 based on this? Yeah, I think that's a fair assessment.

Speaker Change: Do you think that means.

Speaker Change: Earnings are going to be flat year over year in Q3 based on your guidance should we kind of continue to expect sort of that flat year over year trend into Q4 and Q1 based on this.

Marshall W. Witt: As you know, when we exited fiscal 22, we had a large inventory position that unwound itself kind of evenly throughout fiscal 23. And with Hive, a lot of what we carry on the behalf of our customers, we get paid an incremental margin for that carrying cost. And as we sell it through, there's a little bit more richness associated with that margin. That'll make Hive a tough comparison from an overall profit perspective in Q3 and Q4.

Speaker Change: Yes, I think Thats, a fair assessment as you know when we exited fiscal 'twenty. Two we had a large inventory position that unwound itself kind of evenly throughout 'twenty, three and with with Hive a lot of what we carry on the behalf of our customers, we get paid incremental margin for that carrying cost and as we sell it through.

There is a little bit rich and more richness associated with that margin that will make high of a tough compare from an overall profit perspective in Q3 and Q4, but if I just think about the actual quality of margin and the growth attributes I think it's quite positive as we get into fiscal 'twenty five.

Marshall W. Witt: But if I just think about the actual quality of the margin and the growth attributes, I think it's quite positive as we get into fiscal 22. Our next question comes from George Wang with Barclays. Please go ahead. Oh, hey, Patrick, congrats and I'm looking forward to working with you. And also, congratulations to Richard as well.

Speaker Change: Our next question comes from George Wang with Barclays. Please go ahead.

Oh, Hey, Patrick Congrats Im looking forward to working with you and also congrats.

Dong Wang: For rich as well I just have just a quick question on the margin. Just you guys talk all chemical impacts from netted down revenue and then also potentially yes coming for bigger mix SPC grow in the second half.

Marshall W. Witt: I just have a quick question on the margin. You guys talked about kind of the impact from net down revenue and then also potentially in ES coming for a bigger mix as PCs grow in the second half. So how should we model gross margin and operating margin on a sequential basis in the second half? Margin to come down sequentially from 3Q versus 2Q. Just how do you think about the kind of margin, also the kind of expense versus, you know, gross receipts overall for the second half? Marshall, why don't you take that one?

Dong Wang: We model kind of the gross margin operating margin.

Dong Wang: Actual basis in the second half.

Speaker Change: So those margins will come down sequentially <unk> versus <unk> and Tokyo.

Speaker Change: I think Paul can imagine also the kind of expense.

Speaker Change: Gross billings overall second half.

Speaker Change: Yeah.

Speaker Change: Good morning Catherine.

Speaker Change: Sure Yeah.

Marshall W. Witt: Sure. Yeah. First, as you know, in quarter one, we provided kind of our first level down of transparency around ES and AS and the margin profiles. And we're still kind of getting our sense of what that volatility or range of outcomes could look like from quarter to quarter. But they were fairly consistent for both ES and AS, whether it's on a gross fillings basis or on a net revenue basis.

Speaker Change: First.

Speaker Change: As you know in quarter, one we provided kind of our first next level down of transparency around <unk>.

Speaker Change: And the margin profiles, and we are still kind of getting.

Speaker Change: Our sense of what that volatility or or or a range of outcomes could look like from quarter to quarter. They were fairly consistent for both es and ask whether it's on a gross billings basis or on a net revenue basis.

Marshall W. Witt: But as we think about the full year, and we commented on this last quarter, we do expect that in the second half of 24, we will see an increasing proportion of mix tilted more towards endpoint solutions, which has a lower gross margin profile. And we would expect that gross margins, whether it's net or gross billings, or operating margin, whether it is compared to net revenue growth, should decline around 20 basis points, just given that mix shift.

But as we think about the full year.

Speaker Change: We commented on this last quarter, we do expect that in the second half of 'twenty four we will see an increasing proportion of mix tilted more toward endpoint.

Speaker Change: Solutions, which has a lower gross margin profile.

Speaker Change: And we would expect that.

Speaker Change: Gross margins, whether it's net or our gross.

Speaker Change: Gross billings or operating margin, whether it is compared to net revenue growth should decline around 20 basis points, just given that mix shift, but I want to emphasize within the portfolio and sell quite a bit of healthy structural optimism and quite a bit of normal outcomes that we're seeing it's just that now we did.

Marshall W. Witt: But I want to emphasize within the portfolios themselves quite a bit of healthy structural optimism and quite a bit of normal outcomes that we're seeing. It's just that now we disclose that it provides a little more transparency in the way that those margins can ebb and flow within those two portfolios. And again, the last thing I would say, which is important to emphasize, is that our growing strategic technology portfolio is now at 25% of gross billings. That's an all-time high.

Speaker Change: Clothes that it provides a little more transparency in the way that that those margins can ebb and flow within those.

Speaker Change: Two portfolios and again the last thing I would say, which is important to emphasize is our growing strategic technology portfolio is now at 25% of gross billings.

Speaker Change: An all time high.

Marshall W. Witt: Underneath, when you look at the components, if it's cloud, security, data analytics, IOT, hyperscale, those tend to grow faster than the overall core business and, over the longer term, tend to have higher-margin assets. Great, thank you. I go back to the, Our next question comes from David Vogt with UBS. Please go ahead.

Speaker Change: Underneath when you look at the components of its cloud security data analytics Iot your hyperscale.

Speaker Change: Those tend to grow faster than the overall core business and over the longer term tend to have higher margin attributes.

Speaker Change: Great. Thank you I'll go back to the queue.

Speaker Change: Our next question comes from David <unk> with UBS. Please go ahead.

Speaker Change: Great. Thanks, guys and rich congratulations and Patrick Congratulations look forward to working with you.

Marshall W. Witt: Great. Thanks, guys. And, Rich, congratulations.

Marshall W. Witt: And, Patrick, congratulations. I look forward to working with you. Two, if I may, since I know you've said one, but the first question is about advanced solutions.

Speaker Change: Two if I may since I know you've said one but the first question is on advanced solutions can you kind of flush out some of the commentary around the demand drivers I think you, particularly call that networking being tough.

Marshall W. Witt: Can you kind of flesh out some of the commentary around the demand drivers? I think you particularly called out networking being tough. I just want to get a sense of where you think you are from a normalization perspective relative to what sounded like a backlog flush last year. And any other comments on any of the categories like storage?

Speaker Change: Want to get a sense for where do you think you are from a normalization perspective relative to what sounded like backlog flush last year and any other comments on any of the other categories like storage and then one for you Marshall maybe digging a little bit deeper on the gross margin commentary.

Marshall W. Witt: And then one for you, Marshall, maybe digging a little bit deeper on the gross margin commentary. It looks like, you know, your market's endpoint versus advanced solutions was basically relatively consistent, quarter to quarter, and netted down, as you mentioned, contributed 27 BIPs. Do you read a gross margin? Just trying to think through kind of what went on under the surface because it looks like gross margins are only up nine basis points. So, any color there would be helpful to kind of get a sense for the margin profile trajectory in some of the categories.

Speaker Change: It looks like your markets endpoint versus an advanced solutions, where basically relatively consistent quarter to quarter and netted down I think you mentioned contributed 27 bps year over year gross margin just trying to think through kind of what under the surface one off because it looks like gross margins only up nine basis points. So any color there would be helpful.

Speaker Change: Trying to get a sense for margin profile trajectory and some of the categories. Thanks.

Speaker Change: Okay.

Marshall W. Witt: Thank you. Sure, do you want me to take that first, Rich and Patrick, and then you can answer the demand drivers? Sure. Folks, let me first address the overall portfolio range or outcomes. As I said, probably the two biggest drivers to the margin profile, and again, I'm describing it as gross profit as a percentage of gross billings, it came down about 14 bps. The first is the comment I made about the ramping up of our new customer that we won in quarter four, but building out and seeing some significant ramps.

Speaker Change: Sure do you want me to take that first rich and Patrick and then you can answer the demand drivers.

Sure sure.

Marshall W. Witt: That had some margin pressure as we made some significant investments in that partnership that, over the course of the next few quarters and next year, should benefit and increase. And the second, which I'll let Rich and Patrick speak to, is that networking remains soft in general. Networking has a higher gross margin profile, so I wouldn't call it kind of a second big contributor, but it certainly was a contributor to some of the softness and gross margins for the quarter. Got it, and then on the trend. This is Rich. If I could...

Speaker Change: Let me, let me first address the overall portfolio range of outcomes as I said, probably.

Speaker Change: The two biggest drivers to the margin.

Speaker Change: Profiling again, describing it as.

Speaker Change: Gross profit as.

Speaker Change: As a percentage of gross billings it came down about 14 bps.

Speaker Change: The first is the comment I made about the ramping up of.

Speaker Change: Our new customer that we won in quarter, four but building out and saw some significant ramp that had some margin pressure as we are.

Speaker Change: <unk> made some significant investments in that partnership that over the course of the next few quarters and next year should benefit an increase.

Speaker Change: And the second which I'll, let rich and Patrick speak to is that networking remained soft in general networking.

Speaker Change: Has a higher gross margin profile, so I wouldn't call it kind of a second big contributor, but it certainly was a contributor to some of the softness in gross margin.

Speaker Change: For the quarter.

Speaker Change: Got it.

And then on the Chan Janice this.

Richard T. Hume: Rich if I could.

Richard T. Hume: When we look across advanced solutions, actually, when we take a look across the entirety of our business, we've been pretty pleased with seeing flat or growth in just about every category. The only exception to that has been networking. Now, the comments that I would make on networking, and we've talked about this previously, is that, um... From a supply chain perspective, it was the last area to recover, so their backlog runoff went further into last year versus, for example, server storage, which had good growth in the quarter.

Speaker Change: When we look across the bid solutions actually when we take a look across the entirety of our business. We've been pretty pleased with seeing flat or growth in just about every category. The only exception to that is the networking now with the comments that I would make a networking and we've talked about this previously is that.

Speaker Change: From a supply chain perspective, it was the last area to recover so their backlog run off.

Speaker Change: Further into last year versus for example, server storage, which had good growth in the quarter. So I don't think theres anything to stomach around networking, but rather they just stop they get through that rap.

Richard T. Hume: So, you know, I don't think there's anything systemic around networking, but rather, they just have to get through that wrap. But the rest of the advanced technologies for each major category performed pretty well. And Rich, can you just remind us again where that wraps?

Speaker Change: But the rest of the advance technologies for each major category performed pretty well.

Richard T. Hume: You know, is it this next quarter? in terms of the access backlog. Throwing the dart at the board, probably October, November.

Speaker Change: And can you just remind us again where that ramps.

Speaker Change: Next quarter.

Speaker Change: Yes, it might be I guess backlog.

Speaker Change: Throwing a dart at the board probably October November.

Richard T. Hume: Okay, great. Thank you. Just very rapidly again, Q3 last year was very strong in networking because we continued to see the, I mean, basically the backlog converted into billings. Q4 is when we started having a more normalized situation. So I guess the comparables will be easier in Q4. The second thing I wanted to mention is that we see the bookings are nevertheless coming back, which is great. Thank you very much, guys. Our next question comes from Matt Sheerin with Stiefel. Please go ahead.

Speaker Change: Okay, great. Thank you.

Speaker Change: Just very rapidly again in Q3 last year was very strong in networking because we continued to see the I mean basically the backlog converting into billings for Q4 is when we started having a more normalized sit.

Speaker Change: Situation. So I guess, the comparables will be will be easier in Q4 second thing I wanted to mention is that we see the bookings Nevertheless, coming back which is which is a positive.

Speaker Change: Great. Thank you very much guys.

Speaker Change: Our next question comes from Matt Sheerin with Stifel. Please go ahead.

Richard T. Hume: Yes, thank you. Good morning, and I echo my congratulations to Rich and Patrick on your new roles. I'd like to ask kind of a bigger picture question. I'm hearing relatively positive commentary about demand and outlook, yet you did come in below consensus by more than $100 million in the top line, and you're guiding below consensus and guiding just up 1% sequentially. And given that you're expecting demand to be high, it just seems like demand overall is more on the sluggish side. We're hearing that from some peers and suppliers as well. So I'm trying to reconcile that with the commentary and expectations of a stronger second half.

Matthew John Sheerin: Yes. Thank you good morning.

Speaker Change: Echo my congratulations too rich and Patrick on your new roles.

Matthew John Sheerin: I'd like to ask kind of a bigger picture question I'm hearing relatively positive commentary about demand and outlook yet you did come in below.

Matthew John Sheerin: Consensus by more than $100 million in top line.

Matthew John Sheerin: And you're guiding below consensus and guiding just up 1% sequentially.

Matthew John Sheerin: And given that you're expecting high to be up.

Matthew John Sheerin: It just seems like demand overall.

Matthew John Sheerin: And the sluggish side, we're hearing that from some peers and suppliers as well so I'm trying to reconcile that with your commentary and expectations of a stronger second half and given that you're guiding just flat.

Speaker Change: Modestly in August how should we think about it.

Matthew John Sheerin: Seasonality in the November quarter, and how that plays out. Thank you yeah. So Matt thank.

Richard T. Hume: And given that you're guiding just flat or modestly in August, how should we think about seasonality in the November quarter and how that plays out? Thank you. Yeah, so Matt, thank you for the question and thank you for the kind comments. A couple of things.

Speaker Change: Thank you for the question and thank you for the.

Speaker Change: He can comment a couple of things.

Richard T. Hume: Again, when we think about the performance of the business relative to sales performance, we really would encourage everybody to focus on gross billing to get away from the netting that takes place when we get back down to net revenue. When you look at Q2, the actual gross billings growth was about 3% overall, and we're guiding for Q3 at the midpoint at about 5% billings growth overall. So we do see this chronology as we move quarter, quarter, quarter of improvements, improvements, improvements on the top line.

Speaker Change: Again.

Speaker Change: When we think about the performance of the business relative to sales performance.

Speaker Change: We really would encourage everybody to focus on gross billing to get away from the netting that takes place when we get back down to net revenue when you look at the Q2 the actual.

Speaker Change: Gross billings growth.

Speaker Change: About 3% overall and we're guiding in Q3 at the midpoint at about a 5% billings growth overall, so we do see this chronology as we move quarter to quarter quarter of improvements improvements improvements on the topline.

Speaker Change: There has to be candid I think when we started the year and Brian on the call way back in January.

Richard T. Hume: To be candid, I think when we started the year and we were on the call way back in January, and did we think it could be a little bit higher in Q3, like instead of five at the midpoint, maybe six or seven? Yeah, probably. So it might be a little bit slower than originally anticipated, but we kind of see 5% at the midpoint just being pretty solid and kind of building from there. So Marshall, I don't know if you have anything to add. No, no, I just have just a couple of things.

Speaker Change: It could be a little bit higher in Q3, instead of five at the midpoint may be six or seven yes, probably but so it might be a little bit slower trajectory than originally anticipated, but you know.

Speaker Change: We we kind of see 5% at the midpoint has been pretty solid.

Speaker Change: And kind of building from there so Marshall I don't know if you have anything to add.

Richard T. Hume: One, and just to reaffirm what you said, Matt, if I think about quarter three, you know, at that 5%, we see EF being a little bit above that in terms of its growth rate year-on-year and EF being a little bit below that 5%, and I just want to make sure that I'm clear on a response I said back to Adam in regards to the overall OI or Profit Portfolio for Hive I was speaking about the Hive Attribute for Q3 and Q4, not speaking about the portfolio or the worldwide attributes for TD SYNNEX.

Marshall: No no just a couple of things one and just to reaffirm what you said, Matt if I think about quarter three at that 5%.

Speaker Change: We see a S R.

Speaker Change: <unk> being a little bit above that in terms of its growth rate year on year, and asking a little bit below that 5% and I just want to make sure that I'm clear on our response I head back to Adam in regards to.

Speaker Change: Overall.

Speaker Change: Oh, why our profit portfolio for Hive I was speaking to the hive attributes.

Speaker Change: For Q3 and Q4 not.

Not speaking to the portfolio or the worldwide attributes for <unk>. So I just wanted to make that clear.

Richard T. Hume: So, I just want to make that clear to respond to that and to close that out. Usually, what we'll see in terms of Q3 to Q4 seasonality behavior on margin profiles is anywhere from a 15-basis point improvement to a 35-basis point improvement.

Speaker Change: Respond to that and to close that out usually what we'll see in terms of Q3 to Q4 seasonality behavior on margin profile is anywhere from 15 basis point improvement to a 35 basis point improvement. We don't see any reason why we wouldn't fall back into that expectation in terms of that sequential margin and.

Marshall W. Witt: We don't see any reason why we wouldn't fall back into that expectation in terms of that sequential margin improvement that we typically experience between those two quarters. Okay, if I can just ask a quick follow-up question, and thank you for that. Just regarding Hive, and you talked about ramping that second customer. Could you talk about your existing large customer there and the relationship there? I know it seems like you haven't been growing up much.

Speaker Change: That typically we experienced between those two quarters.

Speaker Change: Okay. If I could just ask a quick follow up and thank you for that.

Speaker Change: Just regarding.

Speaker Change: Hi, you talked about ramping that second customer could you talk about your existing large customer there and the relationship there and I know it seems like you haven't been growing much could you talk about that.

Speaker Change: Yes, maybe I'll get started and then Marshall could comment clearly having growth in our customer number one clearly thing design opportunities.

Richard T. Hume: Could you talk about that? Yeah, maybe I'll get started, and then Marshall can comment. Clearly, having growth in our customer number one, clearly seeing design opportunities with regard to new technology, a healthy relationship with customer number one, really no need to be concerned at this point. We think it's quite a good relationship, and we'll continue to take advantage of servicing that customer and winning new business as we move forward. Okay, thanks a lot.

Speaker Change: With regard to new technology.

Speaker Change: Healthy relationship with customer number one.

Speaker Change: No need to.

Speaker Change: We wouldnt be concerned at this point, we think it's quite a good relationship.

Speaker Change: We will continue to take advantage of the servicing that customer and winning new business as we move forward.

Okay. Thanks, a lot yes, yes.

Richard T. Hume: Yeah, nothing else to add to that. Our next question comes from Keith Housum with NorthCoast. Please go ahead.

Speaker Change: Nothing else to add to that rich.

Speaker Change: Our next question comes from Keith <unk> with Northcoast. Please go ahead.

Richard T. Hume: Good morning, guys. And once again, I want to echo whatever we all said earlier. Rich, it's been a pleasure working with you. Congratulations on the retirement, and Patrick is looking forward to working with you. Maybe just clarification before I ask the question, but Marshall, did I hear you say that gross margins were impacted by 14 basis points due to the investment in that high of a customer number two this quarter? That that was one of the drivers.

Keith: Morning, guys and once again I want to Echo what are we all set here rich it's been a pleasure working with you congratulations on the retirement and Patrick we look forward to working with you.

Speaker Change #100: Maybe just a clarification before I ask the question, but Marshall did I hear you say that gross margins were impacted by 14 basis points due to the investment in that higher customer number two this quarter.

Marshall: That was one of the drivers.

Marshall W. Witt: The other was the softer network portfolio, and we knew there would be a tough comparison from backlog. But the demands themselves continue to be soft.

Marshall: The other was the softer network portfolio, we knew there would be a tough compare from backlog.

Speaker Change #101: But the demand themselves continue to be thoughtful it's really first the margin profile of the ramping of the new customer in secondary or at least the partner network and as rich said the rest of the portfolio, which is in terms of the product lines were at or above in terms of.

Speaker Change #101: And gross margin alright.

Marshall W. Witt: So it's, it's really first the margin profile of the ramping up of the new customer. And secondarily, it's the softness of the network. And as Rich said, the rest of the portfolio, which is in terms of the product lines, we're at or above in terms of growth and profitability. All right, that's helpful. I appreciate that.

Speaker Change #102: Alright Thats helpful. I appreciate that yes, Keith can you suggest that's not uncommon in the front end when you have a big ramp have some inefficiencies because everything is new and on time.

Richard T. Hume: Yeah, Keith, it's not uncommon, you know, on the front end when you have a big ramp, to have some inefficiencies because everything is new, and, you know, in time, we're pretty confident that that margin will become efficient and optimized. So, it's not sort of a systemic thing, but rather just a ramping up. Yeah, all reasonable in my eyes.

Speaker Change #103: Pretty confident that that margin will will get efficient and optimized so.

Speaker Change #103: It's not sort of a systemic thing, but rather just the ramping.

Richard T. Hume: I appreciate that. I guess Patrick or Richard or whoever wants to take the question, you know, as we think about AI PCs, they're still relatively new coming out here. Is there a risk that perhaps customers will put off the purchase of a PC refresh until they start looking at AI PCs and deciding which way they need to go?

Speaker Change #103: Yes, all ratable in my eyes I appreciate that.

Speaker Change #104: I guess, Patrick or Richard whoever wants to take the question.

Speaker Change #105: As we think about AIP CS are still relatively new coming out here is there a risk that perhaps customers were put off the purchase of a PC refresh until they start looking at AIP season, deciding which where they need to go.

Speaker Change #106: I'm not sure I would take it.

Patrick Zammit: Yeah, yeah, I will take it. So again, so at the moment, there aren't enough products being launched. So I would say. Customers have the choice between replacing the existing PCs with, I would say, normal PCs or going more high-end, lower-end AIPCs come to the market, I think that's going to unblock many of the purchases, or at least the customers waiting to see what offering will be available. That's going to accelerate in the second half.

Speaker Change #106: So again so.

Speaker Change #106: Yeah.

Speaker Change #106: At the moment.

Speaker Change #106: Enough products being launched so I would say.

They have the choice of the customers have the choice between I mean, replacing the existing Pcs with.

Speaker Change #106: I'd say normal Pcs, all doing more I and but as I mean.

Speaker Change #106: LOE and <unk> come to the market I think thats going to unblock.

Speaker Change #106: The many of the purchases or at least the customers waiting to see what offering would be available that's going to accelerate in the second half.

Speaker Change #107: Yes, that's the way I look at it.

Patrick Zammit: [inaudible] Yeah, that's the way I look at it. I would add one more thing, which is that when you look at it from a software standpoint, and Copilot is a very good example, the workloads which will be enabled by AI are going to increase, and many will run at the edge.

Speaker Change #108: I would add one more thing which is that when you look at from the from a software standpoint than copilot has a very good example.

Speaker Change #108: The workloads, which will be.

Speaker Change #108: Enabled but AI ongoing to increase.

Speaker Change #108: Many will run at the edge. So APC is really a consideration for the for the end users today as they think about replacing I would say the Pcs They bought three four years ago.

Patrick Zammit: So AIPC is really a consideration for end users today as they think about replacing, I would say, the PCs they bought three, four years ago. So that's the way I look at it. Okay, yeah, at the risk of being repetitive here.

Speaker Change #108: So that's the way I look at it.

Richard T. Hume: So anecdotally, I underline that word, we believe that there is a bit of a gate right now to purchase, based on folks waiting until there are, you know, more of the OEMs with their products in the market, which, as Patrick said, is in the back half of the year. So there likely is some constraint on purchase right now until, I'll say, a larger portfolio becomes available, which we would anticipate, you know, probably in calendar Q4 timeframe.

Okay, Yes.

Speaker Change #108: At the risk of at the risk of being repetitive here.

Speaker Change #108: So anecdotally underlying network, we believe that there is a bit of a gate right now to.

Speaker Change #108: Purchase based on folks waiting until there are.

Speaker Change #109: More of the Oems with their products and market, which as Patrick said it in the back half of the year.

Speaker Change #109: They are likely as some constraint on purchased right now until all I'll say, a larger portfolio becomes available, which we would anticipate.

Speaker Change #109: Probably in calendar Q4 timeframe.

Richard T. Hume: So, I guess we're just kind of restating what you're saying here. Yes, there are probably some customers up there that are perhaps pausing their investment, but that pause should be relatively short term. We're talking three, six months, not longer term.

So I guess, we just kind of restating, what youre, saying here, yes, there's probably some customers out there that are perhaps pausing their investment, but that part should be relatively short term. We're talking three six months not longer term correct. The Greek that's correct. That's the way we would project it alright.

Richard T. Hume: Correct? Agreed. That's correct. That's the way we would project. All right. Thanks, guys. Appreciate it. Great. Good luck, Rich.

Speaker Change #110: Alright, Thanks, guys appreciate it good luck rich.

Keith: Thank you Keith.

Richard T. Hume: Thank you. Our next question comes from Vincent Colicchio with Barrington Research. Please go ahead. Yes, congratulations Rich and Patrick and Marshall. Feel better. In terms of PC demand in the quarter, how was the performance by vertical, and how should we think about demand by vertical in the second half? Yeah, maybe I can start, and then Patrick can comment.

Speaker Change #111: Our next question comes from Vincent Colicchio with Barrington Research. Please go ahead.

Yes.

Speaker Change #112: So rich and Patrick and Marshalls feel better.

Vincent Alexander Colicchio: In terms of PC demand in the quarter, how did how does the performance by vertical how should we think about.

Vincent Alexander Colicchio: Demand by vertical in the second half.

Vincent Alexander Colicchio: Right.

Speaker Change #114: Yes, maybe I can start and then Patrick can comment.

Speaker Change #115: Certainly from a vertical perspective, we saw.

Richard T. Hume: Certainly, from a vertical perspective, we saw the public sector, the federal government, being a little bit slower as they sort of work through budget approvals, etc. We do believe that, you know, now that that has been cleared up, there'll be a bit of an opportunity to catch up overall. I would say that the other verticals are, you know, fairly consistent and uniform relative to, you know, their Digestion or purchase of PCs overall. Long story short, the only one that stuck out a little bit was the public sector, with the comments that I've made.

Speaker Change #116: I'll call it the public sector.

Patrick Zammit: Federal in particular being a little bit slower as they sort of.

Work through budget approvals et cetera, we do believe that that has been cleared up that there'll be.

Patrick Zammit: A bit of an opportunity to catch up.

Patrick Zammit: Overall.

Patrick Zammit: And.

Patrick Zammit: I would say that the other the other verticals are fairly consistent and uniform relative to.

Patrick Zammit: There.

Patrick Zammit: Digestion or or purchase of Tcs overall.

Patrick Zammit: Long story short the only one that stuck out a little bit was the public sector.

Speaker Change #117: The comments that Ive made Patrick I'll turn it over to yes, and just would like to add that we see the demand being driven by enterprise and SMB.

Patrick Zammit: Patrick, I'll turn it over to you. Yeah, I just would like to add that we see the demand being driven by enterprise and SMB. So these are the two customer segments, plus the public sector, which is driving the demand as we speak. Okay. Thank you, gentlemen. Thank you. Our next question comes from Ashish Sabadra with RBC Capital Markets. Please go ahead. Thanks for taking my question. Congratulations again to both Rich and Patrick.

Speaker Change #117: Are the two customer segments plus public sector.

Speaker Change #117: Which are driving the demand as we speak.

Speaker Change #118: Okay. Thank you gentlemen.

Speaker Change #119: Thank you.

Speaker Change #120: Our next question comes from Ashish <unk> with RBC capital markets. Please go ahead.

Speaker Change #121: Thanks for taking my question, Congrats again to both connection Patrick.

Marshall W. Witt: Just one quick clarifying question. Should we still expect the netted down to be 25 to 26% for the full year? And then on the trend, I was wondering if you could discuss the trend, what you're seeing by geography, particularly in America, Europe, and Asia. Yeah, I'll start with that. We had forecasted for the quarter about 26.5% of growth versus net, but it came in at 27.5%.

Just one quick clarifying question should we still expect the netted down to be 25% to 26% for the full year and then on the trend I was wondering if you could discuss the trend what you are seeing by deals, particularly in Americas, Europe and APAC.

Speaker Change #122: Yeah, I'll start with that.

Speaker Change #123: We had forecasted for the quarter or about 26, and a half of growth versus net came in at 27 five.

Marshall W. Witt: But we continue to see the expansion of the netting down of revenues, and in my prepared remarks, I had noted that it was about a 400 basis point deterioration or increase in netted down year-on-year. So, it remains quite meaningful. If I think about what Q3 should look like, I would put about a 27.5 netting down, and I would also expect that to be a little bit lower in Q4. Seasonality-wise, in Q4, we tend to see, just in normal times, a little more resurgence of end-point solutions this year because of the way that we're seeing end-point solutions rebound and respond from prior year performance. That probably leads me to a 27 to 27.5.

Speaker Change #124: We continue to see the expansion of netting down our revenues in my prepared remarks.

Speaker Change #124: I had noted that it was about a 400 basis point.

Speaker Change #124: Deterioration or increase the netted down year on year.

Speaker Change #124: It remains quite meaningful if I think about what Q3 should should look like I would put about 27, five netting down in and would also expect that to be a little bit lower in Q4.

Speaker Change #124: Seasonality wise in Q4, we tend to see just in normal times.

Speaker Change #124: Times are little more resurgence of endpoint solutions. This year because of the way that we're seeing endpoint solutions rebounded respond from prior year performance.

Speaker Change #124: It probably leads me to a 27% to 27 five.

Patrick Zammit: For as exact as that sounds, we continue to see the expansion of the netting down, but I would go with that 27 to 27.5, and then I'll turn it over to just commentary for Patrick or Richard around the geomarkers. Yeah, I just would like to add on the growth to net. When you look at the market trends, and we are perfectly aligned with those market trends, software as a service, will continue to be more and more important in our sales mix.

Speaker Change #124: For exactly.

Speaker Change #124: Exactly that bounds, we continued to see the expansion of the netting down.

Speaker Change #124: But I would go with that $27 27, and a half.

Speaker Change #125: And then I'll turn it over to just commentary for Patrick or Richard around the Geo movements, yes.

Speaker Change #126: Just would like just to add on the gross to net when you look at the market trends and we are perfectly aligned with those market trends software as a service service will continue to be more and more important in.

Speaker Change #126: Our sales mix. So the gross to net adjustments I think we'll continue to increase over the years because of that trend.

Patrick Zammit: So the growth to net adjustment, I think would continue to increase over the years because of that trend. Back to geography. So, in fact, North America and Europe more or less perform the same way, with, I mean, slight growth. Europe was interesting because Europe entered into the, so to say, correction a little bit later than North America, but at the moment, it is basically more or less aligned with the trends in North America.

Speaker Change #127: Back to the geography.

So in fact.

Speaker Change #127: North America, and Europe, more or less performed the same way with <unk>.

Speaker Change #127: Slight growth.

Speaker Change #127: Europe was interesting because Europe entered into the so to say correction a little bit later than North America, but at the moment.

Speaker Change #127: Is is basically more or less aligned with the trends.

Speaker Change #127: In North America so.

Patrick Zammit: So it's flat to, I should say, low single-digit growth in those two regions. If you look at APJ, here we are experiencing double-digit growth driven in particular by data centers. Lots of investments in data centers in, I would say, I would call them Tier 2 CSPs, which benefit us in the region. Our final question comes from Alek Valero with Loop Capital. Please go ahead.

Speaker Change #127: It's flat to.

Speaker Change #127: I should say low single digit in those two regions.

Speaker Change #127: If you look at the P. J I mean here, we are experiencing double digit growth driven in particular by data center.

Speaker Change #127: Lots of investments.

Speaker Change #127: In data centers in I would say I would call them, the tier two csp's, which benefit.

Speaker Change #127: If it does in the region.

Speaker Change #128: Okay excellent.

Speaker Change #127: Excellent.

Speaker Change #129: Our final question comes from Alex <unk> with loop capital. Please go ahead.

Alec: Hey, guys. Thanks for taking my question. This is Alec on Fernando.

Patrick Zammit: Hey, guys. Thanks for taking my question. This is Alec.

Patrick Zammit: I'm for Ananda. My question is, what is a good way to think about the GEN-AI impact on SYNNEX's revenue and revenue growth over the next few years from PCs, phones, iPads, and other offerings? And additionally, if you could quickly touch on its impact on margins of the cash conversion cycle as well. So, maybe I should start. So I mean, Gen AI requires a lot of compute and a lot of optimization of your infrastructure.

Alec: My question is what is a good way to think about the journey I impact <unk> revenue and revenue growth over the next few years from Pcs phones and other offerings.

Speaker Change #131: If you can quickly touch on its impact to margins that the cash conversion cycle as well.

Speaker Change #131: So.

Patrick Zammit: So I mean, not only in software, of course; we're going to see the benefits. But basically, companies will have to upgrade their servers, their switches, their storage. So we see the impact of Gen AI being very pervasive across most of our technologies, which obviously is going to be a very nice prospect for the future. So yeah, very positive. Again, Gen AI is a very nice opportunity for the IT industry in general, and, of course, for us in particular. Yeah, Alex, thanks for the question.

Speaker Change #132: So maybe I start so I mean.

Speaker Change #133: <unk> requires a lot of compute.

Speaker Change #132: <unk>.

A lot of optimization of your infrastructure so.

Speaker Change #132: <unk> not only in software of course, we're going to see the benefits, but basically companies will have to upgrade their servers switches their storage.

Speaker Change #132: So we see the <unk>.

Impact of Ginnie, AI being very pervasive across most of our technologies, which obviously is going to be.

Speaker Change #132: Very nice.

Speaker Change #132: Aspect for the future. So yes, very positive again, Jenny I think is a very nice opportunity for us.

Speaker Change #132: The industry in general and of course for Us in particular.

Yes, Alex Thanks for the question as we had said I think a quarter or two ago, the big opportunity for us.

Patrick Zammit: As we had said, I think, a quarter or two ago, the big opportunity for AI for us will be seen in what I would call the legacy products that are now made more intelligent by AI. And that, as Patrick said, is going to likely lead to more robust configurations across the board. And, you know, it could cause a bit of an acceleration over a continuum for demand because people will want to get to the newest technologies.

Speaker Change #132: AI for us will be seen in what I would call. The legacy products that are now made more intelligent by AI and that is.

As Patrick said is going to likely lead to more robust configurations across the board and could cause a bit of an acceleration.

Speaker Change #132: Over a continuum for demand because people will want to get to the newest technologies sort of as it relates to.

Patrick Zammit: Sort of as it relates to, you know, the working capital and how the dynamics play out there. You know, I believe that it will continue pretty much with the current terms and conditions that we have. So not to say that this won't change in the future, but there's not anything that is immediately visible to us that would say that there's going to be a paradigm change in business models. The last comment that I would make is a general rule of thumb.

The working capital.

Speaker Change #134: What dynamics play out there.

I believe that.

We will continue pretty much with the current terms and conditions that we have so.

Not to say that this fall changed in the future, but there is not anything that is immediately visible to us, which would say that there's going to be a paradigm change in business model and the last comment that I would make as.

Speaker Change #134: As a general rule of thumb, so we'll see if that carries forward here, but generally as <unk>.

Richard T. Hume: So we'll see if it carries forward here. But generally, as vendors move to new technologies, there usually are two phenomena. The first is, uh, there's as they kill their people and get them prepared for those new sales, they generally move some of the legacy things that might have existed more into the channel. So we've historically seen, you know, a shift, if you will, of more legacy technologies to be served more broadly by the channel.

Speaker Change #134: Vendors move to new technologies.

Speaker Change #134: Usually our two phenomenon.

Speaker Change #134: First is.

Speaker Change #134: There is as they scale their people and get them prepared for.

Speaker Change #134: Those new sale, they generally move some of the legacy things.

Things that might have existed.

Speaker Change #134: More into the channels. So we have historically seen.

Speaker Change #134: A shift if you will of <unk>.

Speaker Change #134: More of the legacy technologies.

Speaker Change #134: To be served more broadly by the channel.

Speaker Change #134: The second phenomenon is that generally an order.

Richard T. Hume: And then, you know, the second phenomenon is that, generally, in order for the business partner ecosystem to really get focused and make sure that we're enabling the entire business partner ecosystem properly, there are premium incentives to motivate the entire ecosystem to move there.

Operator: for the business partner ecosystem to really get focused in making sure that all we're enabling the entire business partner ecosystem properly. Generally, there are premium and sensitive to motivate the entire ecosystem to move there.

Speaker Change #134: Sure.

Speaker Change #134: For the business partner ecosystem to really get focused.

Speaker Change #134: Sure that.

Speaker Change #134: All we're enabling the entire business partner ecosystem properly generally there are premium incentives to motivate.

Speaker Change #134: The entire ecosystem to move there.

Richard T. Hume: Too early to tell right now. Let's see what happens. But those would be comments around what the future might look like.

Operator: Too early to tell right now; let's see what happened, but those would be the comments around what the future might look like.

Too early to tell right now, let's see what happens, but those those would be the comment around.

What the future might look like.

Operator: Awesome, very helpful guys. Thank you very much.

Awesome very helpful guys. Thank you very much.

Richard T. Hume: Awesome. Very helpful, guys. Thank you very much. This concludes the question and answer session. I will now turn the call back over to Rich for closing remarks. I'd like to thank all of our TD SYNNEX co-workers around the world for all that they do in dedicating themselves to our customers and vendors and shareholders. Obviously, they're the ones that make it happen day in and day out.

Operator: This concludes the question-and-answer session.

Speaker Change #135: This concludes the question and answer session I will now turn the call back over to rich for closing remarks.

Richard T. Hume: I will now turn the call back over to Rich for closing remarks. I'd like to thank all of our TD SYNNEX co-workers around the world for all that they do in dedicating themselves to our customers, vendors, and shareholders. Obviously, they're the ones that make it happen day in and day out. And again, thanks to all of you who have been on the journey with us, and we really appreciate your continued engagement and interest in TD SYNNEX.

Richard T. Hume: I would like to thank all of our TD Center co workers around the world.

Richard T. Hume: For all that they do and dedicating themselves to our customers and vendors and shareholders.

Obviously, they are the ones that make it happen day in and day out.

Richard T. Hume: And again, thanks to all of you who have been on the journey with US and we really appreciate your continued engagement and interest in <unk> and with that I wish you all a great day. Thank you very much.

Richard Hume: And with that, I wish you all a great day. Thank you very much.

Operator: This concludes today's conference call. You may now disconnect. Have a nice day.

Richard T. Hume: And again, thanks to all of you who have been on the journey with us, and we really appreciate your continued engagement and interest in TD SYNNEX. And with that, I wish you all a great day. Thank you very much. This concludes today's conference call. You may now disconnect. Have a nice day.

Speaker Change #136: This concludes today's conference call you may now disconnect have a nice day.

Speaker Change #136: Okay.

Speaker Change #136:

Yeah.