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Item 1A. Risk Factors

2023-01-24 compared with 2022-01-28 · 88 added, 111 removed, 388 unchanged (34% of the section changed)

The following discussion is divided into several sections.

The first section, which begins immediately following this paragraph, discusses some of the risks that may affect our business, results of operations and financial condition.

The first section, which begins immediately following this paragraph, captioned "Risks Related to Our Business and Operations" discusses some of the risks that may affect our business, results of operations and financial condition.

The second section, captioned “Risks Related to Our Indebtedness” discusses our debt-related risks.

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The fourth section, captioned “Risks Related to our Industry,” discusses risks impacting businesses operating in our industry.

The fifth section, captioned “Risks Related to the Acquisition of Tech Data” relates to risks associated with the Merger.

The sixth section, captioned “Risks Related to the Macro-Economic and Regulatory Environment,” relates to risks which broadly affect companies operating in regions in which we operate.

The fifth section, captioned “Risks Related to the Macro-Economic and Regulatory Environment,” relates to risks which broadly affect companies operating in regions in which we operate.

You should carefully review all of these sections, as well as our consolidated financial statements and notes thereto and the other information appearing in this report, for important information regarding risks that affect us.

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• the impact of the business acquisitions and dispositions we make;

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• general economic conditions and level of IT spending;

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Our operating results are affected by the seasonality of the IT products and services industry.

We have historically experienced higher sales in our fourth fiscal quarter due to patterns in the capital budgeting, federal government spending and purchasing cycles of end-users.

These historical patterns may not be repeated in subsequent periods and may be impacted by the Merger.

We have historically experienced slightly higher sales in our first and fourth fiscal quarters due to patterns in the capital budgeting, federal government spending and purchasing cycles of our customers and end-users.

These historical patterns may not be repeated in subsequent periods.

You should not rely on period-to-period comparisons of our operating results as an indication of future performance.

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For example, sales of HP Inc.

products and services comprised approximately 12%, 15% and 14% of our total revenue for fiscal years 2021, 2020 and 2019, respectively.

products and services comprised approximately 10%, 12% and 15% of our total revenue for fiscal years 2022, 2021 and 2020, respectively, and sales of Apple Inc.

products and services comprised approximately 11% of our total revenue for fiscal year 2022.

Our OEM supplier agreements typically are short-term and may be terminated without cause upon short notice.

OEM supplier agreements are often established at a regional or country level and these relationships may change in some countries or regions and not others.

The loss or deterioration of our relationship with HP Inc.

The loss or deterioration of our relationship with HP Inc., Apple Inc.

or any other major OEM supplier, the authorization by OEM suppliers of additional distributors, the sale of products by OEM suppliers directly to our reseller and retail customers and end-users, or our failure to establish relationships with new OEM suppliers or to expand the distribution and supply chain services that we provide OEM suppliers could adversely affect our business, financial position and operating results.

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Generally, each OEM supplier has the ability to change the terms and conditions of its distribution agreements, such as reducing the amount of price protection and return rights or reducing the level of purchase discounts, incentive rebates, scope of the geographic area in which we can sell and marketing programs available to us.

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Additionally, significant changes in vendor payment terms or payment arrangements could negatively impact our liquidity and financial condition.

From time to time we may conduct business with a supplier without a formal agreement because the agreement has expired or was otherwise terminated.

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These low gross margins magnify the impact of variations in revenue and operating costs on our operating results.

A portion of our operating expense is relatively fixed, and planned expenditures are based in part on anticipated orders that are forecasted with limited visibility of future demand.

As a result, we may not be able to reduce our operating expense to sufficiently mitigate any further reductions in gross profit or margin in the future.

A portion of our operating expenses are relatively fixed, and planned expenditures are based in part on anticipated orders that are forecasted with limited visibility of future demand.

As a result, we may not be able to reduce our operating expenses to sufficiently mitigate any further reductions in gross profit or margin in the future.

If we cannot proportionately decrease our cost structure in response to competitive price pressures, our business and operating results could suffer.

We also receive purchase discounts and rebates from OEM suppliers based on various factors, including sales or purchase volume and breadth of customers.

A decrease in net sales could negatively affect the level of volume rebates received from our OEM suppliers and thus, our gross margin.

Because some rebates from OEM suppliers are based on percentage increases in sales of products, it may become more difficult for us to achieve the percentage growth in sales required for larger discounts due to the current size of our revenue base.

A decrease in revenue could negatively affect the level of volume rebates received from our OEM suppliers and thus, our gross margin.

Because some rebates from OEM suppliers are based on percentage increases in sales of products, it may become more difficult for us to achieve the percentage growth in sales

required for larger discounts due to the current size of our revenue base.

A decrease or elimination of purchase discounts and rebates from our OEM suppliers would adversely affect our business and operating results.

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In most cases, we have no guaranteed price or delivery agreements with our OEM suppliers.

We have experienced a supply shortage of certain products as a result of strong demand or problems experienced by our OEM suppliers, including during fiscal year 2020 and 2021 due to global supply chain constraints resulting from the impacts of the COVID-19 pandemic.

We have experienced a supply shortage of certain products as a result of strong demand or problems experienced by our OEM suppliers, including during fiscal years 2022, 2021 and 2020 due to global supply chain constraints.

If shortages or delays persist, the price of those products may increase, or the products may not be available at all.

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One customer accounted for 10%, 17% and 23% of our total revenue in fiscal years 2022, 2021 and 2020.

While we do not believe that the loss of any single customer would have a material adverse effect on us, such loss could result in an adverse impact on certain of our businesses.

The loss of one of our significant customers could result in an adverse impact on our business.

For example, our systems design and integration solutions product line has significant customer concentration, requires investments in working capital and infrastructure, and has customer contracts that often offer limited or no volume guarantees or protection for end-of-life investments.

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Any delay could impact our competitive position and result in loss of customer orders, which could impact our financial position and operating results.

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We have pursued and intend to continue to pursue strategic acquisitions or investments in new markets and may encounter risks associated with these activities, which could harm our business and operating results.

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• risk that the acquired businesses will fail to maintain the quality of services that we have historically provided;

loss of key employees of acquired operations or inability to hire key employees necessary for our expansion;

• loss of key co-workers of acquired operations or inability to hire key co-workers necessary for our expansion;

• diversion of our capital and management attention away from other business issues;

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Our recent and future acquisitions or investments may not be successful, and if we fail to realize the anticipated benefits of these acquisitions or investments, our business and operating results could be harmed.

We have incurred and will continue to incur significant acquisition and integration-related costs in connection with the Merger.

We have incurred a number of non-recurring costs associated with the Merger and combining the operations of Tech Data and SYNNEX, including professional services costs, personnel and other costs, long-lived assets charges and stock-based compensation expense.

We continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred related to the Merger and the integration of Tech Data and SYNNEX.

Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.

Our goodwill and identifiable intangible assets could become impaired, which could have a material non-cash adverse effect on our results of operations.

We recorded substantial goodwill and both definite and indefinite-lived intangible assets as a result of our previous acquisitions, including the Merger.

We recorded substantial goodwill and both finite and indefinite-lived intangible assets as a result of our previous acquisitions, including the Merger.

We review our goodwill and intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

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Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or intangible assets may not be recoverable include declines in stock price, market capitalization or cash flows and slower growth rates in our industry.

Our annual goodwill impairment testing indicated no goodwill impairments for any of the years presented.

As of November 30, 2022, the Europe and APJ reporting units' goodwill balances are $1.3 billion and $74.8 million, respectively, and the fair value of the reporting unit exceeded its carrying value by 6% and 9% as of the annual goodwill impairment testing date, respectively.

If actual results in our Europe or APJ reporting units are substantially lower than the projections used in our valuation methodology, or if market discount rates substantially increase or our market capitalization substantially decreases, then our future valuations could be adversely affected.

We could be required to record a significant charge to earnings in our financial statements during the period in which any impairment of our goodwill or intangible assets is determined, negatively impacting our results of operations.

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Our business requires significant levels of capital to finance accounts receivable and product inventory that is not financed by trade creditors.

If cash from available sources is insufficient, proceeds from our accounts receivable securitization and revolving credit programs are limited or cash is used for unanticipated needs, we may require additional capital sooner than anticipated.

If cash from available sources is insufficient, proceeds from our accounts receivable

securitization and revolving credit programs are limited or cash is used for unanticipated needs, we may require additional capital sooner than anticipated.

In the event we are required, or elect, to raise additional funds, we may be unable to do so on favorable terms, or at all, and may incur expenses in raising the additional funds.

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Any inability to raise additional capital when required could have an adverse effect on our business and operating results.

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We have significant credit exposure to our customers, and negative trends in their businesses could cause us significant credit loss and negatively impact our cash flow and liquidity position.

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Our credit exposure risk may increase due to financial difficulties or liquidity or solvency issues experienced by our customers, resulting in their inability to repay us.

The liquidity or solvency issues may increase as a result of an economic downturn or a decrease in IT spending by end-users.

The liquidity or solvency issues may increase as a result of an economic downturn, increases in costs including due to inflation or higher interest rates, or a decrease in IT spending by end-users.

If we are unable to collect payments in a timely manner from our customers due to changes in financial or economic conditions, or for other reasons, and we are unable to collect under our credit insurance policies, we may write-off the amount due from the customers.

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We are dependent in large part on our ability to retain the services of our key senior executives and other technological and industry experts and personnel.

Except for certain of our key executives, we generally do not have employment agreements with our employees.

We also do not carry “key person” insurance coverage for any of our key executives.

Except for certain of our key executives, we generally do not have employment agreements with our co-workers.

We also do not carry “key person” insurance coverage for any of our key

We compete for qualified senior management and technical personnel.

The loss of, or inability to hire, key executives or qualified employees could inhibit our ability to operate and grow our business successfully.

The loss of, or inability to hire, key executives or qualified co-workers could inhibit our ability to operate and grow our business successfully.

We may experience theft of product from our warehouses, water damage to our properties and other casualty events which could harm our operating results.

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Although we generally have various levels of indemnification protection from our OEM suppliers and design and integration solutions customers, in many cases any indemnification to which we may be entitled is subject to maximum limits or other restrictions.

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In addition, we have developed proprietary IT systems, mobile applications, and cloud-based technology and acquired technologies that play an important role in our business.

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We may be unable to obtain such a license on commercially reasonable terms, if at all.

We are from time to time involved in other litigation in the ordinary course of business which have and may include claims with respect to antitrust, mergers and acquisitions and other matters.

For example, four lawsuits were brought against the Company and its Board in connection with the Merger, each of which was later voluntarily dismissed .

We are from time to time involved in other litigation in the ordinary course of business which has and may include claims with respect to antitrust, mergers and acquisitions and other matters.

In the ordinary course of business, we also receive inquiries from and have discussions with government entities regarding the compliance of our contracting and sales practices with laws and regulations.

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Floor plan financing companies are engaged by our customers to finance, or floor, the purchase of products from us.

In exchange for a fee, we transfer the risk of loss on the sale of our products to the floor plan companies.

In exchange for a fee that is either subsidized by our OEM suppliers or paid by us, we transfer the risk of loss on the sale of our products to the floor plan companies.

We currently receive payment from these financing companies within approximately 15 to 30 days from the date of the sale, which allows our business to operate at much lower relative working capital levels than if such programs were not available.

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The terms of our debt arrangements impose restrictions on our ability to operate which in turn could negatively affect our ability to respond to business and market conditions and therefore could have an adverse effect on our business and operating results.

As of November 30, 2021, we had $4.1 billion in outstanding short and long-term borrowings under term loans, our Senior Notes (as defined below), lines of credit, accounts receivable securitization programs and capital leases, excluding trade payables.

The terms of one or more of the agreements under which this indebtedness was incurred may limit or restrict, among other things, our ability to:

incur additional indebtedness;

As of November 30, 2022 , we had $4.1 billion in outstanding short and long-term borrowings under term loans, our Senior Notes, lines of credit, accounts receivable securitization programs and finance leases, excluding trade payables.

The terms of one or more of the agreements under which this indebtedness was incurred may limit or restrict, among other things, our (or our subsidiaries', as applicable) ability to:

• incur additional indebtedness or liens;

• enter into certain transactions with affiliates;

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We are also required to maintain specified financial ratios and satisfy certain financial condition tests under certain of our debt facilities.

Our inability to meet these ratios and tests could result in the acceleration of the repayment of the related debt, termination of the applicable facility, an increase in our effective cost of funds or the cross-default of other debt facilities and securitization

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arrangements.

As a result, our ability to operate may be restricted and our ability to respond to business and market conditions may be limited, which could have an adverse effect on our business and operating results.

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If new debt is added to our current debt levels, the related risks that we now face could intensify.

Although the TD SYNNEX credit facilities (as defined below) contain restrictions on the incurrence of additional indebtedness by our subsidiaries, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.

Although the TD SYNNEX Credit Agreement (as defined below) contains restrictions on the incurrence of additional indebtedness by our subsidiaries, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial.

Changes in our credit rating may increase our interest expense or other costs of capital.

Certain of our financing instruments involve variable rate debt, thus exposing us to the risk of fluctuations in interest rates.

In addition, the interest rate payable on our Senior Notes (as defined below), our revolving and term loan credit agreement and certain other debt instruments is subject to adjustment from time to time if our credit rating is downgraded.

In addition, the interest rate payable on our Senior Notes, our revolving and term loan credit agreement and certain other debt instruments is subject to adjustment from time to time if our credit rating is downgraded.

The expected replacement of the LIBOR benchmark interest rate and other interbank offered rates with new benchmark rate indices may have an impact on our financing costs.

As of November 30, 2021, we had approximately $1.5 billion of debt outstanding under facilities with interest rates based on LIBOR.

Some of our credit facilities include fallback language that seeks to facilitate an agreement with our lenders on a replacement rate for LIBOR in the event of its discontinuance or that automatically replaces LIBOR with benchmark rates based on the Secured Overnight Financing Rate or other benchmark replacement rates upon certain triggering events.

We cannot predict what the impact of any such replacement rate would be to our interest expense, however, the discontinuation, reform, or replacement of LIBOR or any other benchmark rates may result in fluctuating interest rates that may have a negative impact on our interest expense and our profitability.

As of November 30, 2022, we had approxim ately $1.4 billion of term loan debt outstanding und er facilities with interest rates based on LIBOR.

Some of our credit facilities include fallback language that seeks to facilitate an agreement with our lenders on a replacement rate for LIBOR in the event of its discontinuance or that automatically replaces LIBOR with benchmark rates based on the Secured Overnight Financing Rate ("SOFR") or other benchmark replacement rates upon certain triggering events.

The discontinuation, reform, or replacement of LIBOR or any other benchmark rates may result in fluctuating interest rates that may have a negative impact on our interest expense and our profitability.

Potential changes to the underlying floating-rate indices and reference rates may have an adverse impact on our liabilities indexed to LIBOR and could have a negative impact on our profitability and cash flows.

Furthermore, we cannot predict or quantify the time, effort and cost required to transition to the use of new benchmark rates, including with respect to negotiating and implementing any necessary changes to existing contractual agreements, and implementing changes to our systems and processes.

We continue to evaluate the operational and other effects of such changes, including possible impacts on our accounting for interest rate hedging agreements.

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Our variable rate indebtedness subjects us to interest rate risk, which could cause our indebtedness service obligations to increase significantly.

Interest rates may increase in the future.

As a result, interest rates on the obligations under certain of our credit facilities, our and our subsidiaries’ respective accounts receivable securitization programs and debt facilities, or other variable rate debt incurrences or offerings could be higher or lower than current levels.

As of November 30, 2021, we had approximately $1.5 billion of outstanding term loan debt subject to variable interest rates and our subsidiaries had approximately $178.5 million in the aggregate outstanding under debt facilities subject to variable interest rates.

If interest rates increase, debt service obligations and our interest expense will increase even though the amount borrowed remains the same.

Our net income and cash flows, including cash available for servicing indebtedness, will correspondingly decrease.

Certain of our borrowings and securitization arrangements are variable-rate obligations and expose us to interest rate risks.

Interest rates in the United States and other countries where we operate increased during fiscal year 2022 and may continue to increase in the future.

If interest rates increase, debt service obligations and our interest expense will increase even though the amount borrowed remains the same.

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An increase in interest rates may increase our future borrowing costs and restrict our access to capital.

Additionally, current market conditions, the recovering global economy, and overall credit conditions could limit our availability of capital, which could cause increases in interest margin spreads over underlying indices, effectively increasing the cost of our borrowing.

Additionally, current market conditions, the global economy, and overall credit conditions could limit our availability of capital, which could cause increases in interest margin spreads over underlying indices, effectively increasing the cost of our borrowing.

While some of our debt arrangements have contractually negotiated spreads, any changes to these spreads in connection with renegotiations of our credit facilities could adversely affect our results of operations.

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(“Apollo”) and its affiliates owned approximately 45% of our common stock.

Apollo is the private equity company that owned Tech Data prior to the Merger.

A s part of the Merger, 44 million shares of TD SYNNEX common stock were issued to Apollo.

Apollo is the private equity company that through its affiliates owned Tech Data prior to the Merger.

As part of the Merger, 44 million shares of TD SYNNEX common stock were issued to Apollo.

Additionally, the Company entered into an Investor Rights Agreement at the closing of the Merger, which provides that the board of directors be comprised of eleven directors, and that affiliates of Apollo have the right to nominate (i) up to four directors, if Apollo and its affiliates own 30% or more of the outstanding shares of TD SYNNEX common stock;

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MiTAC Holdings’ and its affiliates’ continuing beneficial ownership of our common stock could create conflicts of interest with respect to a variety of business matters.

For example, we currently purchase inventories from MiTAC Holdings.

For example, we currently purchase inventories from MiTAC Holdings and its affiliates.

Similar risks could exist as a result of Matthew Miau’s positions as our Chairman Emeritus, a member of our Board of Directors, the Chairman of MiTAC Holdings and as a director or officer of MiTAC Holdings’ affiliates.

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Miau received the same compensation as our independent directors.

Miau’s compensation as one of our d irectors is based upon the approval of the Nominating and Corporate Governance Committee, which is solely composed of independent members of the Board of Directors.

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also have adopted a policy requiring material transactions in which any of our directors has a potential conflict of interest to be approved by our Audit Committee, which is also composed of independent members of the Board of Directors.

Miau’s compensation as one of our directors is based upon the approval of the Nominating and Corporate Governance Committee, which is solely composed of independent members of the Board of Directors.

We also have adopted a policy requiring material transactions in which any of our directors has a potential conflict of interest to be approved by our Audit Committee, which is also composed of independent members of the Board of Directors.

Synnex Technology International Corp., or Synnex Technology International, a publicly-traded company based in Taiwan and affiliated with MiTAC Holdings, currently provides distribution and fulfillment services to various markets in Asia and Australia, and is also a competitor of ours.

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We have granted registration rights to Apollo pursuant to an Investors Rights Agreement dated September 1, 2021, and to MiTAC Holdings pursuant to a Letter Agreement dated September 3, 2021, that require us to register their shares for resale in certain circumstances.

Sales of a substantial number of shares of the Company’s common stock in the public market, or the perception that these sales may occur, could cause the market price of our common stock to decline.

Sales of a substantial number of shares of the Company’s common stock in the

public market, or the perception that these sales may occur, could cause the market price of our common stock to decline.

These sales, or the possibility of these sales, also may make it more difficult for us to sell equity securities in the future.

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Softening demand for our products and services caused by an ongoing economic downturn and over-capacity may impact our revenue, as well the salability of inventory and collection of reseller and retail customer accounts receivable.

In addition, if we are not able to adequately adapt to the emergence of new technology or customer demand, such as cloud-based IT infrastructure and software-as-a-service, our future operating results could be adversely affected.

In addition, if we are not able to adequately adapt to the emergence of new technology or customer demand, such as cloud-based IT infrastructure and technology-as-a-service, our future operating results could be adversely affected.

We are subject to intense competition, both in the United States and internationally, and if we fail to compete successfully, we will be unable to gain or retain market share.

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Other suppliers may reduce or eliminate promotional activities to reduce their expenses, which could, in turn, result in declined demand from our reseller or retailer customers and end-users.

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Some OEM suppliers, including some of the leading OEM suppliers that we service, have been selling products and services directly to reseller and retail customers and end-users, thereby limiting our business opportunities.

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We may be unable to successfully respond to and manage our business in light of industry developments and trends.

As end-users migrate to cloud-based IT infrastructure and software-as-a-service, sales of hardware products may be reduced, thereby negatively impacting our operating results.

As end-users migrate to cloud-based IT infrastructure and technology-as-a-service, sales of

hardware products may be reduced, thereby negatively impacting our operating results.

Also crucial to our success in managing our operations is our ability to achieve additional economies of scale.

Our failure to achieve these additional economies of scale or to respond to changes in the IT industry could adversely affect our business and operating results.

Risks Related to the Acquisition of Tech Data

We may fail to realize the anticipated benefits of the Merger, which could adversely affect the value of our common stock.

SYNNEX and Tech Data operated independently prior to the Merger, and there can be no assurances that the businesses will be integrated successfully.

It is possible that the integration process could result in the loss of key employees, the disruption of ongoing business, higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated.

Specifically, issues that must be addressed to realize the anticipated benefits of the Merger so the combined business performs as expected include, among other things:

integrating the companies’ IT systems and other technologies, products and services;

identifying and eliminating redundant and underperforming operations and assets;

harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;

attracting, motivating and retaining executives and other key personnel;

addressing possible differences in business backgrounds, corporate cultures and management philosophies;

consolidating the companies’ corporate, administrative and information technology infrastructure;

managing the movement of certain businesses and positions to different locations;

maintaining existing agreements with customers and vendors and avoiding delays in entering into new agreements with prospective customers and vendors;

consolidating offices that are currently in or near the same location.

In addition, at times, the attention of certain members of management and resources may be focused on the integration of the business and diverted from day-to-day business operations, which may disrupt the business of the combined company.

If we fail to properly mitigate these risks or address the issues set forth above, the anticipated cost savings and other benefits of the Merger may not be realized fully or at all, or may take longer to realize than expected, which in turn could adversely affect our business operations and value of our common stock.

We have incurred and will continue to incur significant transaction and integration-related costs in connection with the Merger.

We have incurred a number of non-recurring costs associated with the Merger and combining the operations of Tech Data and SYNNEX and we expect to continue to incur significant transaction costs related to the Merger.

We also will incur significant integration-related fees and costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and employment-related costs.

We continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred related to the Merger and the integration of Tech Data and SYNNEX.

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Risks Related to the Macro-Economic and Regulatory Environment

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The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and workforce participation due to “shelter-in-place” restrictions by various governments worldwide and created significant volatility and disruption of financial markets.

More recently, the Delta and Omicron variants of the virus have contributed to a surge in COVID-19 cases globally and the full impact of the newly emerged Omicron variant has yet to be determined.

The extent of the impact of the COVID-19 pandemic on our future operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, including the duration and spread of the pandemic and related restrictions on travel and transportation, the effect on our customers and demand for our products and services;

the effect on our customers and demand for our products and services;

our ability to sell and provide our products and services, including as a result of travel restrictions and people working remotely;

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This may result in market pricing that we cannot meet without significantly lower profit on sales.

We conduct hedging activities, which involve the use of currency forward or option contracts.

We hedge some of our exposure to changes in foreign exchange rates through the use of currency forward or option contracts.

Hedging foreign currencies can be risky.

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dollars is also impacted by fluctuations in foreign currency exchange rates, which may positively or negatively impact our results of operations.

For example, in

fiscal year 2022, several foreign currencies in which we transact business depreciated against the U.S.

dollar, including the Euro and the Japanese yen, which adversely affected the results of operations of our Europe and APJ segments for the year.

In addition, the value of our equity investment in foreign countries may fluctuate based upon changes in foreign currency exchange rates.

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Freight and shipping charges can have a significant impact on our gross margin.

As a result, an increase in freight surcharges due to rising fuel cost or general price increases

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will have an immediate adverse effect on our margins, unless we are able to pass the increased charges to our reseller and retail customers or renegotiate terms with our OEM suppliers.

As a result, an increase in freight surcharges due to inflation, rising fuel cost or general price increases will have an immediate adverse effect on our margins, unless we are able to pass the increased charges to our reseller and retail customers or renegotiate terms with our OEM suppliers.

In addition, in the past, carriers have experienced work stoppages due to labor negotiations with management.

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• uncertainty in obtaining tax holiday extensions or expiration or loss of tax holidays in various jurisdictions.

The Organization for Economic Cooperation and Development has been working on the Base Erosion and Profit Sharing Project, and has issued and will continue to issue, guidelines and proposals that may change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we do business.

The Organization for Economic Cooperation and Development has been working on the Base Erosion and Profit Shifting Project, and has issued and will continue to issue, guidelines and proposals that may change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we do business.

Certain countries are evaluating their tax policies and regulations, which could affect international business and may have an adverse effect on our overall tax rate, along with increasing the complexity, burden and cost of tax compliance.

For example, on December 22, 2017, the U.S.

federal government enacted the U.S.

Tax Cuts and Jobs Act (“U.S.

Tax Reform”) which significantly revised U.S.

corporate income tax law by, among other things, reducing the U.S.

federal corporate income tax rate from 35% to 21% and implementing a modified territorial tax system that included a one-time transition tax on deemed repatriated earnings of foreign subsidiaries.

Additional changes in the U.S.

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The results from various tax examinations and audits may differ from the liabilities recorded in our financial statements and could adversely affect our financial results and cash flows.

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Cyberattacks or the improper disclosure or control of personal information could result in liability and harm our reputation, which could adversely affect our business.

Our business is heavily dependent upon information technology networks and systems.

Our business is heavily dependent upon information technology networks and systems, including those of our vendors, suppliers and partners.

Internal or external attacks on those networks and systems could disrupt our normal operations centers and impede our ability to provide critical products and services to our customers, subjecting us to liability under our contracts and damaging our reputation.

Additionally, such attacks could compromise our intellectual property or result in fraud if our business emails are improperly accessed.

For example, in the third quarter of 2021, the Company became aware that certain outside actors gained access to a limited portion of the Company’s networks and systems.

After conducting a thorough review of the attack with a leading third-party cybersecurity firm, the Company determined that the attack did not access any material data.

Our business also involves the use, storage and transmission of information about our employees, and customers.

If any person, including any of our employees, negligently disregards or intentionally breaches our established controls with respect to such data or otherwise mismanages or misappropriates that data, we could be subject to monetary damages, fines or criminal prosecution.

We have security controls for our systems and other security practices in place to protect the security of, and prevent unauthorized access to, our systems and personal and proprietary information, such as firewalls and anti-virus software, and we also provide information to our employees about the need to deploy security measures and the impact of doing so;

however there can be no assurance that such security measures, will prevent improper access to our networks and systems, such as that which occurred earlier in 2021, or access to or disclosure of, personally identifiable or proprietary information.

Additionally, such attacks could compromise our, or our customers' or vendors', intellectual property or confidential information or result in fraud or other financial loss.

For example, in July 2021, SYNNEX announced publicly that a threat actor had gained access to SYNNEX' systems.

That incident did not have a material impact to the business.

In July 2022, we became aware that a sophisticated threat actor gained access to a portion of our networks and systems.

After conducting a thorough review of the attack with a leading third-party cybersecurity firm, we determined that the attack did not have a material impact on us.

Evidence indicates that the threat actor responsible for this incident is related to, or the same as, the threat actor that previously gained unauthorized access to SYNNEX' systems.

In response to both the July 2021 and the July 2022 threat, we engaged in remedial and preventative actions to remove the threat actor and prevent further unauthorized access to our network, analyzed the information that the threat actors accessed, enhanced our data security and governance program, added additional protective security layers and are cooperating with law enforcement authorities.

While we do not believe at this time that these cyber-attacks had a material impact on our systems or operations, should new or different information come to light establishing that the intrusions are broader than now known or if additional attacks occur, it could have a broader impact on our systems and operations, and we could incur significant costs in responding to such intrusions.

Our business also involves the use, storage and transmission of information about our co-workers, and customers.

If any person, including any of our co-workers, negligently disregards or intentionally breaches our established controls with respect to such data or otherwise mismanages or misappropriates that data, we could be subject to monetary damages, fines or criminal prosecution.

We have security controls for our systems and other security practices in place to protect the security of, and prevent unauthorized access to, our systems and personal and proprietary information, such as firewalls and anti-virus software, and we also provide information to our co-workers about the need to deploy security measures and the impact of doing so;

however, notwithstanding our efforts to date, there are numerous sophisticated threat actors that are actively engaging in cyber-attacks that include our systems and there can be no assurance that such security measures will prevent additional improper access to our networks and systems, or access to or disclosure of, personally identifiable or proprietary information which could harm our business.

We could also face legal, reputational and financial risks if we fail to protect customer and internal data from security breaches or cyberattacks.

Furthermore, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we provide services.

The General Data Protection Regulation (“GDPR”) in Europe, the California Consumer Privacy Act and other similar laws have resulted, and will continue to result, in increased compliance costs.

The General Data Protection Regulation (“GDPR”) in Europe, the California Consumer Privacy Act and other similar laws have resulted, and will continue to

result, in increased compliance costs.

Our failure to adhere to or successfully implement processes in response to these and other changing regulatory requirements in this area could result in legal liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business, financial condition and results of operations.

Global health and economic, political and social conditions may harm our ability to do business, increase our costs and negatively affect our stock price.

Worldwide economic conditions remain uncertain due to adverse consequences concerning the United States and China trade negotiations, market volatility as a result of political leadership in certain countries and other disruptions to global and regional economies and markets, including increases in inflation.

Worldwide economic conditions remain uncertain due to increased inflation, increases in interest rates, market volatility as a result of political leadership in certain countries, including due to Russia's invasion of Ukraine, and other disruptions to global and regional economies and markets.

External factors, such as potential terrorist attacks, acts of war, geopolitical and social turmoil or epidemics and other similar outbreaks in many parts of the world, could prevent or hinder our ability to do business, increase our costs and negatively affect our stock price.

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• trade restrictions;

compliance with the Foreign Corrupt Practices Act, U.K.

• compliance with the Foreign Corrupt Practices Act ("FCPA"), U.K.

bribery laws and similar laws;

• difficulties and costs of staffing and managing operations in certain foreign countries;

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• work stoppages or other changes in labor conditions;

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Establishing operations in any foreign country or region presents risks such as those described above as well as risks specific to the particular country or region.

For example, periodically, we receive reports directly from co-workers, vendors and customers related to, or otherwise become aware of, potential non-compliance with our Code of Conduct and various U.S.

or foreign laws, such as the FCPA, U.K.

bribery laws or local anti-corruption laws.

We investigate these reports and matters, report the activity to governmental authorities as required and also cooperate with investigations by U.S.

and foreign law enforcement authorities.

While we do not believe any of the findings of these investigations have been material to the Company to date, we take these matters seriously and activities of our employees, vendors and customers in these regions could subject us to liability, even if we do not explicitly authorize or have actual knowledge of their activities.

In addition, until a payment history is established over time with customers in a new geography or region, the likelihood of collecting accounts receivable generated by such operations could be less than our expectations.

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Additionally, the implementation of these initiatives imposes additional costs on us.

If our ESG initiatives fail to satisfy investors, customers, partners and our other stakeholders, our reputation, our ability to sell products and services to customers, our ability to attract or retain employees, and our attractiveness as an investment, business partner or acquirer could be negatively impacted.

If our ESG initiatives fail to satisfy investors, customers, partners and our other stakeholders, our reputation, our ability to sell products and services to customers, our ability to attract or retain co-workers, and our attractiveness as an investment, business partner or acquirer could be negatively impacted.

Similarly, our failure or perceived failure to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also have similar negative impacts and expose us to government enforcement actions and private litigation.

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Because of the inherent limitations, misstatements due to error or fraud may occur and may not always be prevented or timely detected.

We expect to continue to incur significant expenses and to devote management resources to Section 404 compliance, including impacts resulting from the Merger.

We expect to continue to incur significant expenses and to devote management resources to Section 404 compliance.

In the event that our management or independent registered public accounting firm determines that there is a material weakness in our internal control over financial reporting, investor perceptions and our reputation may be adversely affected, and the market price of our stock could decline.

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We prepare our financial statements to conform to generally accepted accounting principles in the United States (“GAAP”).

These accounting principles are subject to interpretation by the Financial Accounting Standards Board, American Institute of Certified

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Public Accountants, the SEC and various bodies formed to interpret and create appropriate accounting policies.

These accounting principles are subject to interpretation by the Financial Accounting Standards Board, American Institute of Certified Public Accountants, the SEC and various bodies formed to interpret and create appropriate accounting policies.

A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions completed before a change is announced.

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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-K

Item 1A. Risk Factors