What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-07-06 compared with 2023-04-05 · 135 added, 104 removed, 275 unchanged (46% of the section changed)

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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 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 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 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, increased inflation, dependence upon and trends in capital spending budgets in the IT industry, fluctuations in general economic conditions, 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, 2022 and below under Part II, Item 1A, “Risk Factors.” These forward-looking statements speak only as of the date hereof.

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 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 ("OEM") suppliers or customers, market acceptance 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, increased inflation, dependence upon and trends in capital spending budgets in the IT industry, fluctuations in general economic conditions, 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, 2022 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, except where it is made clear that the term means only the parent company or one of its segments .

In the Management’s Discussion and Analysis of Financial Condition and Results of Operations, all references to “TD SYNNEX,” "SYNNEX," “we,” “us,” “our” or the “Company” mean TD SYNNEX Corporation and its subsidiaries, 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 leading global distributor and solutions aggregator for the information technology ("IT") ecosystem.

We are a Fortune 100 corporation and a leading global distributor and solutions aggregator for the information technology ("IT") ecosystem.

We serve a critical role, bringing products from the world's leading and emerging technology vendors to market, and helping our customers create solutions best suited to maximize business outcomes for their end-user customers.

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The following table sets forth, for the indicated periods, data as percentages of total revenue:

Three Months Ended

Three Months Ended Six Months Ended

Statements of Operations Data:

February 28, 2023 February 28, 2022

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Revenue 100.00 % 100.00 % 100.00 % 100.00 %

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• 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 months ended February 28, 2023 in the billing currency using the comparable prior period currency conversion rate.

Revenue in constant currency is calculated by translating the revenue for the three and six months ended May 31, 2023 in the billing currency using the comparable prior period currency conversion rate.

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

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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.

Three Months Ended February 28, 2023 and 2022:

The following table summarizes our revenue and change in revenue by segment for the three months ended February 28, 2023 and 2022:

Three Months Ended

February 28, 2023 February 28, 2022 Percent Change

Revenue in constant currency (in thousands)

Three and Six Months Ended May 31, 2023 and 2022:

The following table summarizes our revenue and change in revenue by segment for the three and six months ended May 31, 2023 and 2022:

Three Months Ended Six Months Ended

May 31, 2023 May 31, 2022 Percent Change May 31, 2023 May 31, 2022 Percent Change

Revenue in constant currency (in thousands) (in thousands)

Revenue $ 14,062,124 $ 15,269,791 (7.9) % $ 29,187,495 $ 30,739,768 (5.0) %

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Consolidated Commentary

During the three months ended February 28, 2023, consolidated revenue decreased by $344.6 million, as compared to the prior year period, driven primarily by the impact of changes in foreign currencies.

During the three months ended February 28, 2023, consolidated revenue in constant currency increased by $115.1 million, as compared to the prior year period, primarily driven by growth in our Advanced Solutions portfolio and high-growth technologies, partially offset by a decline in our Endpoint Solutions portfolio due to a weaker demand environment for client devices.

The shift in product mix resulted in the presentation of additional revenues on a net basis which negatively impacted our revenue growth by approximately 3%.

The impact of changes in foreign currencies is primarily due to the weakening of the euro against the U.S.

During the three months ended May 31, 2023, consolidated revenue and revenue in constant currency decreased by $1.2 billion and $1.1 billion, respectively, as compared to the prior year period.

During the six months ended May 31, 2023, consolidated revenue and revenue in constant currency decreased by $1.6 billion and $961.0 million, respectively, as compared to the prior year period.

The decreases are primarily driven by a decline in our Endpoint Solutions portfolio as the industry experienced a post-pandemic decline in demand for personal computer ecosystem products.

This decline was partially offset by increases in our Advanced Solutions portfolio and high-growth technologies.

The shift in product mix resulted in a greater percentage of our revenues being presented on a net basis, which negatively impacted our revenue compared to the prior three and six months ended May 31, 2022 by approximately 3%.

Americas Commentary

During the three months ended February 28, 2023, Americas revenue decreased by $435.6 million and Americas revenue in constant currency decreased by $380.4 million, as compared to the prior year period.

The decrease is primarily due to a decline in our Endpoint Solutions portfolio in the region, partially offset by growth in our Advanced Solutions portfolio and high-growth technologies.

The shift in product mix resulted in the presentation of additional revenues on a net basis which negatively impacted our revenue growth by approximately 4%.

During the three months ended May 31, 2023, Americas revenue and revenue in constant currency decreased by $1.1 billion and $1.0 billion, respectively, as compared to the prior year period.

During the six months ended May 31, 2023, Americas revenue and revenue in constant currency decreased by $1.5 billion and $1.4 billion, respectively, as compared to the prior year period.

The decreases are primarily due to a decline in our Endpoint Solutions portfolio in the region as the industry experienced a post-pandemic decline in demand for personal computer ecosystem products, partially offset by growth in our Advanced Solutions portfolio and high-growth technologies.

The shift in product mix resulted in a greater percentage of our revenues being presented on a net basis, which negatively impacted our revenue by approximately 3% and 4% compared to the three and six months ended May 31, 2022, respectively.

Europe Commentary

During the three months ended February 28, 2023, Europe revenue decreased by $59.4 million, as compared to the prior year period, driven primarily by the impact of changes in foreign currencies.

During the three months ended February 28, 2023, Europe revenue in constant currency increased by $284.6 million, as compared to the prior year period, primarily due to growth in our Advanced Solutions portfolio, partially offset by a decline in our Endpoint Solutions portfolio.

The shift in product mix resulted in the presentation of additional revenues on a net basis which negatively impacted our revenue growth by approximately 2%.

During the three months ended May 31, 2023, Europe revenue and revenue in constant currency decreased by $191.2 million and $164.2 million, respectively, as compared to the prior year period.

The decreases are primarily due to a shift in product mix that resulted in a greater percentage of our revenues being presented on a net basis, which negatively impacted our revenue by approximately 4% compared to the three months ended May 31, 2022.

The shift in product mix was primarily due to a decline in our Endpoint Solutions portfolio, which was offset by growth in our Advanced Solutions portfolio.

During the six months ended May 31, 2023, Europe revenue decreased by $250.5 million, as compared to the prior year period, primarily due to the impact of changes in foreign currencies.

The impact of changes in foreign currencies is primarily due to the weakening of the euro against the U.S.

During the six months ended May 31, 2023, Europe revenue in constant currency increased by $120.4 million, as compared to the prior year period, primarily due to growth in our Advanced Solutions portfolio, partially offset by a decline in our Endpoint Solutions portfolio.

The shift in product mix resulted in a greater percentage of our revenues being presented on a net basis, which negatively impacted our revenue by approximately 3% compared to the six months ended May 31, 2022.

APJ Commentary

During the three months ended February 28, 2023, APJ revenue increased by $150.3 million and APJ revenue in constant currency increased by $210.9 million, as compared to the prior year period.

The increase is primarily driven by high-growth technologies and our Advanced Solutions portfolio.

Three Months Ended

February 28, 2023 February 28, 2022 Percent Change

Gross Profit and Gross Margin - Consolidated (in thousands)

During the three months ended May 31, 2023, APJ revenue and revenue in constant currency increased by $61.1 million and $98.6 million, respectively, as compared to the prior year period.

During the six months ended May 31, 2023, APJ revenue and revenue in constant currency increased by $211.4 million and $309.5 million, respectively, as compared to the prior year period.

The increases are primarily driven by growth in high-growth technologies.

Three Months Ended Percent Change Six Months Ended Percent Change

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Gross Profit and Gross Margin - Consolidated (in thousands) (in thousands)

Revenue $ 14,062,124 $ 15,269,791 (7.9) % $ 29,187,495 $ 30,739,768 (5.0) %

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Non-GAAP gross margin 6.89 % 6.44 % 6.78 % 6.43 %

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, 2023, as compared to the prior year period, primarily due to our improved gross margin and the impact of lower purchase accounting adjustments related to the Merger.

The increase in gross margin during the three months ended February 28, 2023, as compared to the three months ended February 28, 2022, is primarily due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and high-growth technologies, as well as the impact of lower purchase accounting adjustments related to the Merger.

The shift in product mix resulted in the presentation of additional revenues on a net basis which positively impacted our gross margin by approximately 19 basis points.

Our gross profit increased during the three and six months ended May 31, 2023, as compared to the prior year periods, primarily due to the impact of lower purchase accounting adjustments related to the Merger and our improved gross margin, partially offset by the impact of a decline in revenues in our Endpoint Solutions portfolio.

The increase in gross margin during the three and six months ended May 31, 2023, as compared to the prior year periods, is primarily due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and high-growth technologies, as well as the impact of lower purchase accounting adjustments related to the Merger.

The shift in product mix resulted in the presentation of additional revenues on a net basis, which positively impacted our gross margin during the three and six months ended May 31, 2023 by approximately 21 and 20 basis points, respectively.

During the three months ended May 31, 2023, non-GAAP gross profit decreased, as compared to the prior year period, primarily due to the decrease in revenues in our Endpoint Solutions portfolio, partially offset by an improvement in gross margin.

During the six months ended May 31, 2023, non-GAAP gross profit slightly increased, as compared to the prior year period, primarily due to an improvement in gross margin, partially offset by the decrease in revenues in our Endpoint Solutions portfolio.

During the three and six months ended May 31, 2023, non-GAAP gross margin increased, as compared to the prior year period, primarily due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and high-growth technologies, as well as the presentation of additional revenues on a net basis.

Selling, General and Administrative Expenses

Three Months Ended Percent

February 28, 2023 February 28, 2022

(in thousands)

Change Six Months Ended Percent

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

(in thousands) (in thousands)

Selling, general and administrative expenses $ 673,698 $ 670,574 0.5 % $ 1,327,921 $ 1,323,425 0.3 %

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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, 2023, selling, general and administrative expenses slightly increased, compared to the prior year period, primarily due to higher personnel costs and higher stock-based compensation expense.

During the three and six months ended May 31, 2023, selling, general and administrative expenses slightly increased, compared to the prior year period, primarily due to higher personnel costs.

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

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Personnel and other costs are primarily comprised of costs related to retention and other bonuses, severance and duplicative labor costs.

Long-lived assets charges and termination fees are comprised of accelerated depreciation and amortization expense of $6.2 million and $52.9 million recorded during the three months ended February 28, 2023 and 2022, respectively, due to changes in asset useful lives in conjunction with the consolidation of certain IT systems, as well as $10.2 million recorded during the three months ended February 28, 2023 for termination fees related to certain IT systems.

Long-lived assets charges and termination fees are comprised of accelerated depreciation and amortization expense of $5.3 million and $11.5 million recorded during the three and six months ended May 31, 2023, respectively, and $52.9 million recorded during the six months ended May 31, 2022, due to changes in asset useful lives in conjunction with the consolidation of certain IT systems, as well as $2.3 million and $12.5 million recorded during the three and six months ended May 31, 2023 for termination fees related to certain IT systems.

There were no long-lived assets charges and termination fees recorded during the three months ended May 31, 2022.

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 4 – 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, 2023 and 2022, acquisition and integration expenses related to the Merger were composed of the following:

Three Months Ended

February 28, 2023 February 28, 2022

During the three and six months ended May 31, 2023 and 2022, acquisition and integration expenses related to the Merger were composed of the following:

Three Months Ended Six Months Ended

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

(in thousands)

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Total $ 34,238 $ 23,086 $ 81,952 $ 108,625

During the three months ended February 28, 2023, acquisition and integration expenses related to the Merger decreased, compared to the prior year period, primarily due to the decrease in long-lived assets charges.

During the three months ended May 31, 2023, acquisition and integration expenses related to the Merger increased, compared to the prior year period, due to long-lived assets charges and termination fees, as well as an increase in personnel and other costs primarily due to higher severance costs.

During the six months ended May 31, 2023, acquisition and integration expenses related to the Merger decreased, compared to the prior year period, primarily due to the decrease in long-lived assets charges and termination fees.

GBO 2 Program

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Other costs are primarily comprised of personnel costs, facilities costs and certain professional services fees not related to restructuring activities.

We incurred acquisition, integration and restructuring costs under the GBO 2 Program of $3.5 million and $7.8 million during the three months ended February 28, 2023 and 2022, respectively.

During the three months ended February 28, 2023, acquisition, integration and restructuring costs under the GBO 2 Program decreased, compared to the prior year period, due to the wind-down of activities as the program is not expected to incur material amounts in future periods.

We incurred acquisition, integration and restructuring costs under the GBO 2 Program of $2.6 million and $9.4 million during the three months ended May 31, 2023 and 2022, respectively.

We incurred acquisition, integration, and restructuring costs under the GBO 2 Program of $6.1 million and $17.2 million during the six months ended May 31, 2023 and 2022, respectively.

During the three and six months ended May 31, 2023, acquisition, integration and restructuring costs under the GBO 2 Program decreased, compared to the prior year period, due to the wind-down of activities as the program is not expected to incur material amounts in future periods.

Operating Income

The following tables provide an analysis of operating income and non-GAAP operating income on a consolidated and regional basis as well as a reconciliation of operating income to non-GAAP operating income on a consolidated and regional basis for the three months ended February 28, 2023 and 2022:

Three Months Ended

February 28, 2023 February 28, 2022

Operating Income and Operating Margin - Consolidated (in thousands)

Three Months Ended Percent

Change Six Months Ended Percent Change

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Operating Income and Operating Margin - Consolidated (in thousands) (in thousands)

Revenue $ 14,062,124 $ 15,269,791 $ 29,187,495 $ 30,739,768

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Non-GAAP operating margin 2.67 % 2.61 % 2.81 % 2.70 %

Consolidated operating income and operating margin increased during the three months ended February 28, 2023, compared to the prior year period, due to a decrease in acquisition, integration, and restructuring costs, and an increase in gross margin due to product and customer mix, as well as the impact of lower purchase accounting adjustments related to the Merger.

Consolidated non-GAAP operating income and non-GAAP operating margin increased during the three months ended February 28, 2023, compared to the prior year period, primarily due to an increase in gross margin due to product and customer mix.

Three Months Ended

February 28, 2023 February 28, 2022

Operating Income and Operating Margin - Americas (in thousands)

Consolidated operating income was flat during the three months ended May 31, 2023, compared to the prior year period, primarily due to an improvement in gross margin due to product and customer mix and a decrease in purchase accounting adjustments related to the Merger, offset by the decline in revenues in our Endpoint Solutions portfolio.

Consolidated operating income increased during the six months ended May 31, 2023, compared to the prior year period, primarily due to an improvement in gross margin due to product and customer mix and a decrease in purchase accounting adjustments related to the Merger, partially offset by the decline in revenues in our Endpoint Solutions portfolio.

Consolidated operating margin increased during the three and six months ended May 31, 2023, compared to the prior year period, due to an increase in gross margin due to product and customer mix and a decrease in purchase accounting adjustments related to the Merger, partially offset by higher selling, general and administrative expenses as a percentage of revenue due to the decrease in revenues.

Consolidated non-GAAP operating income decreased during the three and six months ended May 31, 2023, compared to the prior year period, primarily due to the decrease in revenue, partially offset by an increase in gross margin due to product and customer mix.

Consolidated non-GAAP operating margin increased during the three and six months ended May 31, 2023, compared to the prior year period, primarily due to an increase in gross margin due to product and customer mix, partially offset by higher selling, general and administrative expenses as a percentage of revenue due to the decrease in revenues.

Three Months Ended Percent Change Six Months Ended Percent Change

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Operating Income and Operating Margin - Americas (in thousands) (in thousands)

Revenue $ 8,699,342 $ 9,776,933 $ 17,338,046 $ 18,851,206

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Non-GAAP operating margin 3.01 % 2.84 % 3.05 % 2.84 %

Americas operating income and operating margin increased during the three months ended February 28, 2023, compared to the prior year period, primarily due to increased gross margin in the region due to product and customer mix, as well as the impact of lower purchase accounting adjustments related to the Merger, and a decrease in acquisition, integration, and restructuring costs, partially offset by an increase in personnel costs.

Americas non-GAAP operating income and non-GAAP operating margin increased during the three months ended February 28, 2023, compared to the prior year period, primarily due to increased gross margin in the region due to product and customer mix, partially offset by an increase in personnel costs.

Three Months Ended

February 28, 2023 February 28, 2022

Operating Income and Operating Margin - Europe (in thousands)

Americas operating income decreased during the three months ended May 31, 2023, as compared to the prior year period, primarily due to the decrease in revenue in our Endpoint Solutions portfolio along with an increase in acquisition, integration, and restructuring costs, partially offset by increased gross margin in the region due to product and customer mix, as well as the impact of lower purchase accounting adjustments related to the Merger.

Americas operating income increased during the six months ended May 31, 2023, as compared to the prior year period, primarily due to increased gross margin in the region due to product and customer mix and the impact of lower purchase accounting adjustments related to the Merger, partially offset by the decline in revenues in our Endpoint Solutions portfolio.

Americas operating margin increased during the three and six months ended May 31, 2023, compared to the prior year period, primarily due to increased gross margin in the region due to product and customer mix as well as the impact of lower purchase accounting adjustments related to the Merger, partially offset by higher selling, general and administrative expenses as a percentage of revenue due to the decrease in revenues.

Americas non-GAAP operating income decreased during the three and six months ended May 31, 2023, compared to the prior year period, primarily due to the decrease in revenue in our Endpoint Solutions portfolio, partially offset by increased gross margin in the region due to product and customer mix.

Americas non-GAAP operating margin increased during the three and six months ended May 31, 2023, compared to the prior year period, primarily due to increased gross margin in the region due to product and customer mix, partially offset by higher selling, general and administrative expenses as a percentage of revenue due to the decrease in revenues.

Three Months Ended Percent Change Six Months Ended Percent Change

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Operating Income and Operating Margin - Europe (in thousands) (in thousands)

Revenue $ 4,461,461 $ 4,652,611 $ 9,981,898 $ 10,232,399

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Non-GAAP operating margin 1.94 % 2.08 % 2.30 % 2.44 %

Europe operating income and operating margin increased during the three months ended February 28, 2023, compared to the prior year period, primarily due to a decrease in acquisition, integration, and restructuring costs and the impact of lower purchase accounting adjustments related to the Merger, partially offset by an increase in personnel costs.

Europe operating income also decreased due to the impacts from changes in foreign currencies including the euro.

Europe non-GAAP operating income decreased during the three months ended February 28, 2023, compared to the prior year period, primarily due to impacts from changes in foreign currencies including the euro, as well as an increase in personnel costs.

Europe non-GAAP operating margin decreased primarily due to an increase in personnel costs.

Three Months Ended

February 28, 2023 February 28, 2022

Operating Income and Operating Margin - APJ (in thousands)

Europe operating income slightly decreased during the three months ended May 31, 2023, compared to the prior year period, primarily due to the decline in revenues in our Endpoint Solutions portfolio and an increase in personnel costs, partially offset by an increase in gross margin in the region due to product and customer mix and the impact of lower purchase accounting adjustments related to the Merger.

Europe operating income increased during the six months ended May 31, 2023, compared to the prior year period, primarily due to a decrease in acquisition, integration, and restructuring costs and the impact of lower purchase accounting adjustments related to the Merger, partially offset by the decline in revenues in our Endpoint Solutions portfolio and higher personnel costs.

Europe operating margin increased during the three months ended May 31, 2023, compared to the prior year period, primarily due to an increase in gross margin in the region due to product and customer mix and the impact of lower purchase accounting adjustments related to the Merger, partially offset by an increase in personnel costs.

Europe operating margin increased during the six months ended May 31, 2023, compared to the prior year period, primarily due to a decrease in acquisition, integration, and restructuring costs and the impact of lower purchase accounting adjustments related to the Merger, partially offset by an increase in personnel costs.

Europe non-GAAP operating income decreased during the three months ended May 31, 2023, compared to the prior year period, primarily due to the decline in revenues in our Endpoint Solutions portfolio and an increase in personnel costs, partially offset by an increase in gross margin in the region due to product and customer mix.

Europe non-GAAP operating income decreased during the six months ended May 31, 2023, compared to the prior year period, primarily due to the decline in revenues in our Endpoint Solutions portfolio and an increase in personnel costs.

Europe non-GAAP operating margin decreased during the three months ended May 31, 2023, compared to the prior year period, primarily due to an increase in personnel costs partially offset by an increase in gross margin due to product and customer mix.

Europe non-GAAP operating margin decreased during the six months ended May 31, 2023, compared to the prior year period, primarily due to an increase in personnel costs.

Three Months Ended Percent Change Six Months Ended Percent Change

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Operating Income and Operating Margin - APJ (in thousands) (in thousands)

Revenue $ 901,321 $ 840,247 $ 1,867,551 $ 1,656,163

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Non-GAAP operating margin 3.04 % 2.88 % 3.24 % 2.75 %

APJ operating income, on both a GAAP and non-GAAP basis, increased during the three months ended February 28, 2023, compared to the prior year period, primarily due to increased sales in the region due to high-growth technologies and our Advanced Solutions portfolio, and an increase in gross margin due to the shift in product and customer mix.

APJ operating margin, on both a GAAP and non-GAAP basis, increased during the three months ended February 28, 2023, compared to the prior year period, primarily due to regional selling, general and administrative expenses remaining consistent despite the increase in sales, as well as an increase in gross margin due to customer and product mix.

APJ operating income increased during the three and six months ended May 31, 2023, compared to the prior year period, primarily due to increased sales in the region due to high-growth technologies, and a decrease in acquisition, integration, and restructuring costs.

APJ operating margin increased during the three and six months ended May 31, 2023, compared to the prior year period, primarily due to regional selling, general and administrative expenses remaining consistent despite the increase in sales and a decrease in acquisition, integration and restructuring costs.

APJ non-GAAP operating income increased during the three and six months ended May 31, 2023, compared to the prior year period, primarily due to increased sales in the region due to high-growth technologies.

APJ non-GAAP operating margin increased during the three and six months ended May 31, 2023, compared to the prior year period, primarily due to regional selling, general and administrative expenses remaining consistent despite the increase in sales.

Interest Expense and Finance Charges, Net

Three Months Ended Percent

February 28, 2023 February 28, 2022

(in thousands)

Change Six Months Ended Percent

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

(in thousands) (in thousands)

Interest expense and finance charges, net $ 74,285 $ 47,968 54.9 % $ 154,485 $ 90,311 71.1 %

Percentage of revenue 0.53 % 0.31 % 0.54 % 0.30 %

Amounts recorded in interest expense and finance charges, net, consist primarily of interest expense paid on our Senior Notes, our lines of credit, our accounts receivable securitization facilities and our term loans, and fees associated with the sale of accounts receivable, partially 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, 2023, compared to the prior year period, was primarily due to higher average interest rates, along with increased costs associated with the sale of accounts receivable due to higher discount fees, which totaled $11.7 million in the three months ended February 28, 2023, compared to $3.0 million in the three months ended February 28, 2022.

Amounts recorded in interest expense and finance charges, net, consist primarily of interest expense paid on our Senior Notes, our lines of credit, our accounts receivable securitization facility and our term loans, and fees associated with the sale of accounts receivable, partially offset by income earned on our cash investments.

During the three and six months ended May 31, 2023, our interest expense and finance charges, net increased, compared to the prior year period, primarily due to higher average interest rates, along with increased costs associated with the sale of accounts receivable due to higher discount fees, which totaled $12.0 million and $23.7 million in the three and six months ended May 31, 2023, respectively, compared to $3.9 million and $6.9 million in the three and six months ended May 31, 2022, respectively.

Other Expense, Net

Three Months Ended Percent

February 28, 2023 February 28, 2022

(in thousands)

Change Six Months Ended Percent

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

(in thousands) (in thousands)

Other expense, net $ 4,164 $ 6,255 (33.4) % $ 4,320 $ 10,523 (58.9) %

1 unchanged sentence

Amounts recorded as other 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 action lawsuits.

The decrease in other expense, net during the three months ended February 28, 2023, as compared to the prior year period, was primarily due to higher foreign currency transaction gains.

During the three and six months ended May 31, 2023, our other expense, net decreased, compared to the prior year period, primarily due to lower foreign currency transaction losses.

Provision for Income Taxes

Three Months Ended Percent

February 28, 2023 February 28, 2022

(in thousands)

Change Six Months Ended Percent

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

(in thousands) (in thousands)

Provision for income taxes $ 41,347 $ 49,597 (16.6) % $ 92,133 $ 93,102 (1.0) %

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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 months ended February 28, 2023, our income tax expense increased compared to the prior year period, primarily due to higher income during the period.

The effective tax rate was lower during the three months ended February 28, 2023 as compared to the three months ended February 28, 2022, primarily due to the relative mix of earnings and losses within the taxing jurisdictions in which we operate.

During the three months ended May 31, 2023, our income tax expense decreased compared to the prior year period, primarily due to lower income during the period.

During the six months ended May 31, 2023, our income tax expense slightly decreased compared to the prior year period, primarily due to a lower effective tax rate.

The effective tax rate was lower during the three and six months ended May 31, 2023 as compared to the three and six months ended May 31, 2022, primarily due to the relative mix of earnings and losses within the taxing jurisdictions in which we operate.

Net Income and Diluted EPS

The following tables present net income and diluted EPS as well as a reconciliation of our most comparable GAAP measures to the related non-GAAP measures presented:

Three Months Ended

February 28, 2023 February 28, 2022

Three Months Ended Six Months Ended

May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Net Income - Consolidated (in thousands)

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Non-GAAP net income $ 228,980 $ 262,257 $ 508,215 $ 554,701

Three Months Ended

Diluted Earnings per Common Share February 28, 2023 February 28, 2022

Three Months Ended Six Months Ended

Diluted Earnings per Common Share May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022

Diluted EPS (1)

$ 1.41 $ 1.55 $ 3.17 $ 2.92

Acquisition, integration and restructuring costs 0.41 0.36 0.98 1.35

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Non-GAAP diluted EPS $ 2.43 $ 2.72 $ 5.36 $ 5.75

_________________________

(1) Diluted EPS is calculated using the two-class method.

Unvested restricted stock awards granted to employees are considered participating securities.

For purposes of calculating Diluted EPS, net income allocated to participating securities was approximately 0.8% of net income for the three and six months ended May 31, 2023, and was approximately 0.7% and 0.6% of net income for the three and six months ended May 31, 2022, respectively.

Liquidity and Capital Resources

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Three Months Ended

February 28, 2023 November 30, 2022 February 28, 2022

May 31, 2023 November 30, 2022 May 31, 2022

(Amounts in thousands)

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

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

We rely heavily on term loans, sales of accounts receivable, our securitization program, our revolver programs and net 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.

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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 26 days and 23 days as of February 28, 2023 and November 30, 2022, respectively.

Our CCC was 24 days and 23 days as of May 31, 2023 and November 30, 2022, respectively.

The increase was primarily due to our DSO, which was impacted by a shift in our product and customer mix to our Advanced Solutions portfolio and high-growth technologies which generally have a slightly longer cash conversion cycle.

Our CCC was 26 days and 24 days as of February 28, 2023 and February 28, 2022, respectively.

Our CCC was 24 days and 21 days as of May 31, 2023 and May 31, 2022, respectively.

The increase was primarily due to our DSO, which was impacted by changes in product and customer mix and the timing of customer payments, partially offset by an increase in our DPO due to the timing of payments.

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Operating Activities

Net cash used in operating activities was $102.8 million during the three months ended February 28, 2023, primarily due to a decrease in accounts payable due to seasonality along with the timing of payments, partially offset by net income and decreases in inventories and accounts receivable.

Net cash used in operating activities was $1.3 billion during the three months ended February 28, 2022, primarily due to an increase in net working capital to support revenue growth and strategic inventory purchases.

Net cash provided by operating activities was $604.8 million during the six months ended May 31, 2023, compared to net cash used in operating activities of $284.5 million during the six months ended May 31, 2022.

The increase in net cash provided by operating activities was primarily due to a decline in sales volumes which resulted in decreases in accounts receivable and inventories, partially offset by a decrease in accounts payable.

Investing Activities

Net cash used in investing activities during the three months ended February 28, 2023 and 2022 was $34.2 million and $25.2 million, respectively.

Net cash used in investing activities during the six months ended May 31, 2023 and 2022 was $64.5 million and $46.7 million, respectively.

The increase in cash used in investing activities is primarily due to an increase in integration related capital expenditures due to the Merger.

Financing Activities

Net cash provided by financing activities during the three months ended February 28, 2023 was $129.5 million, representing primarily short-term borrowings to fund working capital requirements.

In addition, we paid $114.8 million to repurchase common stock under our share repurchase program and we paid stockholder dividends of $33.2 million.

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 six months ended May 31, 2023 and 2022 was $247.1 million and $130.0 million, respectively.

The increase in cash used in financing activities is primarily due to an increase in repurchases of common stock under our share repurchase program, which totaled $174.8 million during the six months ended May 31, 2023 compared to $52.8 million during the six months ended May 31, 2022.

In addition, we paid stockholder dividends of $66.2 million and $57.6 million during the six months ended May 31, 2023 and 2022, respectively.

Capital Resources

Our cash and cash equivalents totaled $539.3 million and $522.6 million as of February 28, 2023 and November 30, 2022, respectively.

Our cash and cash equivalents totaled $852.1 million and $522.6 million as of May 31, 2023 and November 30, 2022, respectively.

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

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AR Arrangement has a maturity date of December 2024.

We also have a credit agreement, dated as of April 16, 2021 (the "TD SYNNEX Credit Agreement"), 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 $500.0 million.

We also have a credit agreement, dated as of April 16, 2021 and amended May 22, 2023 (as amended, the "TD SYNNEX Credit Agreement"), 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 $500.0 million.

The TD SYNNEX Credit Agreement also includes a $1.5 billion term loan facility that was fully funded in connection with the Merger.

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AR Arrangement and the TD SYNNEX revolving credit facility may fluctuate in response to changes in our working capital and other liquidity requirements.

There was $110.0 million outstanding under the U.S.

AR Arrangement at February 28, 2023 at an interest rate of 5.51%.

There were no amounts outstanding under the U.S.

AR Arrangement at November 30, 2022.

There were no amounts outstanding under the TD SYNNEX revolving credit facility at February 28, 2023 or November 30, 2022.

We have various other committed and uncommitted lines of credit with financial institutions, finance leases, short-term loans, term loans, credit facilities and book overdraft facilities, totaling approximately $600.1 million in borrowing capacity as of February 28, 2023.

AR Arrangement or the TD SYNNEX revolving credit facility at May 31, 2023 or November 30, 2022.

We have various other committed and uncommitted lines of credit with financial institutions, finance leases, short-term loans, term loans, credit facilities and book overdraft facilities, totaling approximately $588.5 million in borrowing capacity as of May 31, 2023.

Our borrowings on these facilities vary within the period primarily based on changes in our working capital.

There was $387.8 million outstanding on these facilities at February 28, 2023, at a weighted average interest rate of 4.88%, and there was $193.1 million outstanding at November 30, 2022, at a weighted average interest rate of 4.69%.

There was $224.7 million outstanding on these facilities at May 31, 2023, at a weighted average interest rate of 6.54%, and there was $193.1 million outstanding at November 30, 2022, at a weighted average interest rate of 4.69%.

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

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

We had total outstanding borrowings of approximately $4.4 billion as of February 28, 2023 and $4.1 billion as of November 30, 2022.

Our outstanding borrowings include Senior Notes of $2.5 billion at February 28, 2023 and November 30, 2022, and term loans under the term loan facility of the TD SYNNEX Credit Agreement of approximately $1.4 billion at February 28, 2023 and November 30, 2022.

We had total outstanding borrowings of approximately $4.1 billion as of May 31, 2023 and November 30, 2022.

Our outstanding borrowings include Senior Notes of $2.5 billion at May 31, 2023 and November 30, 2022, and term loans under the term loan facility of the TD SYNNEX Credit Agreement of approximately $1.4 billion at May 31, 2023 and November 30, 2022.

For additional information on our borrowings, see Note 8 - Borrowings to the Consolidated Financial Statements included in Part I, Item 1 of this Report.

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

At February 28, 2023 and November 30, 2022, we had a total of $1.1 billion and $1.4 billion, respectively, of trade accounts receivable sold to and held by financial institutions under these programs.

Discount fees for these programs in the three months ended February 28, 2023 and February 28, 2022 totaled $11.7 million and $3.0 million, respectively.

At May 31, 2023 and November 30, 2022, we had a total of $1.1 billion and $1.4 billion, respectively, of trade accounts receivable sold to and held by financial institutions under these programs.

Discount fees for these programs totaled $12.0 million and $23.7 million in the three and six months ended May 31, 2023, respectively, and $3.9 million and $6.9 million in the three and six months ended May 31, 2022, respectively.

Covenant Compliance

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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 consolid ate.

As of February 28, 2023, we were in compliance with the financial covenant requirements for the above arrangements.

Critical Accounting Policies and Estimates

During the three months ended February 28, 2023, 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, 2022.

As of May 31, 2023, we were in compliance with the financial covenant requirements for the above arrangements.

Related Party Transactions

For a summary of related party transactions, see Note 1 1 - Related Party Transactions to the Consolidated Financial Statements, which can be found under Part I, Item 1 of this Report.

Critical Accounting Policies and Estimates

During the six months ended May 31, 2023, 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, 2022.

Recently Issued Accounting Pronouncements

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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-Q

Item 2. Management’s Discussion and Analysis