What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-05 compared with 2021-10-05 · 305 added, 361 removed, 144 unchanged (82% of the section changed)

4 unchanged sentences

These are statements that relate to future periods and include statements about market trends, our business model and our services, our business and market strategy, future growth, including expansion of our product and service lines, our infrastructure, our investment in our information technology, or IT, systems, our employee hiring;

and retention, the ownership interest of MiTAC Holdings Corporation or MiTAC Holdings, in us and its impact, our revenue, sources of revenue, our gross margins, our operating costs and results, timing of payment, the value of our inventory, our competition, including with Synnex Technology International Corp., our future needs for additional financing, the likely sources for such funding and the impact of such funding, concentration of customers and suppliers, customer and supplier contract terms, customer forecasts and its impact on us, relationships with our suppliers, adequacy of our facilities, ability to obtain comparable leases, ability to manage and communicate with international resources, ability to meet demand, managing inventory and our shipping costs, our legal proceedings, our operations and trends related thereto, our international operations, foreign currency exchange rates and hedging activities, expansion of our operations and related effects, our strategic acquisitions and divestitures of businesses and assets, including our acquisition of Tech Data and the impact thereof, revenue, cost of revenue and gross margin, our goodwill, seasonality of sales, changes in share price, adequacy of our cash resources to meet our capital needs, our debt and financing arrangements, including the impact of any change to our credit rating, cash held by our international subsidiaries and repatriation, changes in fair value of derivative instruments, our tax liabilities, adequacy of our disclosure controls and procedures, dependency on personnel, pricing pressures, cybersecurity and compliance with related rules and regulations, impact of rules and regulations affecting public companies, impact of our pricing policies, impact of economic and industry trends, changes to the markets in which we compete, impact of our accounting policies and recently issued accounting pronouncements, our estimates and assumptions, impact of inventory repurchase obligations and commitments and contingencies, our effective tax rates, impact of any impairment of our goodwill and intangible assets, our share repurchase and dividend program, our securitization programs and credit facilities, our investments in working capital and personnel and our succession planning.

and retention, the ownership interest of MiTAC Holdings Corporation or MiTAC Holdings, in us and its impact, the ownership interest of Apollo Global Management, Inc., or Apollo, in us and its impact, the impact of the Merger, our integration plans, our plans with respect to the GBO 2 Program, our revenue, sources of revenue, our gross margins, our operating costs and results, timing of payment, the value of our inventory, our competition, including with Synnex Technology International Corp., our future needs for additional financing, the likely sources for such funding and the impact of such funding, concentration of customers and suppliers, customer and supplier contract terms, customer forecasts and its impact on us, relationships with our suppliers, adequacy of our facilities, ability to obtain comparable leases, ability to manage and communicate with international resources, ability to meet demand, managing inventory and our shipping costs, our legal proceedings, including the investigation by the Competition Authority, our operations and trends related thereto, our international operations, foreign currency exchange rates and hedging activities, expansion of our operations and related effects, our strategic acquisitions including anticipated cost savings and other benefits, divestitures of businesses and assets, revenue, cost of revenue and gross margin, our goodwill, seasonality of sales, changes in share price, adequacy of our cash resources to meet our capital needs, our debt and financing arrangements, including the impact of any change to our credit rating, interest rate risk and impact thereof, cash held by our international subsidiaries and repatriation, changes in fair value of derivative instruments, our tax liabilities, adequacy of our disclosure controls and procedures, dependency on personnel, pricing pressures, cybersecurity and compliance with related rules and regulations, impact of rules and regulations affecting public companies, the replacement of LIBOR, impact of our pricing policies, impact of economic and industry trends, changes to the markets in which we compete, impact of our accounting policies and recently issued accounting pronouncements, our estimates and assumptions, impact of inventory repurchase obligations and commitments and contingencies, our effective tax rates, impact of any impairment of our goodwill and intangible assets, our share repurchase and dividend program, our securitization programs, term loans and revolving credit lines, our investments in working capital, personnel, our succession planning and various environmental, social and governance initiatives and attention, our purchase accounting adjustments, plans with respect to our controls and procedures, and the impact of global economic, political and social conditions.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

These risks and uncertainties include, but are not limited to, those risks discussed herein and risks related to the acquisition of Tech Data, the separation, the COVID-19 global pandemic, as well as the seasonality of the buying patterns of our customers, concentration of sales to large customers, dependence upon and trends in capital spending budgets in the IT, and consumer electronics or CE, industries, fluctuations in general economic conditions, change in the market for our customers' products, employee turnover, changes in value of foreign currencies and interest rates and other risk factors contained below under Part II, Item 1A, “Risk Factors.” These forward-looking statements speak only as of the date hereof.

We do not intend to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless otherwise required by law.

In the sections of this Report entitled “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all references to “SYNNEX,” “we,” “us,” “our” or the “Company” mean SYNNEX Corporation and its subsidiaries, except where it is made clear that the term means only the parent company or one of its segments.

SYNNEX, the SYNNEX Logo, TD SYNNEX, the TD SYNNEX Logo and all other SYNNEX company, product and services names and slogans are trademarks or registered trademarks of SYNNEX Corporation.

SYNNEX, TD SYNNEX, the SYNNEX Logo and the TD SYNNEX Logo Reg.

These risks and uncertainties include, but are not limited to, those risks discussed herein and risks related to the risk that the legacy SYNNEX and legacy Tech Data businesses will not be integrated successfully or realize the anticipated benefits of the combined company , the COVID-19 global pandemic, the ability to retain key personnel, the seasonality of the buying patterns of our customers, concentration of sales to large customers, the loss or consolidation of one or more of our significant original equipment manufacturer, or OEM, suppliers or customers, market acceptance and product life of the products we assemble and distribute, competitive conditions in our industry and their impact on our margins, pricing and other terms with our OEM suppliers, our ability to gain market share, variations in supplier-sponsored programs, changes in our costs and operating expenses, dependence upon and trends in capital spending budgets in the IT industry, fluctuations in general economic conditions including impacts from Russia's invasion of Ukraine, change in the market for our customers' products, employee turnover, changes in tax laws, risks associated with our international operations, uncertainties and variability in demand by our reseller and integration customers, supply shortages or delays, any termination or reduction in our floor plan financing arrangements, changes in value of foreign currencies and interest rates and other risk factors contained in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended November 30, 2021 and below under Part II, Item 1A, “Risk Factors.” These forward-looking statements speak only as of the date hereof.

We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, unless otherwise required by law.

In the Management’s Discussion and Analysis of Financial Condition and Results of Operations, all references to “TD SYNNEX,” “we,” “us,” “our” or the “Company” mean TD SYNNEX Corporation and its subsidiaries for periods after the acquisition of Tech Data, except where it is made clear that the term means only the parent company or one of its segments while all references to “SYNNEX,” “we,” “us,” “our” or the “Company” mean SYNNEX Corporation and its subsidiaries for periods prior to the acquisition of Tech Data, except where it is made clear that the term means only the parent company or one of its segments.

TD SYNNEX, the TD SYNNEX Logo and all other TD SYNNEX company, product and services names and slogans are trademarks or registered trademarks of TD SYNNEX Corporation.

Other names and marks are the property of their respective owners.

We are a Fortune 200 corporation and a leading global distributor and solutions aggregator for the IT ecosystem.

On December 1, 2020, we completed the previously announced separation of our customer experience services business (the “Separation”), which was accomplished by the distribution of one hundred percent of the outstanding common stock of Concentrix Corporation (“Concentrix”) to our stockholders as of the close of business on November 17, 2020, the record date for the distribution.

We are a Fortune 200 corporation and a leading global distributor and solutions aggregator for the information technology ("IT") ecosystem.

Our stockholders received one share of Concentrix common stock for every share of our common stock held at the close of business on the record date.

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In connection with the Separation, we have entered into a separation and distribution agreement, as well as various other agreements with Concentrix that provide a framework for the relationships between the parties going forward, including among others an employee matters agreement, a tax matters agreement, and a commercial agreement, pursuant to which Concentrix will continue to provide certain limited services to us following the Separation.

The historical results of operations and financial positions of Concentrix are reported as discontinued operations in our Consolidated Financial Statements.

For further information on discontinued operations, see Note 3 - Discontinued Operations, to the Consolidated Financial Statements in Item 1 of Part I.

Pursuant to the Separation of the Concentrix segment, we operate in a single reportable segment, which represents an aggregation of our four geographic operating segments of United States, Canada, Japan and Latin America.

On March 22, 2021, SYNNEX entered into an agreement and plan of merger (the “Merger Agreement”) to acquire 100% of Tiger Parent (AP) Corporation, the parent company of Tech Data Corporation (“Tech Data”), in a cash and stock transaction (the "Merger").

On September 1, 2021, pursuant to the terms of the Merger Agreement, SYNNEX acquired all the outstanding shares of common stock of Tiger Parent (AP) Corporation for consideration of $1.61 billion in cash and 44 million shares of common stock of SYNNEX, valued at approximately $5.61 billion.

See Note 17 – Subsequent Event to the Consolidated Financial Statements for further information .

The combined company is referred to as TD SYNNEX.

We distribute peripherals, information technology (“IT”) systems including data center server and storage solutions, system components, software, networking, communications and security equipment, consumer electronics (“CE”) and complementary products.

We also provide systems design and integration solutions.

We distribute technology products from IT, CE and original equipment manufacturers (“OEM”), suppliers to resellers, system integrators, and retailers in over 100 countries.

We purchase peripherals, IT systems, system components, software, networking, communications and security equipment, CE and complementary products from our suppliers and sell them to our reseller and retail customers.

On March 22, 2021, SYNNEX entered into an agreement and plan of merger (the “Merger Agreement”) which provided that legacy SYNNEX Corporation would acquire legacy Tech Data Corporation, a Florida corporation (“Tech Data”) through a series of mergers, which would result in Tech Data becoming an indirect subsidiary of TD SYNNEX Corporation (collectively, the "Merger").

On September 1, 2021, pursuant to the terms of the Merger Agreement, SYNNEX acquired all the outstanding shares of common stock of Tiger Parent (AP) Corporation, the parent corporation of Tech Data, for consideration of $1.61 billion in cash ($1.11 billion in cash after giving effect to a $500 million equity contribution by Tiger Parent Holdings, L.P., Tiger Parent (AP) Corporation's sole stockholder and an affiliate of Apollo Global Management, Inc., to Tiger Parent (AP) Corporation prior to the effective time of the Merger) and 44 million shares of common stock of SYNNEX, valued at approximately $5.61 billion.

See Note 3 – Acquisitions to the Consolidated Financial Statements in Part I, Item 1 of this Report for further information.

We previously had two reportable segments as of November 30, 2020:

Technology Solutions and Concentrix.

After giving effect to the Separation on December 1, 2020, we operated in a single reportable segment.

After completion of the Merger, we reviewed our reportable segments as there was a change in our chief executive officer, who is also our chief operating decision maker.

Our chief operating decision maker has a leadership structure aligned with the geographic locations of the Americas, Europe and Asia-Pacific and Japan (“APJ”) and reviews and allocates resources based on these geographic locations.

As a result, as of September 1, 2021 we began operating in three reportable segments based on our geographic locations:

the Americas, Europe and APJ.

Segment results for all prior periods have been restated for comparability to the Company’s current reportable segments.

For financial information by segment, refer to Note 1 1 – Segment Information, to the Consolidated Financial Statements in Part I, Item 1 of this Report.

We have presented limited information by reportable segment within the Management’s Discussion and Analysis of Financial Condition and Results of Operations due to the lack of comparability between periods resulting from the Merger on September 1, 2021.

We distribute technology products from original equipment manufacturers (“OEM”), as well as suppliers of next-generation technologies and delivery models, to resellers, system integrators, and retailers.

We purchase PC systems, mobile phones and accessories, printers, peripherals, IT systems, system components, software, networking, communications and security equipment, consumer electronics and complementary products from our suppliers and sell them to our reseller and retail customers.

We perform a similar function for our distribution of licensed software products.

Our reseller customers include value-added resellers, corporate resellers, government resellers, system integrators, direct marketers, and national and regional retailers.

Our reseller customers include value-added resellers, corporate resellers, government resellers, system integrators, direct marketers, retailers and managed service providers.

We combine our core strengths in distribution with demand generation, supply chain management and design and integration solutions to help our customers achieve greater efficiencies in time to market, cost minimization, real-time linkages in the supply chain and aftermarket product support.

We also provide comprehensive IT solutions in key vertical markets such as government and healthcare and we provide specialized service offerings that increase efficiencies in the areas of print management, renewals, logistics services and supply chain management.

We also provide comprehensive IT solutions in key vertical markets such as government and healthcare and we provide specialized service offerings that increase efficiencies in the areas of global computing components, logistics services and supply chain management.

Additionally, we provide our customers with systems design and integration solutions for data center servers and networking solutions built specific to our customers’ workloads and data center environments.

Our business is characterized by low gross profit as a percentage of revenue, or gross margin, and low income from operations as a percentage of revenue, or operating margin.

The market for IT and CE products is generally characterized by declining unit prices and short product life cycles.

The market for IT products is generally characterized by declining unit prices and short product life cycles.

We set our sales price based on the market supply and demand characteristics for each particular product or bundle of products we distribute and services we provide.

In our business, we are highly dependent on the end-market demand for IT and CE products, and on our partners’ strategic initiatives and business models.

This end-market demand is influenced by many factors including the introduction of new IT and CE products and software by OEMs, replacement cycles for existing IT and CE products, trends toward cloud computing, overall economic growth and general business activity.

A difficult and challenging economic environment may also lead to consolidation or decline in the IT and CE industries and increased price-based competition.

We have been in business since 1980 and are headquartered in Fremont, California and Clearwater, Florida.

We have significant operations in North and South America, Asia-Pacific, Europe and Africa.

We were originally incorporated in the State of California as COMPAC Microelectronics, Inc.

in November 1980, and we changed our name to SYNNEX Information Technologies, Inc.

in February 1994.

We later reincorporated in the State of Delaware under the name of SYNNEX Corporation in October 2003.

As of August 31, 2021, we had over 9,100 full-time and temporary employees worldwide.

We are highly dependent on the end-market demand for IT products, and on our partners’ strategic initiatives and business models.

This end-market demand is influenced by many factors including the introduction of new IT products and software by OEMs, replacement cycles for existing IT products, trends toward cloud computing, overall economic growth and general business activity.

A difficult and challenging economic environment may also lead to consolidation or decline in the IT industries and increased price-based competition.

In December 2019, there was an outbreak of a new strain of coronavirus (“COVID-19”), which was characterized as a pandemic by the World Health Organization in March 2020.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and workforce participation, including our own, and created significant volatility and disruption of financial markets.

The impact of the COVID-19 pandemic on our business is discussed at the appropriate places in the discussion of the results of our operations for the three and nine months ended August 31, 2021.

The disruptions due to COVID-19 have impacted our business including logistics operations.

Despite improvements in the global economy since the onset of the pandemic, the resurgence of the Delta variant and other mutations bring uncertainty to continued economic recovery.

As a result, the Company cannot at this time accurately predict what effects these conditions will have on its

operations and financial condition, including due to the uncertainties relating to the severity and duration of the pandemic, the effect on

its customers and customer demand and the length of t he restrictions and closures imposed by various governments .

Despite improvements in the global economy since the onset of the pandemic, the emergence of the Delta and Omicron variants and other mutations bring uncertainty to continued economic recovery.

As a result, the Company cannot at this time accurately predict what effects these conditions will have on its operations and financial condition, including due to the uncertainties relating to the severity and duration of the pandemic, the effect on its customers and customer demand and the length of t he restrictions and closures imposed by various governments, including recent restrictions and closures within the Asia-Pacific region .

As a result, many of the estimates and assumptions involved in the preparation of the financial statements included in this report on Form 10-Q, required increased judgment and carry a higher degree of variability and volatility.

As events continue to evolve with respect to the pandemic, our estimates may materially change in future periods.

As events continue to evolve with respect to the pandemic, our estimates may change in future periods.

Critical Accounting Policies and Estimates

During the nine months ended August 31, 2021, there were no material changes to our critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the fiscal year ended November 30, 2020, except as such policies relate to the Concentrix business.

During the nine months ended August 31, 2021, we adopted certain other new accounting pronouncements.

During the three months ended February 28, 2022, there were no material changes to our critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021.

During the three months ended February 28, 2022, we adopted certain other new accounting pronouncements.

The impact of adoption of these pronouncements was not material to our consolidated financial statements.

See Note 2 - Summary of Significant Accounting Policies to our Consolidated Financial Statements for further information.

See Note 2 - Summary of Significant Accounting Policies to our Consolidated Financial Statements in Part I, Item 1 of this Report for further information.

We continually seek to augment organic growth in our business with strategic acquisitions of businesses and assets that complement and expand our existing capabilities.

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Three months ended

Nine Months Ended

Statements of Operations Data:

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

February 28, 2022 February 28, 2021

Revenue 100.00 % 100.00 %

Cost of revenue (93.74) % (93.83) %

Gross profit 6.26 % 6.17 %

Acquisition, integration and restructuring costs (0.60) % — %

Selling, general and administrative expenses (4.22) % (3.30) %

Operating income from continuing operations

Operating income 1.44 % 2.87 %

Interest expense and finance charges, net (0.27) % (0.46) %

Other income (expense), net (0.03) % (0.03) %

Income from continuing operations before income taxes

Income before income taxes 1.14 % 2.38 %

Provision for income taxes (0.28) % (0.60) %

Income from continuing operations

Income from discontinued operations, net of taxes

The financial results of the former Concentrix business are presented as income from discontinued operations, net of taxes in the Statements of Operations data.

Net income 0.86 % 1.78 %

Due to the ongoing impact of the COVID-19 pandemic, current results and financial condition discussed herein may not be indicative of future operating results and trends.

Ce rtain non-GAAP financial information

Certain non-GAAP financial information

In addition to disclosing financial results that are determined in accordance with GAAP, we also disclose certain non-GAAP financial information, including:

Revenue in constant currency, which is revenue adjusted for the translation effect of foreign currencies so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of our business performance.

Revenue in constant currency is calculated by translating the revenue for the three and nine months ended August 31, 2021 in the billing currency using their comparable prior period currency conversion rate.

Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates.

Non-GAAP operating income, which is operating income adjusted to exclude transaction-related and integration expenses, amortization of intangible assets and share-based compensation expense.

• Non-GAAP operating income, which is operating income, adjusted to exclude acquisition, integration and restructuring costs, amortization of intangible assets, share-based compensation expense and purchase accounting adjustments.

• Non-GAAP operating margin, which is non-GAAP operating income, as defined above, divided by revenue.

Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) which is net income before interest, taxes, depreciation and amortization, adjusted to exclude other income (expense), net, transaction-related and integration expenses, share-based compensation expense and income from discontinued operations, net of taxes.

Non-GAAP diluted earnings per common share (“EPS”), which is diluted EPS excluding the per share, tax effected impact of (i) transaction-related and integration expenses, (ii) amortization of intangible assets, and (iii) share-based compensation.

Transaction-related expenses typically consist of acquisition, integration, and divestiture related costs and are expensed as incurred.

These expenses primarily represent costs for legal, regulatory, consulting and advisory services.

From time to time, this category may also include transaction-related gains/losses on divestitures/spin-off of businesses.

We believe that providing this additional information is useful to the reader to better assess and understand our base operating performance, especially when comparing results with previous periods and for planning and forecasting in future periods, primarily because management typically monitors the business adjusted for these items in addition to GAAP results.

Management also uses these non-GAAP measures to establish operational goals and, in some cases, for measuring performance for compensation purposes.

These non-GAAP financial measures also exclude amortization of intangible assets.

Our acquisition activities have resulted in the recognition of intangible assets which consist primarily of customer relationships, vendor lists and technology.

Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable.

The amortization of intangible assets is reflected in our statements of operations within each segment.

Although intangible assets contribute to our revenue generation, the amortization of intangible assets does not directly relate to the sale of our products and the services performed for our clients.

• Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) which is net income before interest, taxes, depreciation and amortization, adjusted to exclude other income (expense), net, acquisition, integration and restructuring costs, share-based compensation expense, and purchase accounting adjustments.

• Non-GAAP net income, which is net income, adjusted to exclude acquisition, integration and restructuring costs, amortization of intangible assets, share-based compensation expense, purchase accounting adjustments, income taxes related to the aforementioned items, as well as a capital loss carryback benefit.

• Non-GAAP diluted earnings per common share (“EPS”), which is diluted EPS excluding the per share impact of acquisition, integration and restructuring costs, amortization of intangible assets, share-based compensation expense, purchase accounting adjustments, income taxes related to the aforementioned items, as well as a capital loss carryback benefit.

Acquisition, integration and restructuring costs typically consist of acquisition, integration, restructuring and divestiture related costs and are expensed as incurred.

These expenses primarily represent professional services costs for legal, banking, consulting and advisory services, severance and other personnel related costs, share-based compensation expense and debt extinguishment fees.

From time to time, this category may also include transaction-related gains/losses on divestitures/spin-off of businesses, costs related to long-lived assets including impairment charges and accelerated depreciation and amortization expense due to changes in asset useful lives, as well as various other costs associated with the acquisition or divestiture.

Our acquisition activities have resulted in the recognition of finite-lived intangible assets which consist primarily of customer relationships and lists and vendor lists.

Finite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable.

The amortization of intangible assets is reflected in our statements of operations.

Although intangible assets contribute to our revenue generation, the amortization of intangible assets does not directly relate to the sale of our products.

Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of our acquisition activity.

Accordingly, we believe excluding the amortization of intangible assets, along with the other non-GAAP adjustments which neither relate to the ordinary course of our business nor reflect our underlying business performance, enhances our and our investors’ ability to compare our past financial performance with current performance and to analyze underlying business performance and trends.

Accordingly, we believe excluding the amortization of intangible assets, along with the other non-GAAP adjustments which neither relate to the ordinary course of our business nor reflect our underlying business performance, enhances our and our investors’ ability to compare our past financial performance with our current performance and to analyze underlying business performance and trends.

Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within our GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure.

Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

Share-based compensation expense is a non-cash expense arising from the grant of equity awards to employees based on the estimated fair value of those awards.

Although share-based compensation is an important aspect of the compensation of our employees, the fair value of the share-based awards may bear little resemblance to the actual value realized upon the vesting or future exercise of the related share-based awards and the expense can vary significantly between periods as a result of the timing of grants of new stock-based awards, including grants in connection with acquisitions.

Given the variety and timing of awards and the subjective assumptions that are necessary when calculating share-based compensation expense, we believe this additional information allows investors to make additional comparisons between our operating results from period to period.

Purchase accounting adjustments are primarily related to the impact of recognizing the acquired vendor and customer liabilities from the Merger at fair value.

The Company expects the duration of these adjustments to benefit our non-GAAP operating income through fiscal 2022 and through a portion of fiscal 2023 based on historical settlement patterns with our vendors and in accordance with the timing defined in our policy for releasing vendor and customer liabilities we deem remote to be paid.

Management also uses these non-GAAP measures to establish operational goals and, in some cases, for measuring performance for compensation purposes.

As these non-GAAP financial measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies.

These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures and should be used as a complement to, and in conjunction with data presented in accordance with GAAP.

In prior periods, SYNNEX has excluded other items relevant to those periods for purposes of its non-GAAP financial measures.

Non-GAAP Financial Information:

The following table provides the reconciliations of our most comparable GAAP measures to our non-GAAP measures presented:

The following tables provide the reconciliations of our most comparable GAAP measures to our non-GAAP measures presented:

Three Months Ended

Nine Months Ended

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

(in thousands, except per share amounts)

Foreign currency translation

Revenue in constant currency

February 28, 2022 February 28, 2021

Operating Income and Operating Margin - Consolidated (in thousands)

Revenue $ 15,469,977 $ 4,939,014

Operating income $ 222,440 $ 141,747

Transaction-related and integration expenses

Acquisition, integration and restructuring costs 93,370 —

Amortization of intangibles 76,136 9,369

Share-based compensation 6,750 4,887

Purchase accounting adjustments 33,161 —

Non-GAAP operating income $ 431,857 $ 156,003

1 unchanged sentence

Non-GAAP operating margin 2.79 % 3.16 %

Three Months Ended

February 28, 2022 February 28, 2021

Operating Income and Operating Margin - Americas (in thousands)

Revenue $ 9,074,273 $ 4,307,007

Operating income $ 133,537 $ 120,435

Acquisition, integration and restructuring costs 51,530 —

Amortization of intangibles 43,528 9,369

Share-based compensation 6,750 4,887

Purchase accounting adjustments 17,738 —

Non-GAAP operating income $ 253,083 $ 134,691

GAAP operating margin 1.47 % 2.80 %

Non-GAAP operating margin 2.79 % 3.13 %

Three Months Ended

February 28, 2022 February 28, 2021

Operating Income and Operating Margin - Europe (in thousands)

Revenue $ 5,579,788 $ 132,532

Operating income $ 65,332 $ 6,235

Acquisition, integration and restructuring costs 39,729 —

Amortization of intangibles 31,970 —

Purchase accounting adjustments 15,423 —

Non-GAAP operating income $ 152,454 $ 6,235

GAAP operating margin 1.17 % 4.70 %

Non-GAAP operating margin 2.73 % 4.70 %

Three Months Ended

February 28, 2022 February 28, 2021

Operating Income and Operating Margin - APJ (in thousands)

Revenue $ 815,916 $ 499,475

Operating income $ 23,571 $ 15,078

Acquisition, integration and restructuring costs 2,111 —

Amortization of intangibles 638 —

Non-GAAP operating income $ 26,320 $ 15,078

GAAP operating margin 2.89 % 3.02 %

Non-GAAP operating margin 3.23 % 3.02 %

Three Months Ended

February 28, 2022 February 28, 2021

Adjusted EBITDA - Consolidated (in thousands)

Net income $ 132,324 $ 87,822

Interest expense and finance charges, net 42,343 22,838

Provision for income taxes 43,505 29,754

Depreciation (1)

Amortization of intangibles 76,136 9,369

EBITDA $ 373,673 $ 155,282

Other (income) expense, net 4,268 1,333

Transaction-related and integration expenses

Acquisition, integration and restructuring costs 40,499 —

Share-based compensation 6,750 4,887

Income from discontinued operations

Purchase accounting adjustments 33,161 —

Adjusted EBITDA $ 458,351 $ 161,502

Diluted EPS from continuing operations

Transaction-related and integration expenses

(1) Includes depreciation recorded in acquisition, integration and restructuring costs.

Three Months Ended

February 28, 2022 February 28, 2021

Net Income - Consolidated (in thousands)

Net income $ 132,324 $ 87,822

Acquisition, integration and restructuring costs 95,202 —

Amortization of intangibles 76,136 9,369

Share-based compensation 6,750 4,887

Purchase accounting adjustments 33,161 —

Income taxes related to the above (47,883) (3,525)

Non-GAAP diluted EPS from continuing operations

The tax effect of taxable and deductible non-GAAP adjustments was calculated using the effective year-to-date tax rate during the respective periods.

Three and Nine Months Ended August 31, 2021 and August 31, 2020

Income tax capital loss carryback benefit (3,246) —

Non-GAAP net income $ 292,444 $ 98,553

Three Months Ended

Nine Months Ended

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

(in thousands)

Diluted Earnings per Common Share February 28, 2022 February 28, 2021

Diluted EPS $ 1.37 $ 1.69

Acquisition, integration and restructuring costs 0.99 —

Amortization of intangibles 0.79 0.18

Share-based compensation 0.07 0.09

Purchase accounting adjustments 0.34 —

Income taxes related to the above (0.50) (0.07)

Income tax capital loss carryback benefit (0.03) —

Non-GAAP diluted EPS $ 3.03 $ 1.89

Three Months Ended February 28, 2022

Three Months Ended Percent

February 28, 2022 February 28, 2021

(in thousands)

Our revenue includes sales of products.

Revenue $ 15,469,977 $ 4,939,014 213.2 %

We distribute a comprehensive range of products for the technology industry and design and integrate data center equipment.

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The products we sell from one period to the next are often not comparable due to changes in product models, features and customer demand requirements.

Revenue decreased during the three months ended August 31, 2021, as compared to the prior year period, primarily due to the ongoing industry supply chain constraints during the current quarter.

Revenue increased during the nine months ended August 31, 2021, as compared to the prior year period, due to broad-based demand for technology equipment.

We experienced growth in commercial software, networking, security and notebooks as well as increased demand for our design and integration-based services.

Revenue increased during the three months ended February 28, 2022, as compared to the prior year period, primarily due to an increase in sales resulting from the impact of the Merger of approximately $10 billion as well as broad-based demand for technology equipment.

Three Months Ended Percent

February 28, 2022 February 28, 2021

(in thousands)

Gross profit $ 968,661 $ 304,567 218.0 %

Gross margin 6.26 % 6.17 %

Our gross margin is affected by a variety of factors, including competition, selling prices, mix of products, product costs along with rebate and discount programs from our suppliers, reserves or settlement adjustments, freight costs, inventory losses and fluctuations in revenue.

Our gross profit increased, during the three months ended February 28, 2022, as compared to the prior year period, primarily due to an increase in sales resulting from the impact of the Merger.

The increase in gross margin during the three months ended February 28, 2022, as compared to the prior year period, is primarily due to product mix.

Acquisition, Integration and Restructuring Costs

Acquisition, integration and restructuring costs are primarily comprised of costs related to the Merger and costs related to the Global Business Optimization 2 Program initiated by Tech Data prior to the Merger (the “GBO 2 Program”).

There were no acquisition, integration and restructuring costs incurred during the three months ended February 28, 2021.

We incurred acquisition, integration and restructuring costs related to the completion of the Merger, including professional services costs, personnel and other costs, long-lived assets charges and stock-based compensation expense.

Professional services costs are primarily comprised of legal expenses and tax and other consulting services.

Personnel and other costs are primarily comprised of costs related to retention and other bonuses, as well as severance costs.

Long-lived assets charges are comprised of accelerated depreciation and amortization expense of $52.9 million recorded due to changes in asset useful lives in conjunction with the consolidation of certain IT systems.

Stock-based compensation expense primarily relates to costs associated with the conversion of certain Tech Data performance-based equity awards issued prior to the Merger into restricted shares of TD SYNNEX (refer to Note 5 – Share-Based Compensation to the Consolidated Financial Statements in Part I, Item 1 of this Report for further information) and expenses for certain restricted stock awards issued in conjunction with the Merger.

During the three months ended February 28, 2022, acquisition and integration expenses related to the Merger were composed of the following:

Three Months Ended

Nine Months Ended

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

February 28, 2022

(in thousands)

Professional services costs $ 8,148

Personnel and other costs 10,944

Long-lived assets charges 52,871

Stock-based compensation 13,576

Total $ 85,539

GBO 2 Program

Prior to the Merger, Tech Data implemented its GBO 2 Program, that includes investments to optimize and standardize processes and apply data and analytics to be more agile in a rapidly evolving environment, increasing productivity, profitability and optimizing net-working capital.

TD SYNNEX plans to continue this program in conjunction with the Company’s integration activities.

Acquisition, integration and restructuring expenses related to the GBO 2 Program are primarily comprised of restructuring costs and other professional services costs.

Restructuring costs are comprised of severance costs and other associated exit costs, including certain consulting costs.

Other professional services

costs are primarily comprised of professional services fees not related to restructuring activities, including costs related to improving profitability and optimizing net-working capital.

Acquisition, integration and restructuring costs under the GBO 2 Program for the three months ended February 28, 2022 included the following:

Three Months Ended

February 28, 2022

(in thousands)

Our gross margin is affected by a variety of factors, including competition, selling prices, mix of products and services, product costs along with rebate and discount programs from our suppliers, reserves or settlement adjustments, freight costs, inventory losses, acquisition of business units and fluctuations in revenue.

Our gross profit increased, during the three months ended August 31, 2021, as compared to the prior year period, due to higher margin driven by the product mix, partially offset by the impact of the decline in revenues.

The increase in gross margin during the three months ended August 31, 2021, as compared to the prior year period, is primarily due to product mix.

Our gross profit increased, during the nine months ended August 31, 2021, as compared to the prior year period, due to higher revenue.

The decrease in gross margin during the nine months ended August 31, 2021, as compared to the prior year period, is primarily due to product mix.

Selling, General and Administrative Expenses

Restructuring costs $ 6,046

Other professional services costs 1,785

Total $ 7,831

Restructuring costs under the GBO 2 Program for the three months ended February 28, 2022 were composed of the following:

Three Months Ended

Nine Months Ended

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

February 28, 2022

(in thousands)

Severance $ 359

Other exit costs 5,687

Total $ 6,046

During the three months ended February 28, 2022, we recorded restructuring costs related to GBO 2 of $1.8 million, $3.9 million and $0.3 million, for the Americas, Europe and APJ regions, respectively.

Selling, General and Administrative Expenses

Three Months Ended Percent

February 28, 2022 February 28, 2021

(in thousands)

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Our selling, general and administrative expenses consist primarily of personnel costs such as salaries, commissions, bonuses, share-based compensation and temporary personnel costs.

Selling, general and administrative expenses also include cost of warehouses and other non-integration facilities, utility expenses, legal and professional fees, depreciation on certain of our capital equipment, bad debt expense, amortization of intangible assets, and marketing expenses, offset in part by reimbursements from our OEM suppliers.

During the three months ended August 31, 2021, selling, general and administrative expenses decreased, compared to the prior year period, primarily due to lower incremental COVID-19 related expenses, partially offset by higher transaction-related and integration expenses and an increase in employee related expenses.

Selling, general and administrative expenses increased as a percentage of revenue, compared to the prior year period, primarily due the impact of the decline in revenues.

During the nine months ended August 31, 2021, selling, general and administrative expenses increased, compared to the prior year period, primarily due to higher employee related expenses and higher transaction-related and integration expenses, partially offset by lower incremental COVID-19 related expenses and amortization of intangible assets.

Selling, general and administrative expenses decreased as a percentage of revenue, compared to the prior year period, primarily due to scale.

Selling, general and administrative expenses also include cost of warehouses, delivery centers and other non-integration facilities, utility expenses, legal and professional fees, depreciation on certain of our capital equipment, bad debt expense, amortization of our intangible assets, and marketing expenses, offset in part by reimbursements from our OEM suppliers.

During the three months ended February 28, 2022, selling, general and administrative expenses increased, compared to the prior year period, primarily due to an increase in employee related expenses resulting from the Merger and an increase in amortization of intangible assets acquired in connection with the Merger.

Selling, general and administrative expenses increased as a percentage of revenue, compared to the prior year period, primarily due to the impact of the Merger including an increase in amortization of intangible assets.

Operating Income

Three Months Ended

Nine Months Ended

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

(in thousands)

Three Months Ended Percent

February 28, 2022 February 28, 2021

(in thousands)

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Operating margin 1.44 % 2.87 %

Operating income and margin increased during the three months ended August 31, 2021, compared to the prior year period, primarily due to product mix.

Operating income and margin increased during the nine months ended August 31, 2021, compared to the prior year period, primarily due to broad-based growth across our product portfolio.

Operating income increased during the three months ended February 28, 2022 compared to the prior year period, primarily due to increased sales as a result of the Merger, partially offset by an increase in employee related expenses resulting from the Merger, an increase in acquisition, integration and restructuring costs and an increase in amortization of intangible assets acquired in connection with the Merger.

Operating margin decreased during the three months ended February 28, 2022, compared to the prior year period, primarily due to an increase in employee related expenses resulting from the Merger, an increase in acquisition, integration and restructuring costs and an increase in amortization of intangible assets acquired in connection with the Merger.

Interest Expense and Finance Charges, Net

Three Months Ended

Nine Months Ended

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

(in thousands)

Three Months Ended Percent

February 28, 2022 February 28, 2021

(in thousands)

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Percentage of revenue 0.27 % 0.46 %

Amounts recorded in interest expense and finance charges, net, consist primarily of interest expense paid on our lines of credit and term loans, fees associated with third party accounts receivable flooring arrangements and the sale or pledge of accounts receivable through our securitization facilities, offset by income earned on our cash investments.

During the three and nine months ended August 31, 2021, our interest expense and finance charges, net, increased compared to the prior year period, primarily due to an increase in interest expense related to issuance of notes and the average outstanding borrowings primarily due to the distribution to our stockholders by way of funding Concentrix in connection with the Separation.

Interest expense and finance charges, net, increased as a percentage of revenue, compared to the prior year period, primarily due to an increase in interest expense related to the issuance of notes.

Amounts recorded in interest expense and finance charges, net, consist primarily of interest expense paid on our Senior Notes (as defined below), our lines of credit and term loans and fees associated with the sale or pledge of accounts receivable through our securitization facilities, offset by income earned on our cash investments.

The increase in our interest expense and finance charges, net during the three months ended February 28, 2022, compared to the prior year, was due to an increase in interest expense related to the Senior Notes and higher average outstanding borrowings.

Other Income (Expense), Net

Three Months Ended

Nine Months Ended

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

(in thousands)

Three Months Ended Percent

February 28, 2022 February 28, 2021

(in thousands)

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Percentage of revenue (0.03) % (0.03) %

Amounts recorded as other income (expense), net include foreign currency transaction gains and losses, investment gains and losses, and other non-operating gains and losses, such as settlements received from class actions lawsuits.

The increase in other income (expense), net during the three and nine months ended August 31, 2021, as compared to the prior year period, was primarily due to a gain on sale of investment partially offset by higher foreign currency exchange losses.

Amounts recorded as other income (expense), net include foreign currency transaction gains and losses on certain financing transactions and the related derivative instruments used to hedge such financing transactions, the cost of hedging, investment gains and losses, and other non-operating gains and losses, such as settlements received from class actions lawsuits.

The increase in other income (expense), net during the three months ended February 28, 2022, as compared to the prior year period, was primarily due to higher costs of hedging.

Provision for Income Taxes

Three Months Ended

Nine Months Ended

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

(in thousands)

Three Months Ended Percent

February 28, 2022 February 28, 2021

(in thousands)

Provision for income taxes $ 43,505 $ 29,754 46.2 %

Percentage of income from continuing operations before income taxes

Percentage of income before income taxes 24.74 % 25.31 %

Income taxes consist of our current and deferred tax expense resulting from our income earned in domestic and foreign jurisdictions.

Income taxes for the interim periods presented have been included in the accompanying Consolidated Financial Statements on the basis of an estimated annual effective tax rate.

During the three and nine months ended August 31, 2021, our income tax expense increased compared to the prior year period, due to higher income during the three and nine months ended August 31, 2021.

The effective tax rate was lower during the three months ended August 31, 2020, due to the reversal of uncertain tax positions.

The effective tax rate was lower during the nine months ended August 31, 2020, due to tax benefits received from the exercising of stock options by employees and the reversal of uncertain tax positions.

Discontinued Operations

Three Months Ended

Nine Months Ended

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

(in thousands)

Income from discontinued operations, net of taxes

Percentage of revenue

Income from discontinued operations includes net income from Concentrix during the three and nine months ended August 31, 2020.

Concentrix was separated on December 1, 2020, consequently, there was no revenue earned or cost incurred during the three and nine months ended August 31, 2021 related to the discontinued operations.

During the three months ended February 28, 2022, our income tax expense increased compared to the prior year period, primarily due to higher income during the three months ended February 28, 2022, including the impacts of the Merger.

The effective tax rate was slightly lower during the three months ended February 28, 2022 as compared to the three months ended February 28, 2021, primarily due to the relative mix of earnings and losses within the taxing jurisdictions in which we operate.

Liquidity and Capital Resources

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Three Months Ended

August 31, 2021

November 30, 2020

August 31, 2020

February 28, 2022 November 30, 2021 February 28, 2021

(Amounts in thousands)

Days sales outstanding ("DSO")

Accounts receivable, net ( 1)

Days sales outstanding

Revenue (a) $ 15,469,977 $ 15,611,266 $ 4,939,014

Accounts receivable, net (b) 8,732,024 8,310,032 2,381,064

Days sales outstanding (c) = ((b)/(a))*the number of days during the period 51 48 43

Days inventory outstanding ("DIO")

Cost of revenue

Inventories ( 1)

Days inventory outstanding

(f) = (e)/((d)/the number of days during the period)

Cost of revenue (d) $ 14,501,316 $ 14,668,096 $ 4,634,447

Inventories (e) 7,883,265 6,642,915 2,556,716

Days inventory outstanding (f) = ((e)/(d))*the number of days during the period 49 41 50

Days payable outstanding ("DPO")

Cost of revenue

Accounts payable ( 1)

Days payable outstanding

(i) = (h)/((g)/the number of days during the period)

Cash conversion cycle ("CCC")

(j) = (c)+(f)-(i)

(1) Accounts receivable, inventories and accounts payable as of November 30, 2020 and August 31, 2020 are based on pro forma presentation to reflect the separation of the Company’s prior Concentrix reportable segment into an independent public company on December 1, 2020.

Cost of revenue (g) $ 14,501,316 $ 14,668,096 $ 4,634,447

Accounts payable (h) 12,193,263 12,034,946 3,116,095

Days payable outstanding (i) = ((h)/(g))*the number of days during the period 76 75 61

Cash conversion cycle ("CCC") (j) = (c)+(f)-(i) 24 14 32

Our business is working capital intensive.

Our working capital needs are primarily to finance accounts receivable and inventory.

We rely heavily on term loans, accounts receivable arrangements, our securitization programs, and our revolver programs for our working capital needs.

We rely heavily on term loans, accounts receivable arrangements, our securitization programs, our revolver programs and trade credit from vendors for our working capital needs.

We have financed our growth and cash needs to date primarily through cash generated from operations and financing activities.

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 dollars typically decreases, which generally results in increases in cash flows generated from operating activities.

Our cash conversion cycle was 32 days and 33 days as of August 31, 2021, and 2020, respectively.

The decrease in CCC as of August 31, 2021, as compared to the prior year period, was primarily due to the improved collections of accounts receivables.

This decrease was partially offset by slower turnover of our inventories and the timing of payments of accounts payable.

To increase our market share and better serve our customers, we may further expand our operations through investments or acquisitions, such as the recently completed acquisition of Tech Data.

Conversely, when sales volumes decrease, our net investment in working capital dollars typically decreases, which generally results in increases in cash flows generated from operating activities.

We calculate CCC as days of the last fiscal quarter’s revenue outstanding in accounts receivable plus days of supply on hand in inventory, less days of the last fiscal quarter’s cost of revenue outstanding in accounts payable.

Our CCC was 24 days and 32 days as of February 28, 2022 and February 28, 2021, respectively.

The decrease was primarily due to our DPO, which was impacted by the increase in the payment timing of accounts payable in our business primarily due to the impact of the Merger.

Our CCC was 24 days and 14 days as of February 28, 2022 and November 30, 2021, respectively.

The increase was primarily due to our DIO, which was impacted by a temporary increase to support revenue growth and strategic inventory purchases that are expected to sell through in the next 3 to 5 months.

To increase our market share and better serve our customers, we may further expand our operations through investments or acquisitions.

We expect that any such expansions would require an initial investment in working capital, personnel, facilities and operations.

These investments or acquisitions would likely be funded primarily by our existing cash and cash equivalents, additional borrowings, or the issuance of securities.

Net cash provided by operating activities was $248.8 million during the nine months ended August 31, 2021, primarily due to a decrease in accounts receivable of $571.7 million, receivables from vendors of $24.7 million, our net income of $275.6 million, adjustments to net income for non-cash items of $69.5 million, and a net change of $24.9 million in other operating assets and liabilities.

These cash inflows were partially offset by a decrease in accounts payable of $533.9 million and an increase in inventories of $183.8 million.

The decrease in accounts receivable is due to efficient collections during the three months ended August 31, 2021 as well as lower revenue compared to a seasonally high fourth quarter of fiscal year 2020.

The decrease in accounts payable is primarily due to timing of payments .

The adjustments for non-cash items consist primarily of amortization and depreciation and share-based compensation expense.

Net cash provided by operating activities was $1.547 billion during the nine months ended August 31, 2020, primarily due to net income of $314.0 million, adjustments for non-cash items of $320.9 million, decreases in accounts receivable of $280.5 million and receivables from vendors of $44.7 million, an increase in accounts payable of $454.3 million and a net change of $415.4 million in other operating assets and liabilities.

These cash inflows were partially offset by an increase in inventories of $282.7 million.

The decrease in accounts receivable and vendor receivables is primarily due to lower revenue in our business including discontinuing operations during the three months ended August 31, 2020 following a seasonally high fourth quarter of fiscal year 2019 as well as an improvement in our collections.

DSO in our business also decreased by approximately 3 days from the end of fiscal year 2019.

The increase in accounts payable and cash inflow from changes in other

operating assets and liabilities reflects primarily efficient working capital management and prepayments from customers received in our business .

The increase in inventories was driven by purchases related to larger projects in the second fiscal quarter which were transacted in the third fiscal quarter.

The adjustments for non-cash items consist primarily of amortization and depreciation, provision for doubtful accounts, share-based compensation expense, unrealized foreign exchange losses and a deferred tax benefit related to both our continuing operations as well as discontinued operations.

Net cash used in investing activities during the nine months ended August 31, 2021 was $2.9 million, primarily due to capital expenditures related to infrastructure investments to support growth in our business and proceeds from sale of non-marketable securities.

Net cash used in investing activities during the nine months ended August 31, 2020 was $137.5 million, primarily due to capital expenditures of $127.3 million related to infrastructure investments to support growth in both of our businesses including discontinued operations and $4.9 million of cash paid related to the settlement of employee stock-based awards assumed under the Convergys acquisition, being paid in accordance with the original vesting schedule.

Net cash provided by financing activities during the nine months ended August 31, 2021 was $2,232.7 million, representing primarily proceeds received on issuance of Notes of $2.5 billion to support the Merger with Tech Data, net transfer of cash and cash equivalents of $149.9 million to Concentrix in connection with the Separation and $64.5 million representing a pay down of our revolving lines of credit with cash generated from operations.

In addition, we paid stockholders dividends of $31.1 million and $26.7 million of issuance costs related to the Notes.

Net cash used in financing activities during the nine months ended August 31, 2020 was $187.8 million, representing primarily a pay down of our revolving lines of credit with cash generated from operations and scheduled quarterly repayments of our term loans aggregating $168.4 million.

In addition, we paid dividends of $20.8 million in January 2020, prior to suspension of our dividends program due to the COVID-19 related economic uncertainties in March 2020.

Operating Activities

Net cash used in operating activities was $1.3 billion during the three months ended February 28, 2022, primarily due to a temporary increase in net working capital to support revenue growth and strategic inventory purchases that are expected to sell through in the next 3 to 5 months.

Net cash provided by operating activities was $25.0 million during the three months ended February 28, 2021, primarily due to decreases in accounts receivable and inventories, which were largely offset by a decrease in accounts payable.

The decreases in accounts receivable and inventories were primarily due to lower revenue during the three months ended February 28, 2021 compared to a seasonally high fourth quarter of fiscal year 2020.

The decrease in accounts payable was primarily due to timing of payments.

Investing Activities

Net cash used in investing activities during the three months ended February 28, 2022 was $25.2 million, primarily due to capital expenditures related to infrastructure investments to support growth in our business.

Net cash used in investing activities during the three months ended February 28, 2021 was $4.0 million, primarily due to capital expenditures related to infrastructure investments to support growth in our business.

Financing Activities

Net cash provided by financing activities during the three months ended February 28, 2022 was $854.5 million, representing primarily short-term borrowings to fund working capital requirements.

In addition, we paid stockholders dividends of $28.8 million and we paid $23.8 million to repurchase common stock under our share repurchase program.

Net cash used in financing activities during the three months ended February 28, 2021 was $147.2 million, representing primarily the net transfer of cash and cash equivalents of $149.9 million to Concentrix in connection with the Separation and a return of cash to stockholders in the form of dividends of $10.3 million.

This was partially offset by net proceeds of $13.0 million from our borrowing arrangements in certain international locations to fund working capital requirements.

Capital Resources

Our cash and cash equivalents totaled $4.1 billion and $1.4 billion as of August 31, 2021 and November 30, 2020, respectively.

Of our total cash and cash equivalents, the cash held by our international subsidiaries was $470.8 million and $434.8 million as of August 31, 2021 and November 30, 2020, respectively.

Our cash and cash equivalents totaled $510.2 million and $994.0 million as of February 28, 2022 and November 30, 2021, respectively.

Our cash and cash equivalents held by international subsidiaries are no longer subject to U.S.

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Historically, we have fully utilized and reinvested all foreign cash to fund our foreign operations and expansion.

If in the future our intentions change, and we repatriate the cash back to the United States, we will report in our Consolidated Financial Statements the impact of state and withholding taxes depending upon the planned timing and manner of such repatriation.

If in the future our intentions change, and we repatriate the cash back to the United States, we will report in our Consolidated

Financial Statements the impact of state and withholding taxes depending upon the planned timing and manner of such repatriation.

Presently, we believe we have sufficient resources, cash flow and liquidity within the United States to fund current and expected future working capital, investment and other general corporate funding requirements.

1 unchanged sentence

We also believe that our longer-term working capital, planned capital expenditures, anticipated stock repurchases, dividend payments and other general corporate funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities and future financial market activities.

Historically, we have renewed our accounts receivable securitization program and our U.S.

credit facility agreement described below on, or prior to, their respective expiration dates.

Historically, we have renewed our accounts receivable securitization program and our parent company credit facilities on, or prior to, their respective expiration dates.

We have no reason to believe that these and other arrangements will not be renewed or replaced as we continue to be in good credit standing with the participating financial institutions.

We have had similar borrowing arrangements with various financial institutions throughout our years as a public company.

On-Balance Sheet Arrangements

TD SYNNEX United States accounts receivable securitization agreement

In the United States, we have an accounts receivable securitization program to provide additional capital for our operations (the “U.S.

AR Arrangement”).

U nder the terms of the U.S.

AR Arrangement, which has a maturity date of May 2022, our subsidiary, which is the borrower under this facility, can borrow up to a maximum of $650.0 million based upon eligible trade accounts receivable.

In addition, the U.S.

AR Arrangement includes an accordion feature to allow requests for an increase in the lenders' commitment by an additional $150.0 million.

Under the terms of the U.S.

AR Arrangement, as amended in December 2021, we and our subsidiaries that are party to the U.S.

AR Arrangement can borrow up to a maximum of $1.5 billion based upon eligible trade accounts receivable.

AR Arrangement has a maturity date of December 2024.

The effective borrowing cost under the U.S.

AR Arrangement is a blended rate based upon the composition of the lenders that included prevailing dealer commercial paper rates and a rate based upon LIBOR.

In addition, a program fee of 1.25% per annum is payable on the used portion of the lenders’ commitment, in the case of lender groups who fund their advances based on prevailing commercial paper rates, and 1.30% per annum in the case of lender groups who fund their advances based on LIBOR (subject to a 0.50% per annum floor).

AR Arrangement is a blended rate based upon the composition of the lenders, that includes prevailing dealer commercial paper rates and a rate based upon LIBOR.

In addition, a program fee payable on the used portion of the lenders’ commitment, accrues at 0.75% per annum.

A facility fee is payable on the adjusted commitment of the lenders, to accrue at different tiers ranging between 0.30% per annum and 0.40% per annum depending on the amount of outstanding advances from time to time.

There was $749.0 million outstanding under the U.S.

AR Arrangement at February 28, 2022 at an interest rate of 1.18%.

There were no amounts outstanding under the U.S.

AR Arrangement at November 30, 2021.

Under the terms of the U.S.

AR Arrangement, we and two of our U.S.

subsidiaries sell, on a revolving basis, our receivables to a wholly-owned, bankruptcy-remote subsidiary.

AR Arrangement, we and certain of our U.S.

subsidiaries sell, on a revolving basis, our receivables (other than certain excluded receivables) to a wholly-owned, bankruptcy-remote subsidiary.

The borrowings are funded by pledging all of the rights, title and interest in the receivables acquired by our bankruptcy-remote subsidiary as security.

1 unchanged sentence

AR Arrangement are recorded as debt on our Consolidated Balance Sheets.

As of both August 31, 2021 and November 30, 2020, there were no borrowings outstanding under this facility.

In Canada, we have an accounts receivable securitization program with a bank to provide additional capital for operations.

Under the terms of this program , as renewed in March 2020 , SYNNEX Canada Limited (“SYNNEX Canada”) can borrow up to CAD 100.0 million , or $79.3 million , in exchange for the transfer of eligible trade accounts receivable, on an ongoing revolving basis through May 202 3 .

The program includes an accordion feature t hat allow s us to request an increase in the bank's commitment by an additional CAD 50.0 million , or $39.6 million .

Any amounts received under this arrangement are recorded as debt on our Consolidated Balance Sheets and are secured by pledging all of the rights, title and interest in the receivables to the bank.

We guarantee the performance obligations of SYNNEX Canada under this arrangement .

The effective borrowing cost is based on the weighted - average of the Canadian Dollar Offered Rate plus a margin of 1.00% per annum and the prevailing lender commercial paper rates.

In addition, prior to an event of termination, SYNNEX Canada is obligated to pay a program fee of 0.75% per annum based on the used portion of the commitment.

After an event of termination, the program fee shall be the sum of the base rate and 2.50% per annum, based on the used portion of the commitment .

SYNNEX Canada pays a fee of 0.40% per annum for any unused portion of the commitment up to CAD 60.0 million , or $47.6 million , and when the unused portion exceeds CAD 60.0 million , or $47.6 million , a fee of 0.55% per annum on the remaining unused commitment.

As of both August 31, 2021 and November 30, 2020 , there was no o utstanding balance under this arrangement.

SYNNEX Japan has a credit agreement with a group of banks for a maximum commitment of JPY15.0 billion or $136.4 million.

The credit agreement is comprised of a JPY5.0 billion, or $45.5 million, term loan and a JPY10.0 billion, or $90.9 million, revolving credit facility and expires in June 2026.

Prior to renewal in June 2021, SYNNEX Japan had a maximum commitment of JPY 15.0 billion, or $136.4 million, comprised of a JPY7.0 billion, or $63.6 million, term loan and a JPY8.0 billion, or $72.7 million, revolving credit facility.

The interest rate for the term loan and revolving credit facility is based on the Tokyo Interbank Offered Rate, plus a margin, which, prior to the Merger transaction was based on our consolidated leverage ratio, and after the Merger transaction is based on our credit rating.

Currently the margin over the Tokyo Interbank Offered Rate equals 0.80% per annum.

The unused line fee on the revolving credit facility is currently 0.125% per annum and prior to the Merger was based on our consolidated current leverage ratio, but is now also based on our credit ratings.

The term loan can be repaid at any time prior to the expiration date without penalty.

We have guaranteed the obligations of SYNNEX Japan under this facility.

As of August 31, 2021 and November 30, 2020, the balances outstanding under the term loan component of these facilities were $45.5 million and $67.1 million respectively.

As of August 31, 2021 and November 30, 2020, the balances outstanding under the revolving credit facility were $8.2 million and $31.6 million.

In the United States, we have a senior secured credit agreement (as amended, the "U.S.

Credit Agreement") with a group of financial institutions.

Credit Agreement includes a $600.0 million commitment for a revolving credit facility and a term loan in the original principal amount of $1.2 billion.

We can request incremental commitments to increase the principal amount of the revolving line of credit or term loan by $500.0 million, plus an additional amount which is dependent upon our pro forma first lien leverage ratio, as calculated under the U.S.

Credit Agreement.

Credit Agreement matures in September 2022.

The remaining outstanding principal of the term loan is payable on maturity.

Interest on borrowings under the U.S.

Credit Agreement can be based on LIBOR or a base rate at our option, plus a margin.

The margin for LIBOR loans ranges from 1.25% to 2.00% and the margin for base rate loans ranges from 0.25% to 1.00%, provided that LIBOR shall not be less than zero.

The base rate is a variable-rate which is the highest of (a) the Federal Funds Rate, plus a margin of 0.50%, (b) the rate of interest announced, from time to time, by the agent, Bank of America, N.A., as its “prime rate,” and (c) the Eurodollar Rate, plus 1.00%.

The unused revolving credit facility commitment fee ranges from 0.175% to 0.30% per annum.

The margins above the applicable interest rates and the revolving commitment fee for revolving loans are based on our consolidated leverage ratio, as calculated under the U.S.

Credit Agreement.

Our obligations under the U.S.

Credit Agreement are secured by substantially all of the parent company’s and its United States domestic subsidiaries’ assets on a pari passu basis with the interests of the lenders under the U.S.

Term Loan Credit Agreement (defined below) pursuant to an intercreditor agreement and are guaranteed by certain of our United States domestic subsidiaries.

As of both August 31, 2021 and November 30, 2020, the balance outstanding under the term loan component of the U.S.

Credit Agreement was $500.0 million.

There were no borrowings outstanding under the revolving line of credit under the U.S.

Credit Agreement as of both August 31, 2021 and November 30, 2020.

Credit Agreement was terminated on September 1, 2021 and all outstanding balances were repaid in full as part of the Merger transaction (see Note 17 – Subsequent Event to the Consolidated Financial Statements for further discussion).

We have a senior secured term loan credit agreement (the “U.S.

Term Loan Credit Agreement”) with a group of financial institutions, in the original principal amount of $1.8 billion.

Term Loan Credit Agreement matures in October 2023.

The remaining outstanding principal amount of the term loan is payable on maturity.

Interest on borrowings under the U.S.

Term Loan Credit Agreement can be based on LIBOR or a base rate at our option, plus a margin.

The margin for LIBOR loans ranges from 1.25% to 1.75% and the margin for base rate loan ranges from 0.25% to 0.75%, provided that LIBOR shall not be less than zero.

The base rate is a variable-rate which is the highest of (a) 0.5% plus the greater of (x) the Federal Funds Rate in effect on such day and (y) the overnight bank funding rate in effect on such day, (b) the Eurodollar Rate plus 1.0% per annum, and (c) the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S.

During the period in which the term loans were available to be drawn, we paid term loan commitment fees.

The margins above our applicable interest rates are, and the term loan commitment fee were, based on our consolidated leverage ratio as calculated under the U.S.

Term Loan Credit Agreement.

Our obligations under the U.S.

Term Loan Credit Agreement are secured by substantially all of the parent company and certain of its domestic subsidiaries’ assets on a pari passu basis with the interests of the lenders under the existing U.S.

Credit Agreement pursuant to an intercreditor agreement, and are guaranteed by certain of our domestic subsidiaries.

As of both August 31, 2021 and November 30, 2020, the balance outstanding under the U.S.

Term Loan Credit Agreement was $1.0 billion.

Term Loan Credit Agreement was terminated on September 1, 2021 and all outstanding balances were repaid in full as part of the Merger transaction (see Note 17 – Subsequent Event to the Consolidated Financial Statements for further discussion).

In connection with the Merger, we have entered into a credit agreement, dated as of April 16, 2021 (the “New Credit Agreement”) with the lenders party thereto and Citibank, N.A., as agent, pursuant to which we received commitments for the extension of a senior unsecured revolving credit facility not to exceed an aggregate principal amount of $3.5 billion, which revolving credit facility (the “new revolving credit

facility”) may, at our request but subject to the lenders’ discretion, potentially be increased by up to an aggregate amount of $500 million .

The New Credit Agreement also includes a senior unsecured term loan (the “new term loan” and, together with the new revolving credit facility, the “new credit facilities”) in an aggregate principal amount of $1 .

5 billion , which was fully funded in connection with the closing of the Merger .

The borrower under the new credit facilities is the Company.

There are no guarantors of the new credit facilities.

The maturity of the new credit facilities is on the fifth anniversary of the September 2021 closing date, which will occur in September 2026, subject in the case of the revolving credit facility, to two one-year extensions upon the Company’s prior notice to the lenders and the agreement of the lenders to extend such maturity date.

The outstanding principal amount of the new term loan is payable in quarterly installments in an amount equal to 1.25% of the original $1.5 billion principal balance, commencing on the last day of the first full fiscal quarter after the closing date of the new credit facilities, with the outstanding principal amount of the term loans due in full on the maturity date.

Loans borrowed under the New Credit Agreement bear interest, in the case of LIBOR (or successor) rate loans, at a per annum rate equal to the applicable LIBOR (or successor) rate, plus the applicable margin, which may range from 1.125% to 1.75%, based on the Company’s public debt rating (as defined in the New Credit Agreement).

TD SYNNEX credit agreement

The Company is party to a credit agreement, dated as of April 16, 2021 (the “TD SYNNEX Credit Agreement”) with the lenders party thereto and Citibank, N.A., as agent, pursuant to which we received commitments for the extension of a senior unsecured revolving credit facility not to exceed an aggregate principal amount of $3.5 billion, which revolving credit facility (the “TD SYNNEX revolving credit facility”) may, at our request but subject to the lenders’ discretion, potentially be increased by up to an aggregate amount of $500 million.

There were no amounts outstanding under the TD SYNNEX revolving credit facility at February 28, 2022 or November 30, 2021.

The TD SYNNEX Credit Agreement also includes a fully funded senior unsecured term loan (the “TD SYNNEX term loan” and, together with the TD SYNNEX revolving credit facility, the “TD SYNNEX credit facilities”) that had an original aggregate principal amount of $1.5 billion and has begun amortizing as described below.

The borrower under the TD SYNNEX credit facilities is the Company.

There are no guarantors of the TD SYNNEX credit facilities.

The maturity of the TD SYNNEX credit facilities is on the fifth anniversary of the September 2021 closing date, to occur in September 2026, subject in the case of the revolving credit facility, to two one-year extensions upon our prior notice to the lenders and the agreement of the lenders to extend such maturity date.

The outstanding principal amount of the TD SYNNEX term loan is payable in quarterly installments in an amount equal to 1.25% of the original $1.5 billion principal balance, with the outstanding principal amount of the term loans due in full on the maturity date.

Loans borrowed under the TD SYNNEX Credit Agreement bear interest, in the case of LIBOR (or successor) rate loans, at a per annum rate equal to the applicable LIBOR (or successor) rate, plus the applicable margin, which may range from 1.125% to 1.75%, based on our public debt rating (as defined in the TD SYNNEX Credit Agreement).

The applicable margin on base rate loans is 1.00% less than the corresponding margin on LIBOR (or successor rate) based loans.

In addition to these borrowing rates, there is a commitment fee which ranges from 0.125% to 0.300% on any unused commitment under the new revolving credit facility based on the Company’s public debt rating.

The New Credit Agreement contains various loan covenants that are customary for similar facilities for similarly rated borrowers that will restrict the ability of the Company and its subsidiaries to take certain actions.

The New Credit Agreement also contains financial covenants which require compliance with a maximum debt to EBITDA ratio and a minimum interest coverage ratio, in each case tested on the last day of each fiscal quarter commencing with the first full fiscal quarter to occur after the closing date of the new credit facilities.

The New Credit Agreement also contains various customary events of default, including with respect to a change of control of the Company.

See Note 17 – Subsequent Event to the Consolidated Financial Statements for further discussion regarding borrowings under the New Credit Agreement in conjunction with the Merger.

On March 22, 2021, we had entered into a debt commitment letter (the “Commitment Letter”), under which Citigroup Global Markets Inc.

and certain other financing institutions joining thereto pursuant to the terms thereof committed to provide (i) a $1.5 billion senior unsecured term bridge facility (the "Term Loan A Bridge Facility"), (ii) a $2.5 billion senior unsecured term bridge facility (the “Bridge Facility”) and (iii) a $3.5 billion senior unsecured revolving bridge facility (the "Bridge Revolving Facility"), subject to the satisfaction of certain customary closing conditions.

On April 16, 2021, (i) the $1.5 billion commitment with respect to the Term Loan A Bridge Facility under the Commitment Letter and (ii) the $3.5 billion commitment with respect to the Bridge Revolving Facility under the Commitment Letter were reduced to zero, in each case, as a result of us entering into the New Credit Agreement;

and on August 9, 2021 the Bridge Facility was reduced to zero as a result of the issuance of the Notes described below.

On August 9, 2021, SYNNEX completed its offering of $2.5 billion aggregate principal amount of senior unsecured notes, consisting of $700.0 million of 1.25% senior notes due 2024, $700.0 million of 1.75% senior notes due 2026, $600.0 million of 2.375% senior notes due 2028, and $500.0 million of 2.65% senior notes due 2031 (collectively, the “Notes,” and such offering, the “Notes Offering”).

SYNNEX incurred $27 million towards issuance costs.

SYNNEX will pay interest semi-annually on the notes on each of February 9 and August 9, beginning February 9, 2022.

The net proceeds from this offering were used to fund a portion of the aggregate cash consideration payable in connection with the Merger, refinance certain of SYNNEX’ and Tech Data’s existing indebtedness and pay related fees and expenses (see Note 17 – Subsequent Event to the Consolidated Financial Statements for further discussion).

SYNNEX expects to use any remaining net proceeds from the Notes Offering for general corporate purposes.

SYNNEX Canada has an uncommitted revolving line of credit with a bank under which it can borrow up to CAD50.0 million, or $39.6 million.

Borrowings under the facility are secured by eligible inventory and bear interest at a base rate plus a margin ranging from 0.50% to 2.25% depending on the base rate used.

The base rate could be a Banker's Acceptance Rate, a Canadian Prime Rate, LIBOR or U.S.

As of both August 31, 2021 and November 30, 2020, there were no borrowings outstanding under this credit facility.

Other borrowings and term debt include lines of credit with financial institutions at certain locations outside the United States, factoring of accounts receivable with recourse provisions, finance leases, a building mortgage and book overdrafts.

In addition to these borrowing rates, there is a commitment fee that ranges from 0.125% to 0.300% on any unused commitment under the TD SYNNEX revolving credit facility based on our public debt rating.

effective interest rate for the TD SYNNEX term loan was 1.59% and 1.49% as of February 28, 2022 and November 30, 2021, respectively.

The TD SYNNEX Credit Agreement contains various loan covenants that are customary for similar facilities for similarly rated borrowers that restrict our ability to take certain actions.

The TD SYNNEX Credit Agreement also contains financial covenants that require compliance with a maximum debt to EBITDA ratio and a minimum interest coverage ratio, in each case tested on the last day of each fiscal quarter commencing with the first full fiscal quarter to occur after the closing date of the TD SYNNEX credit facilities.

The TD SYNNEX Credit Agreement also contains various customary events of default, including with respect to a change of control of the Company.

TD SYNNEX Senior Notes

On August 9, 2021, we completed our offering of $2.5 billion aggregate principal amount of senior unsecured notes, consisting of $700.0 million of 1.25% senior notes due 2024, $700.0 million of 1.75% senior notes due 2026, $600.0 million of 2.375% senior notes due 2028, and $500.0 million of 2.65% senior notes due 2031 (collectively, the “Senior Notes,” and such offering, the “Senior Notes Offering”).

We incurred $19.6 million towards issuance costs for the Senior Notes.

We pay interest semi-annually on the notes on each of February 9 and August 9.

The net proceeds from this offering were used to fund a portion of the aggregate cash consideration payable in connection with the Merger, refinance certain of our existing indebtedness and pay related fees and expenses and for general corporate purposes.

The interest rate payable on each series of the Senior Notes will be subject to adjustment from time to time if the credit rating assigned to such series of Senior Notes is downgraded (or downgraded and subsequently upgraded).

We may redeem the Senior Notes, at any time in whole or from time to time in part, prior to (i) August 9, 2022 (the “2024 Par Call Date”) in the case of the 2024 Senior Notes, (ii) July 9, 2026 (the “2026 Par Call Date”) in the case of the 2026 Senior Notes, (iii) June 9, 2028 (the “2028 Par Call Date”) in the case of the 2028 Senior Notes, and (iv) May 9, 2031 in the case of the 2031 Senior Notes (the “2031 Par Call Date” and, together with the 2024 Par Call Date, the 2026 Par Call Date and the 2028 Par Call Date, each, a “Par Call Date” and together, the “Par Call Dates”), at a redemption price equal to the greater of (x) 100% of the aggregate principal amount of the applicable Senior Notes to be redeemed and (y) the sum of the present values of the remaining scheduled payments of the principal and interest on the Senior Notes, discounted to the date of redemption on a semi-annual basis at a rate equal to the sum of the applicable treasury rate plus 15 basis points for the 2024 Senior Notes, 20 basis points for the 2026 Senior Notes and 25 basis points for the 2028 Senior Notes and 2031 Senior Notes, plus in each case, accrued and unpaid interest thereon to, but excluding, the redemption date.

We may also redeem the Senior Notes of any series at our option, at any time in whole or from time to time in part, on or after the applicable Par Call Date, at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed.

Other borrowings and term debt

The Company has various other committed and uncommitted lines of credit with financial institutions, accounts receivable securitization arrangements, factoring of accounts receivable with recourse provisions, finance leases, short-term loans, term loans, credit facilities and book overdraft facilities, totaling approximately $618.8 million as of February 28, 2022.

Interest rates and other terms of borrowing under these lines of credit vary by country, depending on local market conditions.

Borrowings under these facilities are generally guaranteed by us or secured by eligible accounts receivable.

As of August 31, 2021 and November 30, 2020, the balances outstanding under these revolving credit facilities were $0.6 million and $25.8 million, respectively.

The maximum commitment amounts for local currency credit facilities have been translated into United States Dollars at August 31, 2021 exchange rates.

Off-Balance Sheet Arrangements

We have financing programs in the United States and Japan under which trade accounts receivable of certain customers may be sold to financial institutions.

There was $287.4 million outstanding on these facilities at February 28, 2022, at a weighted average interest rate of 2.98%, and there was $106.3 million outstanding at November 30, 2021, at a weighted average interest rate of 4.59%.

Borrowings under certain of these lines of credit facilities are guaranteed by the Company or secured by eligible accounts receivable.

At February 28, 2022, we were also contingently liable for reimbursement obligations with respect to issued standby letters of credit in the aggregate outstanding amount of $102.0 million.

These letters of credit typically act as a guarantee of payment to certain third parties in accordance with specified terms and conditions.

The maximum commitment amounts for local currency credit facilities have been translated into United States Dollars at February 28, 2022 exchange rates.

Accounts Receivable Purchase Agreements

We have uncommitted supply-chain financing programs with global financial institutions under which trade accounts receivable owed by certain customers may be acquired, without recourse, by the financial institutions.

Available capacity under these programs is dependent upon the level of our trade accounts receivable eligible to be sold into these programs and the financial institutions’ willingness to purchase such receivables.

At August 31, 2021 and November 30, 2020, we had a total of $48.7 million and $21.4 million, respectively, of trade accounts receivable sold to and held by the financial institutions under these programs.

In addition, certain of these programs also require that we continue to service, administer and collect the sold accounts receivable.

At February 28, 2022 and November 30, 2021, we had a total of $966.0 million and $759.9 million, respectively, of trade accounts receivable sold to

and held by the financial institutions under these programs.

Discount fees for these programs in the three months ended February 28, 2022 and February 28, 2021 tota led $3.0 million an d $0.6 million, r espectively.

Covenant Compliance

Our credit facilities have a number of covenants and restrictions that, among other things, require us to maintain specified financial ratios and satisfy certain financial condition tests.

They also limit our ability to incur additional debt, make intercompany loans, pay dividends and make other types of distributions, make certain acquisitions, repurchase our stock, create liens, cancel debt owed to us, enter into agreements with affiliates, modify the nature of our business, enter into sale-leaseback transactions, make certain investments, enter into new real estate leases, transfer and sell assets, cancel or terminate any material contracts and merge or consolidate.

As of August 31, 2021, we were in compliance with all material covenants for the above arrangements, and we do not believe we are at material risk of not meeting such covenants.

Contractual Obligations

Our contractual obligations consist of future payments due under our loans, payments for our operating lease commitments and repatriation tax under the Tax Cuts and Jobs Act (“the TCJA”) which are already recorded on our Consolidated Balance Sheet.

In addition, our contractual obligations include interest on our debt.

The following table summarizes our contractual obligations as at August 31, 2021 (prepared on a fiscal year basis with the remaining three months of fiscal 2021 representing the less than 1 year obligations):

Payments Due by Period

(in thousands)

Contractual Obligations:

Principal debt payments

Interest on debt

Repatriation tax under the TCJA

Non-cancellable operating leases

Interest on debt, in the table above, includes estimated interest on our term loans at rates of interest applicable at the end of our fiscal period.

We are contingently liable under agreements, without expiration dates, to repurchase repossessed inventory acquired by flooring companies as a result of default on floor plan financing arrangements by our customers.

There have been no repurchases through August 31, 2021 under these agreements and we are not aware of any pending customer defaults or repossession obligations.

As we do not have access to information regarding the amount of inventory purchased from us still on hand with the customer at any point in time, our repurchase obligations relating to inventory cannot be reasonably estimated.

As of August 31, 2021, and November 30, 2020, accounts receivable subject to flooring arrangements were $42.1 million and $49.5 million, respectively.

For more information on our third-party revolving short-term financing arrangements, see Note 8 - Accounts Receivable Arrangements to the Consolidated Financial Statements included in Item 1 of Part I of this Report.

As of August 31, 2021, we have established a reserve of $11.6 million for unrecognized tax benefits.

As we are unable to reasonably predict the timing of settlement of these guarantees and the reserve for unrecognized tax benefits, the table above excludes such liabilities.

In addition, refer to Note 17 - Subsequent Event to the Consolidated Financial Statements for contractual obligations under the New Credit Agreement entered into in connection with our acquisition of Tech Data.

Our credit facilities have a number of covenants and restrictions that require us to maintain specified financial ratios.

They also limit our ability to incur additional debt, create liens, enter into agreements with affiliates, modify the nature of our business, and merge or consolida te.

As of February 28, 2022, we were in compliance with all current and material covenants for the above arrangements.

Related Party Transactions

We have a business relationship with MiTAC Holdings, a publicly-traded company in Taiwan, which began in 1992 when MiTAC Holdings became our primary investor through its affiliates.

As of both August 31, 2021 and November 30, 2020, MiTAC Holdings and its affiliates beneficially owned approximately 18% of our outstanding common stock.

We have a business relationship with MiTAC Holdings Corporation ("MiTAC Holdings"), a publicly-traded company in Taiwan, which began in 1992 when MiTAC Holdings became our primary investor through its affiliates.

As of both February 28, 2022 and November 30, 2021, MiTAC Holdings and its affiliates beneficially owned approximately 9.5% of our outstanding common stock.

Matthew Miau, the Chairman Emeritus of our Board of Directors and a director, is the Chairman of MiTAC Holdings' and a director or officer of MiTAC Holdings' affiliates.

The shares owned by MiTAC Holdings are held by the following entities:

As of August 31, 2021

As of February 28, 2022

(in thousands)

1 unchanged sentence

Synnex Technology International Corp.

_______________

(1) Shares are held via Silver Star Developments Ltd., a wholly-owned subsidiary of MiTAC Holdings.

8 unchanged sentences

Miau is affiliated with any person(s), entity, or entities that hold a majority interest in MiTAC Incorporated.

MiTAC Holdings generally has influence over us regarding matters submitted to stockholders for consideration, including any merger or acquisition of ours.

Among other things, this could have the effect of delaying, deterring or preventing a change of control over the Company.

We purchased inventories and services from MiTAC Holdings and its affiliates totaling $46.4 million and $136.2 million during the three and nine months ended August 31, 2021, respectively and totaling $53.4 million and $151.9 million during the three and nine months ended August 31, 2020, respectively.

Our sales to MiTAC Holdings and its affiliates totaled $0.1 million and $0.5 million during the three and nine months ended August 31, 2021, respectively, and totaled $0.2 million and $0.7 million during the three and nine months ended August 31, 2020, respectively.

In addition, we paid for reimbursement of rent and overhead costs for the use of facilities of MiTAC Holdings and its affiliates amounting to $38 thousand and $118 thousand during the three and nine months ended August 31, 2021, respectively, and $27 thousand and $91 thousand during the three and nine months ended August 31, 2020, respectively.

As of August 31, 2021 and November 30, 2020, our payables to MiTAC Holdings and its affiliates were $24.1 million and $49.6 million, respectively.

As of August 31, 2021 and November 30, 2020, our receivables from MiTAC Holdings and its affiliates were $11.0 million and $26.1 million, respectively.

Our business relationship with MiTAC Holdings and its affiliates has been informal and is generally not governed by long-term commitments or arrangements with respect to pricing terms, revenue or capacity commitments.

We negotiate pricing and other material terms on a case-by-case basis with MiTAC Holdings.

We have adopted a policy requiring that material transactions with MiTAC Holdings or its related parties be approved by our Audit Committee, which is composed solely of independent directors.

In addition, Mr.

Miau’s compensation is approved by the Nominating and Corporate Governance Committee, which is also composed solely of independent directors.

Synnex Technology International is a publicly-traded corporation in Taiwan that currently provides distribution and fulfillment services to various markets in Asia and Australia, and is also our potential competitor.

MiTAC Holdings and its affiliates are not restricted from competing with us.

The following table presents the Company's transactions with MiTAC Holdings and its affiliates for the periods indicated:

Three Months Ended

February 28, 2022 February 28, 2021

(in thousands)

Purchases of inventories and services $ 46,576 $ 41,157

Sale of products to MiTAC Holdings and affiliates 60 218

Payments made for rent and overhead costs

for use of facilities of MiTAC Holdings and affiliates, net 36 32

The following table presents the Company’s receivable from and payable to MiTAC Holdings and its affiliates for the periods presented:

February 28, 2022 November 30, 2021

(in thousands)

Receivable from related parties (included in Accounts receivable, net) $ 40,197 $ 21,841

Payable to related parties (included in Accounts payable) 35,825 32,802

Recently Issued Accounting Pronouncements

For a summary of recent accounting pronouncements and the anticipated effects on our Consolidated Financial Statements, see Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements.

For a summary of recent accounting pronouncements and the anticipated effects on our consolidated financial statements, see Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements, which can be found under Item 1 of this Report.

Quantitative and Qualitative Disclosures about Market Risk

For a description of the Company’s market risks, see “Part II, Item 7A.

Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended November 30, 2021.

No material changes have occurred in our market risks since November 30, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis