Ingram Micro Holding Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 30, 2023 included in our final prospectus filed with the Securities and Exchange Commission (the “SEC”) on October 24, 2024 (the “Prospectus”). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve significant risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to those differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q and the Prospectus, particularly in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” Unless otherwise noted in this quarterly report, the use of the terms “Ingram Micro,” “we,” “us,” “our” and the “Company” refers to Ingram Micro Holding Corporation and its subsidiaries. The use of the term “Platinum” means Platinum Equity, LLC together with its affiliated investment vehicles. Overview of Our Business Ingram Micro Holding Corporation and its subsidiaries are primarily engaged in the distribution of information technology (“IT”) products, cloud and other services worldwide. Ingram Micro operates in North America; Europe, Middle East and Africa (“EMEA”); Asia-Pacific; and Latin America. Our product, service and solution offerings consist of Client and Endpoint Solutions, Advanced Solutions, Cloud-based Solutions and Other, which include the product and service categories further described below. Results are impacted by changes in product mix, including entry or expansion into new markets, new product offerings and the exit or retraction of certain business. Furthermore, we have invested most heavily in recent years into Advanced Solutions and Cloud-based Solutions and capabilities globally, for which an increased need for more complex solutions coupled with more products being consumed on an as-a-service basis is driving a more rapid shift towards these offerings. Advanced Solutions and Cloud sales now collectively comprise more than one-third of our net sales. As part of our global presence in each of our four geographic regions, we offer customers a full spectrum of hardware and software, cloud services and logistics expertise through three main lines of business: Technology Solutions, Cloud and Other. In each of our geographic segments we offer customers the product categories listed below broken down under the respective line of business. Beginning in the second quarter of 2024, we began to refer to our Commercial & Consumer category as Client and Endpoint Solutions as a better reflection of the nature of the products and services within that category. Technology Solutions: • Client and Endpoint Solutions. We offer a variety of higher-volume products targeted for corporate and individual end users, including desktop personal computers, notebooks, tablets, printers, components (including hard drives, motherboards, video cards, etc.), application software, peripherals, accessories and Ingram Micro branded solutions. We also offer a variety of products that enable mobile computing and productivity, including phones, phone tablets (including two-in-one “notebook/tablet” devices), smartphones, feature phones, mobile phone accessories, wearables and mobility software. • Advanced Solutions . We offer enterprise grade hardware and software products aimed at corporate and enterprise users and generally characterized by specific projects, which account for lower volumes but higher-margin products individually and collectively in the form of solutions and related services. And while Advanced Solutions requires higher operational expenditures, primarily in the form of technical capabilities to serve the market, the operating margin delivered by this business is also generally stronger than Client and Endpoint Solutions. Within this product category, we offer servers, storage, networking, hybrid and software-defined solutions, cyber security, power and cooling and virtualization (software and hardware) solutions. This category also includes training, professional services and financial solutions related to these product sets. We also offer customers data capture-point of sale ( “ DC / POS ” ), physical security, audio visual & digital signage, Unified Communications and Collaboration ( “ UCC ” ) and Telephony, Internet-of-Things ( “ IoT ” ) (smart office/home automation) and artificial intelligence products. 27 Cloud: • Cloud-based Solutions. Our cloud portfolio comprises third-party services and subscriptions spanning a breadth of products from solution software through infrastructure-as-a-service. As technology consumption increasingly moves to anything-as-a-service, we have expanded our cloud solutions to more than 200 third-party cloud-based services or subscription offerings, including business applications, security, communications and collaboration, cloud enablement solutions and infrastructure-as-a-service. Also included here are the offerings of our CloudBlue business, which provides customers with multichannel and multi-tier catalog management, subscription management, billing and orchestration capabilities through a software-as-a-service model. Other: • We provide customers with IT Asset Disposition ( “ ITAD ” ), reverse logistics and repair and other related solutions. These offerings represent less than 10% of net sales for all periods presented herein. Presentation Net Sales We are one of the largest distributors of technology hardware, software and services worldwide, including a leading global presence in cloud, based on revenues. We offer a broad range of IT products and services to help generate demand and create efficiencies for our customers and suppliers around the world. We serve as an integral link in the global technology value chain, driving sales and profitability for the world’s leading technology companies, resellers, mobile network operators and other customers. Our results of operations have been, and will continue to be, directly affected by the conditions in the economy in general. As our international operations constitute a significant portion of our consolidated net sales, they are subject to fluctuations in the U.S. dollar against foreign currencies. In order to provide a framework for assessing our financial performance we exclude the effect of foreign currency fluctuations for certain periods by comparing the percent change in net sales and other key metrics on a constant currency basis. These key metrics on a constant currency basis are not accounting principles generally accepted in the United States of America (“U.S. GAAP”) financial measures. Amounts presented on a constant currency basis remove the impact of changes in exchange rates between the U.S. dollar and the local currencies of our foreign subsidiaries by translating the current period amounts into U.S. dollars using the same foreign currency exchange rates that were used to translate the amounts for the previous comparable period. Gross Margin The technology distribution industry in which we operate is characterized by narrow gross profit as a percentage of net sales, or gross margin. Historically, our margins have also been impacted by pressures from price competition and declining average selling prices, as well as changes in vendor terms and conditions, including, but not limited to, variations in vendor rebates and incentives, our ability to return inventory to vendors and time periods qualifying for price protection. We expect competitive pricing pressures and restrictive vendor terms and conditions to continue in the foresee able future. In addition, our margins have been and may continue to be impacted by our inventory levels which are based on projections of future demand, product availability, product acceptance and marketability and market conditions. Any sudden decline in demand and/or rapid technological changes in products could cause us to have a charge for excess an d/or obsolete inventory. Likewise, in times of heavy demand or when supply constraints become significant, prices for certain technology products will tend to increase. To manage our profitability, we have implemented changes to and continue to refine our pricing strategies, inventory management processes and vendor engagement programs. In addition, we continuously monitor and work to change, as appropriate, certain terms, conditions and credit offered to our customers to reflect those being imposed by our vendors, to recover costs and/or to facilitate sales opportunities. We have also strived to improve our profitability through diversification of prod uct offerings, including our presence in adjacent product categories, such as enterprise computing, data center and automatic identification and DC / POS. Additionally, we continue to expand our capabilities in what we believe are faster growing and higher margin service-oriented businesses, including cloud and hybrid cloud/on-premise solutions. 28 Selling, General and Administrative (“SG&A”) Expenses Another key area for our overall profitability management is the monitoring and control of our level of SG&A expenses. On an ongoing basis, we regularly look to optimize and drive efficiencies throughout our operations, which includes the use of temporary workforce to address staffing needs particularly in our warehouse operations where demand levels are more impactful on workloads. SG&A expenses also include the cost of investment in certain initiatives to accelerate growth and profitability and optimize our operations. We continue to increase our presence in cloud which generally has higher gross margins but also requires higher automation and investment in commerce and other platforms to address its respective end markets. Restructuring Costs We have instituted a number of cost reduction and profit enhancement programs over the years, which in certain years included reorganization actions across various parts of our business to respond to changes in the economy and to further enhance productivity and profitability. These actions have included the rationalization and re-engineering of certain roles and processes, resulting in the reduction of headcount and consolidation of certain facilities. Foreign Currency Translation The financial statements of our foreign subsidiaries for which the functional currency is the local currency, are translated into U.S. dollars using (i) the exchange rate at each balance sheet date for assets and liabilities and (ii) an average exchange rate for each period for statement of income items. Translation adjustments are recorded in accumulated other comprehensive income, a component of stockholders’ equity. The functional currency of a small number of operations within our EMEA, Asia-Pacific and Latin America regions is the U.S. dollar; accordingly, the monetary assets and liabilities of these subsidiaries are remeasured into U.S. dollars at the exchange rate in effect at the applicable balance sheet date. Revenues, expenses, gains or losses are remeasured at the average exchange rate for the period, and nonmonetary assets and liabilities are remeasured at historical rates. The resultant remeasurement gains and losses of these operations as well as gains and losses from foreign currency transactions are included in the Condensed Consolidated Statements of Income. Working Capital and Debt The IT products distribution business is working capital intensive. Our business requires significant levels of working capital, primarily trade accounts receivable and inventory, which is partially financed by vendor trade accounts payable. For our working capital needs, we rely heavily on trade credit from vendors, and also on trade accounts receivable financing programs and proceeds from debt facilities. We maintain a strong focus on management of working capital in order to maximize returns on investment, cash provided by operations, and our debt and cash levels. However, our debt and/or cash levels may fluctuate significantly on a day-to-day basis due to the timing of customer receipts, inventory stocking levels and periodic payments to vendors. A higher concentration of payments received from customers toward the end of each month, combined with the timing of payments we make to our vendors, typically yields lower debt balances and higher cash balances at our quarter-ends than is the case throughout the quarter or year. Our future debt requirements may increase and/or our cash levels may decrease to support growth in our overall level of business, changes in our required working capital profile, or to fund acquisitions or other investments in the business. 29 Results of Operations Results of Operations for the Thirteen Weeks Ended September 28, 2024 and Thirteen Weeks Ended September 30, 2023: We do not allocate cash-based compensation expense or certain Corporate costs to our reportable segments; therefore, we are reporting these amounts separately. The following tables set forth our net sales by reportable segment and the percentage of total net sales represented thereby, as well as income from operations and income from operations margin by reportable segment for each of the periods indicated: Change Increase (Decrease) Net sales by reportable segment Thirteen Weeks Ended September 28, 2024 Thirteen Weeks Ended September 30, 2023 Amount Percentage North America $ 4,283,677 36 % $ 4,551,370 38 % $ (267,693) (5.9) % EMEA 3,470,507 30 3,474,126 29 (3,619) (0.1) Asia-Pacific 3,153,879 27 2,899,522 24 254,357 8.8 Latin America 854,565 7 1,000,355 9 (145,790) (14.6) Total $ 11,762,628 100 % $ 11,925,373 100 % $ (162,745) (1.4) % Thirteen Weeks Ended September 28, 2024 Thirteen Weeks Ended September 30, 2023 Amount Percentage Income from operations and operating margin percentage by reportable segment Income from Operations Income from Operations Margin Income from Operations Income from Operations Margin Income from Operations Income from Operations Margin North America $ 83,330 1.95 % $ 79,205 1.74 % $ 4,125 0.21 % EMEA 66,912 1.93 72,185 2.08 (5,273) (0.15) Asia-Pacific 58,158 1.84 55,885 1.93 2,273 (0.09) Latin America 27,746 3.25 19,998 2.00 7,748 1.25 Corporate (11,885) — (8,814) — (3,071) — Cash-based compensation expense (6,087) — (6,057) — (30) — Total $ 218,174 1.85 % $ 212,402 1.78 % $ 5,772 0.07 % Thirteen Weeks Ended September 28, 2024 Thirteen Weeks Ended September 30, 2023 Net sales 100.00 % 100.00 % Cost of sales 92.81 92.83 Gross profit 7.19 7.17 Operating expenses: Selling, general and administrative 5.33 5.23 Restructuring costs — 0.16 Income from operations 1.85 1.78 Total other (income) expense 0.84 0.77 Income before income taxes 1.01 1.01 Provision for income taxes 0.36 0.28 Net income 0.65 % 0.73 % 30 Consolidated net sales were $11,762,628 for the Thirteen Weeks Ended September 28, 2024, compared to $11,925,373 for the Thirteen Weeks Ended September 30, 2023. The 1.4% decrease for the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023, was primarily a result of lower net sales in our North America and Latin America regions, partially offset by net sales growth in our Asia-Pacific region. Net sales of advanced solutions offerings declined by 5% globally in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023, partially offset by growth of 1% globally in net sales of client and endpoint solutions, particularly in mobility devices in some markets, growth of 21% globally in net sales of our cloud-based solutions and growth of 11% globally in net sales of Other services. The translation impact of foreign currencies relative to the U.S. dollar negatively impacted the comparison of our global net sales year-over-year by approximately 0.1%. The $267,693, or 5.9%, decrease in North American net sales for the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023, was primarily driven by a decline of 8% in net sales of client and endpoint solutions attributed to declines in mobility distribution, particularly smartphones, application software and components in the United States. Net sales of advanced solutions offerings also declined by 6% attributed to declines in networking solutions in the United States and Canada, as well as declines in audio visual and digital signage, DC / POS and UCC and Telephony in the United States. The networking decline is inclusive of a challenging comparison to prior year when we were fulfilling heavy backlog from prior period supply constraints. These factors were partially offset by growth of 42% in net sales of Other services, as well as growth of 30% in net sales of cloud-based solutions in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023. The $3,619, or 0.1%, decrease in EMEA net sales for the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023, was a result of a 13% decline in net sales of Other services due to declines in our Reverse Logistics and Repair business in the United Kingdom and France. These results were partially offset by growth of 22% in net sales of cloud-based solutions in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023 driven by the United Kingdom and Spain. Additionally, advanced solutions offerings and client and endpoint solutions saw modest growth in the region, driven by infrastructure software in Germany, as well as notebooks in the Netherlands, Sweden, Turkey and the United Kingdom, respectively. The translation impact of foreign currencies relative to the U.S. dollar had a positive impact of approximately 1% on the year-over-year comparison of the region’s net sales. On a constant currency basis, net sales for Other services decreased by 15%, client and endpoint solutions decreased by 1%, advanced solutions decreased by 1% and cloud-based solutions increased by 19%. The $254,357, or 8.8%, increase in Asia-Pacific net sales for the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023 was driven by 17% growth in net sales of client and endpoint solutions in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023 driven by growth in mobility distribution, particularly smartphones in China, as well as consumer electronics in India. Net sales of Other services also increased by 13% driven by growth in ITAD in the Philippines. These results were partially offset by a decline of 7% in net sales of advanced solutions driven by lower net sales of infrastructure software in Hong Kong. Additionally, net sales of cloud-based solutions declined by 1% in the region during the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023. The translation impact of foreign currencies relative to the U.S. dollar had no impact on the year-over-year comparison of the region’s net sales. The $145,790, or 14.6%, decrease in Latin American net sales for the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023 was primarily driven by a 13% decrease in net sales of client and endpoint solutions, attributed to declines in mobility distribution, particularly smartphones in Miami Export, as well as notebooks in Miami Export and consumer electronics in Mexico and Peru. Additionally, net sales of advanced solutions offerings declined by 19% year-over-year in the region as a result of declines in networking in Mexico. Net sales of cloud-based solutions also declined by 5%, largely driven by Brazil. These results were partially offset by growth of 54% in net sales of Other services. The translation impact of foreign currencies relative to the U.S. dollar had a negative impact of 6% on the year-over-year comparison of the region’s net sales. On a constant currency basis, net sales of client and endpoint solutions decreased by 7%, advanced solutions offerings decreased by 13%, while Other services increased by 76% and cloud-based solutions increased by 5% in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023. Gross profit was $845,492 for the Thirteen Weeks Ended September 28, 2024, compared to $854,844 for the Thirteen Weeks Ended September 30, 2023. Gross margin increased by 2 basis points in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023. The decrease in gross profit dollars was primarily attributable to the previously described declines in our net sales. The 2 basis point increase in gross margin was driven by a shift in sales mix towards our higher-margin cloud-based solutions and Other services net sales particularly in North America during the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023. These factors were partially offset by the translation impact of foreign currencies relative to the U.S. dollar, which had a negative impact of 2 basis points on the year-over-year comparison of gross margin. 31 Total SG&A expenses increased $3,966, and increased by 10 basis points of net sales in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023. The increase in SG&A dollars is driven by increases in depreciation expense of $3,927, corporate costs of $3,071 and professional and outside service costs of $2,922. In connection with the refinancing of our senior secured term loan facility (the “Term Loan Credit Facility”) in September 2024, we incurred $8,786 of debt refinancing costs within SG&A expenses. These increases were partially offset by a decrease in compensation and headcount expenses of $2,998, driven by the efforts taken under our global restructuring plan further described below. The translation impact of foreign currencies relative to the U.S. dollar had a positive impact of 1 basis point on the year-over-year comparison of SG&A as a percentage of net sales. During the Thirteen Weeks Ended September 30, 2023, we recognized $19,090 of restructuring costs, which represented organizational and staffing changes, including a headcount reduction, primarily in our North American operations. Income from operations was $218,174, or 1.85% of net sales, in the Thirteen Weeks Ended September 28, 2024, compared to $212,402, or 1.78% of net sales, in the Thirteen Weeks Ended September 30, 2023. The 7 basis point year-over-year increase in income from operations margin is primarily due to the impact of $19,090, or 16 basis points as a percentage of net sales, of restructuring costs incurred in the Thirteen Weeks Ended September 30, 2023, as well as the increase in gross margin described above. This was partially offset by the increase in SG&A expenses as a percentage of net sales described above. The translation impact of foreign currencies relative to the U.S. dollar had a negative impact of 1 basis point on the year-over-year comparison of our consolidated income from operations margin. Our North American income from operations margin increased 21 basis points in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023 primarily due to a shift in sales mix towards our higher-margin cloud-based solutions and Other services net sales. Additionally, SG&A expenses as a percentage of net sales decreased in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023 in the region; most notably restructuring costs decreased by 36 basis points, insurance costs decreased by 4 basis points and integration and transition costs decreased by 4 basis points. These were partially offset by compensation and headcount expenses which, although we saw a decrease in dollars, increased by 18 basis points as a percentage of net sales due to the decrease in net sales in the Thirteen Weeks Ended September 28, 2024. Our EMEA income from operations margin decreased 15 basis points in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023 primarily due to an increase in SG&A expenses as a percentage of net sales in the region. Most notably, integration and transition costs increased by 10 basis points of net sales, professional and outside services costs increased by 2 basis points, rental and occupancy costs increased by 2 basis points and advertising expenses increased by 2 basis points. The translation impact of foreign currencies relative to the U.S. dollar had a positive impact of 3 basis points on the year-over-year comparison on the region’s income from operations margin Our Asia-Pacific income from operations margin decreased 9 basis points in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023, primarily as a result of a shift in sales mix away from our higher-margin advanced solutions offerings to lower-margin client and endpoint solutions. Additionally, income from operations margin was impacted by a 10 basis point increase in inventory reserves in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023, which combined to have a negative impact of 17 basis points of net sales on the region’s income from operations margin. These factors were partially offset by a decrease in SG&A expenses as a percentage of net sales in the region. Most notably, compensation and headcount expenses decreased by 10 basis points and professional and outside service costs decreased by 3 basis points. The translation impact of foreign currencies relative to the U.S. dollar had no impact on the year-over-year comparison of the region’s income from operations margin. Our Latin American income from operations margin increased 125 basis points in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023. Despite lower net sales, the region’s net sales mix shifted towards our higher-margin cloud-based solutions net sales. The region also experienced favorable margin achievement on cloud-based solutions, advanced solutions offerings and client and endpoint solutions net sales in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023. These factors had a combined positive impact of 153 basis points on the region’s income from operations margin. These results were partially offset by an increase in SG&A expenses as a percentage of net sales in the region. Most notably, compensation and headcount expenses increased by 55 basis points, software-related costs increased by 6 basis points, depreciation expense increased by 4 basis points, partially offset by a 23 basis point decrease in bad debt expense as well as a 23 basis point decrease in integration and transition costs. The translation impact of foreign currencies relative to the U.S. dollar had a negative impact of 13 basis points on the year-over-year comparison of the region’s income from operations margin. 32 In the Thirteen Weeks Ended September 28, 2024, Corporate costs included $6,250 of advisory fees paid to Platinum Equity Advisors, LLC (“Platinum Advisors”), which we will no longer incur following the initial public offering (the “IPO”), $3,315 of remaining costs no longer covered by payments under the Transition Services Agreement, dated as of April 4, 2022 with CMA CGM Group and $2,329 related to investments in certain initiatives to accelerate our growth and profitability and optimize our operations. In the Thirteen Weeks Ended September 30, 2023, Corporate costs consisted primarily of $6,250 of advisory fees paid to Platinum A dvisors, an d $1,631 related to investments in certain initiatives to accelerate our growth and profitability and optimize our operations. Cash-based compensation expense increased slightly by $30 in the Thirteen Weeks Ended September 28, 2024 compared to the Thirteen Weeks Ended September 30, 2023. Total other (income) expense consists primarily of interest income, interest expense, foreign currency exchange gains and losses, and other non-operating gains and losses. We incurred total other (income) expense of $98,951 in the Thirteen Weeks Ended September 28, 2024 compared to $92,064 in the Thirteen Weeks Ended September 30, 2023. The increase is largely driven by an increase of $21,137 in net foreign currency exchange loss. This was partially offset by a decrease in interest expense of $12,067, primarily as a result of lower average debt outstanding in the current year period, due in particular to $805,000 in voluntary principal payments on our Term Loan Credit Facility made since June 2023, including recent payments of $150,000 made in June 2024 and $100,000 made in September 2024. We recorded an income tax provision of $42,254, or an effective tax rate of 35.4%, in the Thirteen Weeks Ended September 28, 2024, compared to $33,555, or an effective tax rate of 27.9% in the Thirteen Weeks Ended September 30, 2023. The tax provision for the Thirteen Weeks Ended September 28, 2024 included $4,481 of net tax expense, or 3.8 percentage points of the effective tax rate, which is associated with withholding tax expense from our business operations in the Latin America region, primarily from our Miami Export business. The tax provision for the Thirteen Weeks Ended September 28, 2024, also included $4,139 of tax expense, or 3.5 percentage points of the effective tax rate, due to a reduction in estimated U.S. foreign tax credit utilization in 2024. The tax provision for the Thirteen Weeks Ended September 30, 2023, included $4,057 of tax expense, or 3.4 percentage points of the effective tax rate, which is associated with withholding tax expense from our business operations in the Latin America region, primarily from our Miami Export business. The tax provision for the Thirteen Weeks Ended September 30, 2023, also included $5,777 of net tax benefit, or 4.8 percentage points of the effective tax rate, primarily due to an increase in actual 2022 U.S. foreign tax credit utilization as compared to our previous estimate, partially offset by a variety of other small tax adjustments. Results of Operations for the Thirty-Nine Weeks Ended September 28, 2024 and Thirty-Nine Weeks Ended September 30, 2023: The following tables set forth our net sales by reportable segment and the percentage of total net sales represented thereby, as well as income from operations and income from operations margin by reportable segment for each of the periods indicated: Change Increase (Decrease) Net sales by reportable segment Thirty-Nine Weeks Ended September 28, 2024 Thirty-Nine Weeks Ended September 30, 2023 Amount Percentage North America $ 12,704,320 37 % $ 13,662,409 39 % $ (958,089) (7.0) % EMEA 10,194,670 29 10,355,358 30 (160,688) (1.6) Asia-Pacific 9,161,016 26 8,236,696 23 924,320 11.2 Latin America 2,578,995 8 2,766,400 8 (187,405) (6.8) Total $ 34,639,001 100 % $ 35,020,863 100 % $ (381,862) (1.1) % 33 Thirty-Nine Weeks Ended September 28, 2024 Thirty-Nine Weeks Ended September 30, 2023 Change Increase (Decrease) Amount Percentage Income from operations and operating margin percentage by reportable segment Income from Operations Income from Operations Margin Income from Operations Income from Operations Margin Income from Operations Income from Operations Margin North America $ 206,974 1.63 % $ 225,528 1.65 % $ (18,554) (0.02) % EMEA 168,558 1.65 210,342 2.03 (41,784) (0.38) Asia-Pacific 169,985 1.86 170,704 2.07 (719) (0.21) Latin America 75,462 2.93 59,374 2.15 16,088 0.78 Corporate (33,224) — (27,141) — (6,083) — Cash-based compensation expense (18,332) — (25,395) — 7,063 — Total $ 569,423 1.64 % $ 613,412 1.75 % $ (43,989) (0.11) % Thirty-Nine Weeks Ended September 28, 2024 Thirty-Nine Weeks Ended September 30, 2023 Net sales 100.00 % 100.00 % Cost of sales 92.76 92.67 Gross profit 7.24 7.33 Operating expenses: Selling, general and administrative 5.55 5.53 Restructuring costs 0.06 0.05 Income from operations 1.64 1.75 Total other (income) expense 0.84 0.86 Income before income taxes 0.80 0.89 Provision for income taxes 0.28 0.27 Net income 0.52 % 0.62 % Consolidated net sales were $34,639,001 for the Thirty-Nine Weeks Ended September 28, 2024 compared to $35,020,863 for the Thirty-Nine Weeks Ended September 30, 2023. The 1.1% decrease in our consolidated net sales for the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023, was primarily a result of lower net sales in our North America, Latin America and EMEA regions, partially offset by growth in our Asia-Pacific region. The Thirty-Nine Weeks Ended September 28, 2024 saw lower volume compared to the Thirty-Nine Weeks Ended September 30, 2023, particularly in advanced solutions offerings resulting from the fulfillment of significant product backlogs that benefited net sales in the prior year period. Advanced solutions offerings declined by 6% globally. This was partially offset by growth of 2% globally in net sales of client and endpoint solutions, primarily from mobility device sales in certain markets, growth of 27% in net sales of our cloud-based solutions, and growth of 2% in net sales of Other services. The translation impact of foreign currencies relative to the U.S. dollar negatively impacted the comparison of our global net sales year-over-year by approximately 0.2%. The $958,089, or 7.0%, decrease in our North American net sales for the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023, was primarily driven by a decline of 11% in net sales of advanced solutions offerings attributed to declines in networking solutions in the United States and Canada, which includes a challenging prior year comparison due to heavy backlog fulfillment in the prior year as noted above, as well as declines in net sales of DC / POS and audio visual and digital signage solutions in the United States. Net sales of client and endpoint solutions also declined by 5% attributed to declines in mobility distribution, particularly in smartphones in the United States. These factors were partially offset by growth of 28% in net sales of cloud-based solutions, as well as growth of 14% in net sales of Other services in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023. 34 The $160,688, or 1.6%, decrease in EMEA net sales for the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023 was primarily driven by a 6% decline in net sales of advanced solutions offerings due to declines in networking in Germany and the United Kingdom. Specialty offerings also declined in the region, attributed to DC / POS declines in Germany and the United Kingdom. Additionally, net sales of Other services declined by 9% in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023. These results were partially offset by growth of 2% in net sales of client and endpoint solutions in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023, driven by growth in mobility distribution, particularly smartphones in the United Kingdom, as well as notebooks in the Netherlands, Turkey, Sweden, and the United Kingdom. Additionally, net sales of cloud-based solutions increased by 21% year-over-year in the region. The translation impact of foreign currencies relative to the U.S. dollar had a positive impact of approximately 1% on the year-over-year comparison of the region’s net sales. On a constant currency basis, net sales for advanced solutions offerings declined by 7% and Other services declined by 11%, while client and endpoint solutions increased by 1% and cloud-based solutions increased by 20%. The $924,320, or 11.2%, increase in Asia-Pacific net sales for the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023 was primarily driven by double-digit net sales growth in client and endpoint solutions and cloud-based solutions. Net sales of client and endpoint solutions increased 13% in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023, primarily as a result of growth in mobility distribution, particularly smartphones in China and India. Net sales of advanced solutions offerings increased by 7%, which was driven by growth in server net sales in India and Singapore, as well as growth in networking solutions in China. Additionally, net sales of cloud-based solutions increased by 16% year-over-year, led by growth in Australia and Singapore. These results were slightly offset by a 17% decline in net sales of Other services. The translation impact of foreign currencies relative to the U.S. dollar had a negative impact of approximately 2% on the year-over-year comparison of the region’s net sales. On a constant currency basis, net sales for client and endpoint solutions increased by 15%, advanced solutions offerings increased by 8%, cloud-based solutions increased by 17%, while Other services declined by 15%. The $187,405, or 6.8%, decrease in Latin American net sales for the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023 was primarily driven by a 6% decrease in net sales of client and endpoint solutions, which was driven by declines in mobility distribution, particularly smartphones in Miami Export. Additionally, net sales of advanced solutions offerings declined by 10% year-over-year in the region as a result of declines in networking in Mexico and Brazil, a portion of which results from the challenging prior year comparisons driven by backlog fulfillment as discussed above. These results were partially offset by growth of 36% in net sales of cloud-based solutions, driven by strong results in Brazil. The translation impact of foreign currencies relative to the U.S. dollar had a negative impact of approximately 1% on the year-over-year comparison of the region’s net sales. On a constant currency basis, net sales for client and endpoint solutions declined by 5%, advanced solutions offerings declined by 9%, while cloud-based solutions increased by 40%. Gross profit was $2,508,860 for the Thirty-Nine Weeks Ended September 28, 2024, compared to $2,568,477 for the Thirty-Nine Weeks Ended September 30, 2023. Gross margin decreased by 9 basis points in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023. The decrease in gross profit dollars was primarily attributable to the previously described declines in our net sales. The 9 basis point decrease in gross margin was driven primarily by a shift in sales mix away from our higher-margin advanced solutions offerings to lower-margin client and endpoint solutions in North America and EMEA, as well as an overall shift in net sales mix towards our lower gross margin, but lower cost-to-serve, Asia Pacific region during the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023. These factors were partially offset by the translation impact of foreign currencies relative to the U.S. dollar, which had a positive impact of 1 basis point on the year-over-year comparison of gross margin. Total SG&A expenses decreased $18,556, and increased by 2 basis points of net sales in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023. The decrease in SG&A dollars is driven by decreases in compensation and headcount expenses of $15,770, driven by the efforts taken under our global restructuring plan further described below. Additionally, bad debt expense decreased $7,252, and professional and outside service costs decreased $6,014. These decreases were partially offset by an increase in corporate costs of $6,083. Additionally, the prior year period includes a one-time benefit of $5,261 related to a legal settlement. In connection with the September 2024 refinancing of our Term Loan Credit Facility, we incurred $8,786 of debt refinancing costs within SG&A expenses. The translation impact of foreign currencies relative to the U.S. dollar had no impact on the year-over-year comparison of SG&A as a percentage of net sales. 35 We recorded restructuring costs of $22,018, or 6 basis points of net sales, during the Thirty-Nine Weeks Ended September 28, 2024 compared to $19,090, or 5 basis points of net sales during the Thirty-Nine Weeks Ended September 30, 2023 . Such costs represented efforts taken under our global restructuring plan originally announced in July 2023, and for which many actions were taken in the third quarter of the prior year. The charges in the current year included organizational and staffing changes as well as headcount reductions during the first quarter of 2024. The impact of this global restructuring plan was not fully achieved until the third quarter of 2024 and is coupled with other efforts to manage headcount costs through management of discretionary operating expenses. T he charges in the Thirty-Nine Weeks Ended September 30, 2023 represented organizational and staffing changes, including a headcount reduction, primarily in our North American operation. Income from operations was $569,423, or 1.64%, of net sales in the Thirty-Nine Weeks Ended September 28, 2024, compared to $613,412, or 1.75% of net sales, in the Thirty-Nine Weeks Ended September 30, 2023. The 11 basis point year-over-year decrease in income from operations margin was primarily due to the decrease in gross margin, the increase in SG&A expenses as a percentage of net sales, as well as the increase in restructuring costs of 1 basis point of net sales, described above. The translation impact of foreign currencies relative to the U.S. dollar had a negative impact of 1 basis point on the year-over-year comparison of our consolidated income from operations margin. Our North American income from operations margin decreased 2 basis points in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023 primarily due to an increase in SG&A expenses as a percentage of the lower net sales in the region as described above. Most notably, compensation and headcount expenses, which decreased in dollars, increased by 17 basis points of net sales due to the lower net sales noted above. Depreciation expense also increased by 7 basis points. These were partially offset by a 7 basis point reduction in other miscellaneous expenses, a 3 basis point reduction in insurance costs as well as an increase in gross margin driven by a shift towards higher-margin cloud-based solutions net sales. Our EMEA income from operations margin decreased 38 basis points in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023, primarily due to an increase in SG&A expenses as a percentage of the lower net sales in the region as described above. Most notably, restructuring costs increased by 9 basis points of net sales, compensation and headcount expenses increased by 8 basis points, integration and transition costs increased by 4 basis points and professional and outside service costs increased by 2 basis points. Additionally, the region’s gross margin declined 10 basis points primarily as a result of a shift in sales mix away from our higher-margin advanced solutions offerings to lower-margin client and endpoint solutions during the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023. The EMEA region also benefited from strong margin performance and vendor programs on product categories for which there was significant backlog fulfillment occurring in the prior year as supply constraints eased. The translation impact of foreign currencies relative to the U.S. dollar had a positive impact of 2 basis points on the year-over-year comparison of the region’s income from operations margin. Our Asia-Pacific income from operations margin decreased 21 basis points in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023, primarily as a result of a shift in sales mix away from our higher-margin advanced solutions offerings to lower-margin client and endpoint solutions. Additionally, income from operations margin was impacted by an 8 basis point increase in inventory reserves in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023. These factors had a combined negative impact of 34 basis points of net sales on the region’s income from operations margin. These factors were partially offset by a decrease in SG&A expense as a percentage of net sales in the region. Most notably, compensation and headcount expenses decreased by 19 basis points and depreciation expense decreased by 2 basis points. The translation impact of foreign currencies relative to the U.S. dollar had no impact on the year-over-year comparison of the region’s income from operations margin. Our Latin American income from operations margin increased 78 basis points in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023. Despite lower net sales, the region’s net sales mix shifted towards our higher-margin cloud-based solutions net sales. The region also experienced favorable margin achievement on advanced solutions and client and endpoint solutions net sales in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023. These factors had a combined positive impact of 115 basis points on the region’s income from operations margin. These results were partially offset by an increase in SG&A expenses as a percentage of net sales in the region. Most notably, compensation and headcount expenses increased by 52 basis points, partially offset by a decrease in bad debt expense of 34 basis points as the previous period was impacted by aging receivable balances related to a single project. The translation impact of foreign currencies relative to the U.S. dollar had a negative impact of 9 basis points on the year-over-year comparison of the region’s income from operations margin. 36 In the Thirty-Nine Weeks Ended September 28, 2024, Corporate included $18,750 of advisory fees paid to Platinum Ad visors, which we will no longer incur following the IPO, and $7, 253 related to investments in certain initiatives to accelerate our growth and profitability and optimize our operations. In the Thirty-Nine Weeks Ended September 30, 2023, Corporate costs consisted primarily of $18,750 of advisory fees paid to Platinum Advisors and $5,086 related to investments in certain initiatives to accelerate growth and profitability and optimize our operations. Cash-based compensation expense decreased by $7,063 in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023 primarily due to the impact of over-achievement on performance targets in the Thirty-Nine Weeks Ended September 30, 2023. Total other (income) expense consists primarily of interest income, interest expense, foreign currency exchange gains and losses, and other non-operating gains and losses. We incurred total other (income) expense of $290,356 in the Thirty-Nine Weeks Ended September 28, 2024 compared to $303,713 in the Thirty-Nine Weeks Ended September 30, 2023. The decrease is largely driven by lower interest expense of $26,961 primarily as a result of lower average debt outstanding in the current year period, due in particular to $805,000 in voluntary principal payments on our Term Loan Credit Facility made since June 2023, including recent payments of $150,000 made in June 2024 and $100,000 made in September 2024. The decrease was partially offset by an increase of $11,297 in net foreign currency exchange loss in the Thirty-Nine Weeks Ended September 28, 2024 compared to the Thirty-Nine Weeks Ended September 30, 2023. We recorded an income tax provision of $97,961, or an effective tax rate of 35.1%, in the Thirty-Nine Weeks Ended September 28, 2024, compared to $93,511, or an effective tax rate of 30.2%, in the Thirty-Nine Weeks Ended September 30, 2023. The tax provision for the Thirty-Nine Weeks Ended September 28, 2024 included $10,407 of tax expense, or 3.7 percentage points of the effective tax rate, which is associated with withholding tax expense from our business operations in the Latin America region, primarily from our Miami Export business. In addition, the tax provision for the Thirty-Nine Weeks Ended September 28, 2024 included $1,878 of tax expense, or 0.7 percentage points of the effective tax rate, due to foreign exchange losses generated by a foreign subsidiary that is currently under valuation allowance. The tax provision for the Thirty-Nine Weeks Ended September 28, 2024 also included $5,817 of tax expense, or 2.1 percentage points of the effective tax rate, due to a reduction in estimated U.S. foreign tax credit utilization in 2024. The tax provision for the Thirty-Nine Weeks Ended September 30, 2023 included $7,743 of tax expense, or 2.5 percentage points of the effective tax rate, which is associated with withholding tax expense from our business operations in the Latin America region, primarily from our Miami Export business. The tax provision for the Thirty-Nine Weeks Ended September 30, 2023 also included $5,949 of net tax benefit, or 1.9 percentage points of the effective tax rate, primarily due to an increase in actual 2022 U.S. foreign tax credit utilization as compared to our previous estimate, partially offset by $1,666, or 0.5 percentage points of the effective tax rate, due to a reduction in estimated U.S. foreign tax credit utilization in 2023. 37 Liquidity and Capital Resources Cash Flows Our cash and cash equivalents totaled $849,472 and $948,490 at September 28, 2024 and December 30, 2023, respectively. We finance our working capital needs and investments in the business largely through net income before noncash items, available cash, trade and supplier credit and various financing facilities. As a distributor, our business requires significant investment in working capital, particularly trade accounts receivable and inventory, which is partially financed by vendor trade accounts payable. As a general rule, when sales volumes are increasing, our net investment in working capital dollars typically increases, which generally results in decreased cash flow generated from operating activities. Conversely, when sales volume decreases, our net investment in working capital typically decreases, which generally results in increases in cash flows generated from operating activities. Working capital dollars are calculated at any point in time by adding the trade accounts receivable and inventory less the trade accounts payable balance at that point in time. Our working capital dollars were $4,344,822 at September 28, 2024 and $4,417,984 at December 30, 2023 Thirty-Nine Weeks Ended September 28, 2024 Thirty-Nine Weeks Ended September 30, 2023 Cash provided by (used in): Operating activities $ 23,878 $ 59,764 Investing activities $ 77,008 $ (56,566) Financing activities $ (158,424) $ (472,073) Operating activities provided net cash of $23,878 and $59,764 during the Thirty-Nine Weeks Ended September 28, 2024 and Thirty-Nine Weeks Ended September 30, 2023, respectively. The lower net cash provided during the Thirty-Nine Weeks Ended September 28, 2024 was primarily driven by the prior year period benefiting from a significant reduction in inventory as we worked through significant product backlogs and supply constraints through the first three quarters of 2023, which was partially offset by a return to more normal payment terms with our vendors after we were granted extended terms in prior periods when supply constraints were most significant. Investing activities provided net cash of $77,008 and used net cash of $56,566 during the Thirty-Nine Weeks Ended September 28, 2024 and Thirty-Nine Weeks Ended September 30, 2023, respectively. The net cash provided during the Thirty-Nine Weeks Ended September 28, 2024 was primarily driven by proceeds from the deferred purchase price of factored receivables of $188,877 and proceeds from note s receivable due from certain customers of $29,465, partially offset by capital expenditures of $106,643 and issuance of notes receivable to certain customers of $48,692. The net cash used during the Thirty-Nine Weeks Ended September 30, 2023 was primarily driven by capital expenditures of $164,986, partially offset by proceeds from the deferred purchase price of factored receivables of $111,695. Financing activities used net cash of $158,424 and $472,073 during the Thirty-Nine Weeks Ended September 28, 2024 and Thirty-Nine Weeks Ended September 30, 2023, respectively. The net cash used during the Thirty-Nine Weeks Ended September 28, 2024 was primarily driven by voluntary repayments of our term loan totaling $250,000, gross repayments of other debt of $105,002, purchase of the remaining minority interest of Colsof in Colombia totaling $21,846, partially offset by net proceeds from revolving and other credit facility of $162,617 and gross proceeds from other debt of $89,132. The net cash used during the Thirty-Nine Weeks Ended September 30, 2023 primarily reflects voluntary repayments of our term loan totaling $560,000, gross repayments of other debt of $43,794, and the change in unremitted cash collections from servicing factored receivables of $25,661, partially offset by net proceeds from our revolving and other credit facilities of $139,286 and gross proceeds from other debt of $29,024. 38 Capital Resources We have a range of financing facilities which are diversified by type, maturity and geographic region with various financial institutions worldwide with a total capacity of approximately $7,938,685, of which $3,834,829 was outstanding, at September 28, 2024. These facilities have staggered maturities through 2031. Our cash and cash equivalents totaled $849,472 and $948,490 at September 28, 2024 and December 30, 2023, respectively, of which $757,226 and $874,890, respectively, resided in operations outside of the United States. Cash and cash equivalents located in China were approximately 10% and 20% of our total cash and cash equivalents at September 28, 2024 and December 30, 2023, respectively, along with lesser amounts in Brazil, Luxembourg, Malaysia, Mexico, India, Canada, and Australia. Cash held by foreign subsidiaries, including China, can generally be used to finance local operations and cannot, under the current legal and regulatory environment, be transferred to finance other foreign subsidiaries’ operations. Additionally, our ability to repatriate these funds to the U.S. in an economical manner may be limited. Our cash balances are deposited and/or invested with various financial institutions globally that we endeavor to monitor regularly for credit quality. However, we are exposed to risk of loss on funds deposited with the various financial institutions and money market mutual funds, and we may experience significant disruptions in our liquidity needs if one or more of these financial institutions were to suffer bankruptcy or similar restructuring. As of September 28, 2024 and December 30, 2023, we had book overdrafts of $446,491 and $409,420, respectively, representing checks issued on disbursement bank accounts but not yet paid by such banks. These amounts are classified as accounts payable in our Condensed Consolidated Balance Sheets and are typically paid by the banks in a relatively short period of time. We believe that our existing sources of liquidity provide sufficient resources to meet our capital requirements, including the potential need to post cash collateral for identified contingencies, for at least the next twelve months. We currently anticipate that the cash used for debt repayments will primarily come from our domestic cash, cash generated from on-going U.S. operating activities and from borrowings. Nevertheless, depending on capital and credit market conditions, we may from time to time seek to increase or decrease our available capital resources through changes in our debt or other financing facilities. Finally, since the capital and credit markets can be volatile, we may be limited in our ability to replace maturing credit facilities and other indebtedness in a timely manner on terms acceptable to us, or at all, or to access committed capacities due to the inability of our finance partners to meet their commitments to us. Our current portfolio of utilized committed debt is almost evenly distributed between fixed and floating interest rate facilities. Our ABL Revolving Credit Facility, Term Loan Credit Facility and a revolving trade accounts receivable-backed financing program in Europe (the “European ABS Facility”) reprice periodically, and we plan to service any increase in interest expense with cash provided by operations. We do not have any expectation at this time to draw down on any of our other sources of liqui dity, outside of normal operations. We continue to monitor our cash flows and manage our operations with the purpose of optimizing our leverage and value. To mitigate our exposure to interest rate risk, during the first quarter of 2023, we entered into certain agreements to establish a 5. 5% upper limit on the London Interbank Offered Rate (“LIBOR”) interest rate applicable to a substantial portion of our borrowings under the Term Loan Credit Facility further discussed below. Due to the cessation of the LIBOR interest rate on June 30, 2023, we amended the interest rate cap agreements to establish a 5.317% upper limit on the Secured Overnight Financing Rate (“SOFR”) interest rate in order to align with the conversion to a SOFR-based rate for the underlying Term Loan Credit Facility as further discussed herein. During the second quarter of 2023, the Term Loan Credit Facility and the ABL Revolving Credit Facility were amended pursuant to their transition provisions to replace LIBOR-based benchmark rates with SOFR-based benchmark rates. During the third quarter of 2023, the interest rate cap agreements transitioned from LIBOR to SOFR as the interest reference rate. The following is a detailed discussion of our various financing facilities. On October 13, 2020, we secured a $200,000 uncommitted line of credit with a term of five years. Applicable interest rates are determined at the time of borrowing using the bank’s money market rate. In the second quarter of 2022, we expanded the capacity of this facility to $300,000. As of September 28, 2024 and December 30, 2023, we had borrowings of $300,000 and $0, respectively. On April 22, 2021, in anticipation of the acquisition of Ingram Micro by Platinum, Imola Merger Corporation (“Escrow Issuer”) offered $2,000,000 Senior Secured Notes due May 2029 (“2029 Notes”). Prior to the acquisition, the 2029 Notes were the sole obligation of the Escrow Issuer. Upon consummation of the acquisition on July 2, 2021, the proceeds from the notes were used, in part, to finance the acquisition and repay existing indebtedness. The notes bear interest at a rate of 4.750% per annum, which is payable semi-annually on May 15 and November 15 of each year, beginning on November 15, 2021. On July 2, 2021, we recognized $1,945,205, net of debt issuance costs of $54,795, associated with the 2029 Notes. 39 On July 2, 2021, we entered into the Term Loan Credit Facility for $2,000,000, the proceeds of which were also used to, among other things, finance a portion of the acquisition of Ingram Micro by Platinum and repay certain of our existing indebtedness. We recognized $1,920,761, net of debt issuance costs and discount of $59,239 and $20,000, respectively, related to this facility. The Term Loan Credit Facility had an original maturity of July 2, 2028 and amortizes in equal quarterly installments aggregating to 1.00% per annum. In June 2023, we voluntarily repaid $500,000 on our Term Loan Credit Facility over and above normal quarterly installments, which, as a result of this prepayment, are no longer mandatory. In September 2023, we refinanced our Term Loan Credit Facility, reducing the interest rate spread over SOFR by 50 basis points. We also amended the aforementioned interest rate cap agreements to reflect the updated notional amount of the Term Loan Credit Facility, with the 5.317% upper limit on the SOFR interest rate remaining unchanged under the amended interest rate cap agreements. In September 2024, we refinanced our Term Loan Credit Facility again, reducing the interest rate spread over SOFR by 25 basis points, eliminating the credit-spread adjustments, repaying $100 million of the principal balance, and extending the maturity date to September 19, 2031 (see Note 7, “Debt”, to the Condensed Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q). Borrowings under the Term Loan Credit Facility bear interest at a rate per annum equal to, at our option, either (1) the base rate (which is the highest of (a) the then-current federal funds rate set by the Federal Reserve Bank of New York, plus 0.50%, (b) the prime rate on such day and (c) the one-month SOFR rate published on such date plus 1.00%) plus a margin of 1.75% or (2) SOFR (subject to a 0.50% floor) plus a margin of 2.75%. In connection with these refinancings, we repaid an incremental $50,000 and $100,000 in September 2023 and 2024, respectively, on our Term Loan Credit Facility and in June 2024, we voluntarily repaid an incremental $150,000. As of September 28, 2024 and December 30, 2023, $1,117,692 and $1,362,487 respectively, remained outstanding under the Term Loan Credit Facility. Upon the closing of the IPO, we used the net proceeds from the offering to repay $233,100 of debt outstanding under our Term Loan Credit Facility. On July 2, 2021, we entered into new ABL Credit Facilities providing for senior secured asset-based, multi-currency revolving loans and letter of credit availability in an aggregate amount of up to $3,500,000 (the “ABL Revolving Credit Facility”), which is subject to borrowing base capacity, and a senior secured asset-based term loan facility of $500,000 (the “ABL Term Loan Facility” and, together with the ABL Revolving Credit Facility, the “ABL Credit Facilities”), both of which had contractual maturity dates in July 2026. The ABL Term Loan Facility amortizes in equal quarterly installments aggregating to 1.00% per annum. We may borrow under the ABL Revolving Credit Facility only up to our available borrowing base capacity. Borrowings under the ABL Revolving Credit Facility bear interest at a rate per annum equal to, at our option, either (1) the base rate plus a margin ranging (based on the availability under the ABL Revolving Credit Facility) from 0.25% to 0.75% or (2) SOFR (subject to a 0% floor) plus a margin ranging (based on the availability under the ABL Revolving Credit Facility) from 1.25% to 1.75%. Borrowings under the ABL Term Loan Facility bear interest at a rate per annum equal to, at our option, either (1) the base rate plus a margin of 2.50% or (2) SOFR (subject to a 0% floor) plus a margin of 3.50%. We capitalized $84,350 of debt issuance costs on July 2, 2021. In September 2024, we entered into Amendment No. 4 to the ABL Credit Agreement, to amend the ABL Credit Agreement to, among other things, extend the maturity date to September 20, 2029. As of September 28, 2024 and December 30, 2023, we had borrowings of $100,000 and $30,000 under our ABL Revolving Credit Facility. The weighted-average interest rate on the outstanding borrowings under this facility, as amended, was 7.1% and 8.1% per annum at September 28, 2024 and December 30, 2023, respectively Additionally, our European ABS Facility initially provided for a borrowing capacity of up to €300,000, or approximately $334,560 at September 28, 2024 exchange rates. In the fourth quarter of 2022, the facility was further modified providing for a borrowing capacity of up to €375,000, or approximately $418,200, at September 28, 2024 exchange rates. This program, which matures in October 2026, requires certain commitment fees and borrowings incur financing costs based on the local short-term bank indicator rate for the currency in which the drawing is made plus a predetermined margin. At September 28, 2024 and December 30, 2023, we had borrowings of $258,327 and $331,920 under this financing program in Europe. The weighted-average interest rate on the outstanding borrowings under this facility, as amended, was 5.0% and 4.4% per annum at September 28, 2024 and December 30, 2023, respectively. At September 28, 2024, our actual aggregate capacity under our ABL Revolving Credit Facility and other receivable-backed programs was approximately $3,897,692, of which $358,327 was used. Even if we do not borrow or choose not to borrow to the full available capacity of certain programs, most of our trade accounts receivable-backed financing programs are subject to certain restrictions outlined in our ABL Credit Facilities. These restrictions generally prohibit us from assigning or transferring the underlying eligible receivables as collateral for other financing programs, unless the underlying eligible receivables are sold in conjunction with a dedicated, non-recourse facility. 40 We also have additional lines of credit, short-term overdraft facilities and other credit facilities with various financial institutions worldwide, which provide for borrowing capacity aggregating to $955,286 at September 28, 2024. Most of these arrangements are on an uncommitted basis and are reviewed periodically for renewal. At September 28, 2024 and December 30, 2023, respectively, we had $390,796 and $217,463 outstanding under these facilities. The weighted-average interest rate on the outstanding borrowings under these facilities, which may fluctuate depending on geographic mix, was 7.1% and 7.9% per annum at September 28, 2024 and December 30, 2023, respectively. At September 28, 2024 and December 30, 2023, letters of credit totaling $183,663 and $108,690 and, respectively, were issued to various customs agencies and landlords to support our subsidiaries. The issuance of these letters of credit reduces our available capacity under the corresponding agreements by the same amount. Covenant Compliance We are subject to certain customary affirmative covenants, including reporting and cash management requirements, and certain customary negative covenants that limit our and our subsidiaries’ ability to incur additional indebtedness or liens, to dispose of assets, to make certain fundamental changes, to enter into restrictive agreements, to make certain investments, loans, advances, guarantees and acquisitions, to prepay certain indebtedness, to pay dividends or other distributions in respect of our and our subsidiaries’ equity interests and to engage in transactions with affili ates. At September 28, 2024 and December 30, 2023, we were in compliance with all covenants or other requirements in all of our credit facilities. Trade Accounts Receivable Factoring Programs We have several uncommitted factoring programs under which trade accounts receivable of several customers may be sold, without recourse, to financial institutions. Available capacity under these programs is dependent on the level of our trade accounts receivable eligible to be sold into these programs and the financial institutions’ willingness to purchase such receivables. At September 28, 2024 and December 30, 2023, we had a total of $593,584 and $738,714, respectively, of trade accounts receivable sold to and held by the financial institutions under these programs. Contractual Obligations and Off-Balance Sheet Arrangements We have guarantees to third parties that provide financing to a limited number of our customers. Net sales under these arrangements accounted for less than one percent of our consolidated net sales for each of the periods presented. The guarantees require us to reimburse the third party for defaults by these customers up to an aggregate of $4,874. The fair value of these guarantees has been recognized as cost of sales on the Consolidated Statements of Income to these customers and is included in accrued expenses and other on the Condensed Consolidated Balance Sheets. New Accounting Standards See Note 2, “ Summary of Significant Accounting Policies, ” to the Condensed Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q. Critical Accounting Estimates Our condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. We review our estimates and assumptions on an on-going basis. Significant estimates primarily relate to the realizable value of accounts receivable, vendor programs, inventory, goodwill, intangible and other long-lived assets, income taxes, and contingencies and litigation. Actual results could differ from these estimates. There have been no material changes to our critical accounting policies and estimates as described in our Prospectus. 41