TD SYNNEX CORP 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and related Notes included elsewhere in this Report. Amounts in certain tables may not add or compute due to rounding. When used in this Quarterly Report on Form 10-Q, or this “Report”, the words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “allows,” “can,” “may,” “could,” “designed,” “will,” and similar expressions are intended to identify forward-looking statements. These are statements that relate to future periods and include statements about our business model and our services, our business and market strategy, future growth, demand, our infrastructure, our investment in our information technology, or IT, systems, our employee hiring and retention, our Merger-related integration plans including with respect to the GBO 2 Program, our revenue, sources of revenue, our gross margins, our operating costs and results, timing of payment, our competition, our future needs and sources for additional financing, contract terms, relationships with our suppliers, adequacy of our facilities, our operations, foreign currency exchange rates and hedging activities, our strategic acquisitions including anticipated cost savings and other benefits, seasonality of sales, adequacy of our cash resources, our debt and financing arrangements, including the impact of any change to our credit rating, interest rate risk and impact thereof, cash held by our international subsidiaries and repatriation, changes in fair value of derivative instruments, our tax liabilities, adequacy of our disclosure controls and procedures, cybersecurity, impact of our pricing policies, impact of economic and industry trends, changes to the markets in which we compete, impact of new reporting rules and accounting policies, our estimates and assumptions, impact of inventory repurchase obligations and commitments and contingencies, our effective tax rates, and our share repurchase and dividend program. 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 others, including 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,” "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. Overview 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. 28 Table of contents On March 22, 2021, the Company entered into an agreement and plan of merger (the “Merger Agreement”) which provided that legacy SYNNEX Corporation would acquire legacy Tech Data Corporation, a Florida corporation (“Tech Data”) through a series of mergers, which would result in Tech Data becoming an indirect subsidiary of TD SYNNEX Corporation (collectively, the "Merger"). On September 1, 2021, pursuant to the terms of the Merger Agreement, the Company acquired all the outstanding shares of common stock of Tiger Parent (AP) Corporation, the parent corporation of Tech Data, for consideration of $1.6 billion in cash ($1.1 billion in cash after giving effect to a $500.0 million equity contribution by Tiger Parent Holdings, L.P., Tiger Parent (AP) Corporation's sole stockholder and an affiliate of Apollo Global Management, Inc., to Tiger Parent (AP) Corporation prior to the effective time of the Merger) and 44 million shares of common stock of SYNNEX, valued at approximately $5.6 billion. Digital transformation and the migration to cloud computing is reshaping our industry, enabling businesses and consumers to evaluate, procure, acquire, and consume technology products and services in a variety of ways. Hybrid models of IT consumption, supporting both physical and virtual delivery methods are emerging, as hardware and software-based solutions become increasingly combined. As a result, customers are seeking greater integration of products, services and solutions that tie technologies together. Therefore, we believe it is important to provide a broad, end-to-end portfolio, with deep capabilities across the computing continuum to help customers manage the increasingly complex IT ecosystem and deliver the solutions and business outcomes the market desires. Our vision for the future is to be the vital solutions aggregator and orchestrator that connects the IT ecosystem. Our global strategy is to deliver higher value by focusing on the following strategic priorities: • Invest in high-growth technologies such as hybrid cloud, security, analytics/Internet of Things ("IoT"), artificial intelligence ("AI"), hyperscale infrastructure, and services. • Strengthen our end-to-end portfolio of products, services and solutions, including technology-as-a-service and recurring revenue models. • Transform our company digitally through greater automation and advanced analytics, which we believe will enhance the customer experience, broaden our customer base, increase sales and augment our presence in high growth technologies. • Expand our global footprint and enhance the operational excellence of our businesses around the world. We offer a comprehensive catalog of technology products from original equipment manufacturers (“OEM”), suppliers of high-growth technologies such as converged and hyper-converged infrastructure, cloud, security, data/analytics/IoT and services. We purchase IT hardware, software, and systems including personal computing devices and peripherals, mobile phones and accessories, printers, server and datacenter infrastructure, networking, communications and storage solutions, and systems components from our suppliers and sell them to our reseller and retail customers. Our reseller customers include value-added resellers, corporate resellers, government resellers, system integrators, direct marketers, retailers and managed service providers. We combine our core strengths in distribution with demand generation, supply chain management and design and integration solutions to help our customers achieve greater efficiencies in time to market, cost minimization, real-time linkages in the supply chain and aftermarket product support. We also provide comprehensive IT solutions in key vertical markets such as government and healthcare and we provide specialized service offerings that increase efficiencies in the areas of global computing components, logistics services and supply chain management. Additionally, we provide systems design and integration solutions for data center servers and networking solutions built specific to our customers’ workloads and data center environments. Our business is characterized by low gross profit as a percentage of revenue, or gross margin, and low operating income as a percentage of revenue, or operating margin. The market for IT products has generally been characterized by declining unit prices and short product life cycles, although unit prices for certain products have increased during certain periods due to factors such as supply chain constraints and inflation. We set our sales price based on the market supply and demand characteristics for each particular product or bundle of products we distribute and services we provide. 29 Table of contents We are highly dependent on the end-market demand for IT products, and on our partners’ strategic initiatives and business models. This end-market demand is influenced by many factors including the introduction of new IT products and software by OEM suppliers, replacement cycles for existing IT products, trends toward cloud computing, overall economic growth and general business activity. A difficult and challenging economic environment, including due to the continued impacts of increased inflation, rising interest rates, increased risk in banking and financial institutions and Russia's invasion of Ukraine, may also lead to consolidation or decline in the IT industries and increased price-based competition. Our systems design and integration solutions business is highly dependent on the demand for cloud infrastructure, and the number of key customers and suppliers in the market. Our business includes operations in the Americas, Europe and Asia-Pacific and Japan ("APJ") so we are affected by demand for our products in those regions, as well as the impact of fluctuations in foreign currency exchange rates compared to the U.S. dollar. Acquisitions We continually seek to augment organic growth in our business with strategic acquisitions of businesses and assets that complement and expand our existing capabilities. We also divest businesses that we deem no longer strategic to our ongoing operations. We seek to acquire new OEM relationships, enhance our supply chain and integration capabilities, the services we provide to our customers and OEM suppliers, and expand our geographic footprint. Results of Operations The following table sets forth, for the indicated periods, data as percentages of total revenue: Three Months Ended Nine Months Ended Statements of Operations Data: August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 Revenue 100.00 % 100.00 % 100.00 % 100.00 % Cost of revenue (93.04) % (94.03) % (93.19) % (93.84) % Gross profit 6.96 % 5.97 % 6.81 % 6.16 % Selling, general and administrative expenses (4.73) % (4.10) % (4.61) % (4.24) % Acquisition, integration and restructuring costs (0.51) % (0.30) % (0.37) % (0.37) % Operating income 1.72 % 1.57 % 1.83 % 1.55 % Interest expense and finance charges, net (0.48) % (0.34) % (0.51) % (0.31) % Other expense, net (0.02) % (0.01) % (0.02) % (0.03) % Income before income taxes 1.22 % 1.22 % 1.30 % 1.21 % Provision for income taxes (0.22) % (0.25) % (0.28) % (0.29) % Net income 1.00 % 0.97 % 1.02 % 0.92 % Certain Non-GAAP Financial Information In addition to disclosing financial results that are determined in accordance with GAAP, we also disclose certain non-GAAP financial information, including: • Revenue in constant currency, which is revenue adjusted for the translation effect of foreign currencies so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of our business performance. Revenue in constant currency is calculated by translating the revenue for the three and nine months ended August 31, 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. • Non-GAAP gross profit, which is gross profit, adjusted to exclude the portion of purchase accounting adjustments that affected cost of revenue. • Non-GAAP gross margin, which is non-GAAP gross profit, as defined above, divided by revenue. 30 Table of contents • Non-GAAP operating income, which is operating income, adjusted to exclude acquisition, integration and restructuring costs, amortization of intangible assets, share-based compensation expense and purchase accounting adjustments. • Non-GAAP operating margin, which is non-GAAP operating income, as defined above, divided by revenue. • Non-GAAP net income, which is net income, adjusted to exclude acquisition, integration and restructuring costs, amortization of intangible assets, share-based compensation expense, purchase accounting adjustments, income taxes related to the aforementioned items, as well as a capital loss carryback benefit. • Non-GAAP diluted earnings per common share (“EPS”), which is diluted EPS excluding the per share impact of acquisition, integration and restructuring costs, amortization of intangible assets, share-based compensation expense, purchase accounting adjustments, income taxes related to the aforementioned items, as well as a capital loss carryback benefit. Acquisition, integration and restructuring costs, which are expensed as incurred, primarily represent professional services costs for legal, banking, consulting and advisory services, severance and other personnel related costs, share-based compensation expense and debt extinguishment fees that are incurred in connection with acquisition, integration, restructuring and divestiture activities. From time to time, this category may also include transaction-related gains/losses on divestitures/spin-off of businesses, costs related to long-lived assets including impairment charges and accelerated depreciation and amortization expense due to changes in asset useful lives, as well as various other costs associated with the acquisition or divestiture. Our acquisition activities have resulted in the recognition of finite-lived intangible assets which consist primarily of customer relationships and vendor lists. Finite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in our statements of operations. Although intangible assets contribute to our revenue generation, the amortization of intangible assets does not directly relate to the sale of our products. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of our acquisition activity. Accordingly, we believe excluding the amortization of intangible assets, along with the other non-GAAP adjustments which neither relate to the ordinary course of our business nor reflect our underlying business performance, enhances our and our investors’ ability to compare our past financial performance with our current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within our GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised. Share-based compensation expense is a non-cash expense arising from the grant of equity awards to employees based on the estimated fair value of those awards. Although share-based compensation is an important aspect of the compensation of our employees, the fair value of the share-based awards may bear little resemblance to the actual value realized upon the vesting or future exercise of the related share-based awards and the expense can vary significantly between periods as a result of the timing of grants of new stock-based awards, including grants in connection with acquisitions. Given the variety and timing of awards and the subjective assumptions that are necessary when calculating share-based compensation expense, we believe this additional information allows investors to make additional comparisons between our operating results from period to period. Purchase accounting adjustments are primarily related to the impact of recognizing the acquired vendor and customer liabilities from the Merger at fair value. These adjustments benefited our non-GAAP operating income through the third fiscal quarter of fiscal 2023 based on historical settlement patterns with our vendors and in accordance with the timing defined in our policy for releasing vendor and customer liabilities we deem remote to be paid. 31 Table of contents We believe that providing this additional information is useful to the reader to better assess and understand our base operating performance, especially when comparing results with previous periods and for planning and forecasting in future periods, primarily because management typically monitors the business adjusted for these items in addition to GAAP results. Management also uses these non-GAAP measures to establish operational goals and, in some cases, for measuring performance for compensation purposes. As these non-GAAP financial measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures and should be used as a complement to, and in conjunction with data presented in accordance with GAAP. Three and Nine Months Ended August 31, 2023 and 2022: Revenue The following table summarizes our revenue and change in revenue by segment for the three and nine months ended August 31, 2023 and 2022: Three Months Ended Nine Months Ended August 31, 2023 August 31, 2022 Percent Change August 31, 2023 August 31, 2022 Percent Change Revenue in constant currency (in thousands) (in thousands) Consolidated Revenue $ 13,960,615 $ 15,356,085 (9.1) % $ 43,148,110 $ 46,095,853 (6.4) % Impact of changes in foreign currencies (176,615) — 414,683 — Revenue in constant currency $ 13,784,000 $ 15,356,085 (10.2) % $ 43,562,793 $ 46,095,853 (5.5) % Americas Revenue $ 8,879,585 $ 9,900,779 (10.3) % $ 26,217,631 $ 28,751,985 (8.8) % Impact of changes in foreign currencies 24,979 — 147,323 — Revenue in constant currency $ 8,904,564 $ 9,900,779 (10.1) % $ 26,364,954 $ 28,751,985 (8.3) % Europe Revenue $ 4,227,590 $ 4,681,797 (9.7) % $ 14,209,488 $ 14,914,196 (4.7) % Impact of changes in foreign currencies (216,477) — 154,406 — Revenue in constant currency $ 4,011,113 $ 4,681,797 (14.3) % $ 14,363,894 $ 14,914,196 (3.7) % APJ Revenue $ 853,440 $ 773,509 10.3 % $ 2,720,991 $ 2,429,672 12.0 % Impact of changes in foreign currencies 14,883 — 112,954 — Revenue in constant currency $ 868,323 $ 773,509 12.3 % $ 2,833,945 $ 2,429,672 16.6 % Consolidated Commentary During the three months ended August 31, 2023, consolidated revenue and revenue in constant currency decreased by $1.4 billion and $1.6 billion, respectively, as compared to the prior year period. During the nine months ended August 31, 2023, consolidated revenue and revenue in constant currency decreased by $2.9 billion and $2.5 billion, 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 an increase in our Advanced 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 compared to the prior three and nine months ended August 31, 2022 by approximately 2% and 3%, respectively. 32 Table of contents Americas Commentary During the three months ended August 31, 2023, Americas revenue and revenue in constant currency both decreased by $1.0 billion, as compared to the prior year period. During the nine months ended August 31, 2023, Americas revenue and revenue in constant currency decreased by $2.5 billion and $2.4 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. 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 2% and 3% compared to the three and nine months ended August 31, 2022, respectively. Europe Commentary During the three months ended August 31, 2023, Europe revenue and revenue in constant currency decreased by $454.2 million and $670.7 million, respectively, as compared to the prior year period. The decrease is 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. 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 5% compared to the three months ended August 31, 2022 . The quarter-to-date impact of changes in foreign currencies is primarily due to the strengthening of the euro against the U.S. dollar. During the nine months ended August 31, 2023, Europe revenue and revenue in constant currency decreased by $704.7 million and $550.3 million, respectively, as compared to the prior year period, primarily due to a shift in p roduct 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 nine months ended August 31, 2022 . The year-to-date impact of changes in foreign currencies is primarily due to a weaker average foreign exchange rate for the euro against the U.S. dollar during the first half of fiscal 2023 as compared to the average foreign exchange rate during the first half of fiscal 2022. APJ Commentary During the three months ended August 31, 2023, APJ revenue and revenue in constant currency increased by $79.9 million and $94.8 million, respectively, as compared to the prior year period. During the nine months ended August 31, 2023, APJ revenue and revenue in constant currency increased by $291.3 million and $404.3 million, respectively, as compared to the prior year period. The increases are primarily driven by growth in high-growth technologies. Gross Profit Three Months Ended Percent Change Nine Months Ended Percent Change August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 Gross Profit and Gross Margin - Consolidated (in thousands) (in thousands) Revenue $ 13,960,615 $ 15,356,085 (9.1) % $ 43,148,110 $ 46,095,853 (6.4) % Gross profit $ 971,273 $ 916,030 6.0 % $ 2,938,250 $ 2,840,480 3.4 % Purchase accounting adjustments 2,427 25,922 15,047 78,407 Non-GAAP gross profit $ 973,700 $ 941,952 3.4 % $ 2,953,297 $ 2,918,887 1.2 % Gross margin 6.96 % 5.97 % 6.81 % 6.16 % Non-GAAP gross margin 6.97 % 6.13 % 6.84 % 6.33 % 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 due to factors such as shift in product mix that may result in additional revenues being presented on a net basis. 33 Table of contents Our gross profit increased during the three and nine months ended August 31, 2023, compared to the prior year period, 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. Our gross margin increased during the three and nine months ended August 31, 2023, compared to the prior year period, primarily due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and margin expansion in 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 nine months ended August 31, 2023 by approximately 16 and 19 basis points, respectively. During the three and nine months ended August 31, 2023, non-GAAP gross profit 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 nine months ended August 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 margin expansion in high-growth technologies, as well as the presentation of additional revenues on a net basis. Selling, General and Administrative Expenses Three Months Ended Percent Change Nine Months Ended Percent Change August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 (in thousands) (in thousands) Selling, general and administrative expenses $ 659,454 $ 628,078 5.0 % $ 1,987,375 $ 1,951,503 1.8 % Percentage of revenue 4.73 % 4.10 % 4.61 % 4.24 % Our selling, general and administrative expenses consist primarily of personnel costs such as salaries, commissions, bonuses, share-based compensation and temporary personnel costs. Selling, general and administrative expenses also include cost of warehouses, 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 and nine months ended August 31, 2023, selling, general and administrative expenses 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 a decrease in revenue and higher personnel costs. Acquisition, Integration and Restructuring Costs Acquisition, integration and restructuring costs are primarily comprised of costs related to the Merger and costs related to the Global Business Optimization 2 Program initiated by Tech Data prior to the Merger (the “GBO 2 Program”). The Merger We incurred acquisition, integration and restructuring costs related to the completion of the Merger, including professional services costs, personnel and other costs, long-lived assets charges and termination fees, and stock-based compensation expense. Professional services costs are primarily comprised of IT and other consulting services, as well as legal expenses. 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 include accelerated depreciation and amortization expense of $4.7 million and $16.2 million recorded during the three and nine months ended August 31, 2023, respectively, and $4.4 million and $57.3 million recorded during the three and nine months ended August 31, 2022, respectively due to changes in asset useful lives in conjunction with the consolidation of certain IT systems. Long-lived asset charges and termination fees also include $0.4 million and $12.9 million recorded during the three and nine months ended August 31, 2023 for termination fees related to certain IT systems, along with $4.3 million recorded during the three and nine months ended August 31, 2022 for impairment charges. 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. 34 Table of contents In July 2023, we offered a voluntary severance program ("VSP") to certain co-workers in the United States as part of our cost optimization efforts related to the Merger. We incurred $37.2 million of costs in connection with the VSP during the three and nine months ended August 31, 2023, including $30.0 million of severance costs and $7.2 million of duplicative labor costs. During the three and nine months ended August 31, 2023 and 2022, acquisition and integration expenses related to the Merger were composed of the following: Three Months Ended Nine Months Ended August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 (in thousands) Professional services costs $ 5,036 $ 6,514 $ 16,157 $ 20,455 Personnel and other costs 9,430 11,699 33,712 27,047 Long-lived assets charges and termination fees 5,078 8,693 29,067 61,564 Stock-based compensation 11,912 12,911 34,472 39,376 Voluntary severance program costs 37,178 — 37,178 — Total $ 68,634 $ 39,817 $ 150,586 $ 148,442 During the three months ended August 31, 2023, acquisition and integration expenses related to the Merger increased, compared to the prior year period, primarily due to costs incurred related to the VSP. During the nine months ended August 31, 2023, acquisition and integration expenses related to the Merger slightly increased, compared to the prior year period, primarily due to costs incurred related to the VSP, offset by the decrease in long-lived assets charges and termination fees. GBO 2 Program Prior to the Merger, Tech Data implemented its GBO 2 Program that includes investments to optimize and standardize processes and apply data and analytics to be more agile in a rapidly evolving environment, increasing productivity, profitability and optimizing net-working capital. TD SYNNEX continued this program in conjunction with the Company’s integration activities. Acquisition, integration and restructuring expenses related to the GBO 2 Program are primarily comprised of restructuring costs and other costs. Restructuring costs are comprised of severance costs and other associated exit costs, including certain consulting costs. 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 $3.0 million and $6.6 million during the three months ended August 31, 2023 and 2022, respectively. We incurred acquisition, integration, and restructuring costs under the GBO 2 Program of $9.0 million and $23.8 million during the nine months ended August 31, 2023 and 2022, respectively. During the three and nine months ended August 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. 35 Table of contents 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 and nine months ended August 31, 2023 and 2022: Three Months Ended Percent Change Nine Months Ended Percent Change August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 Operating Income and Operating Margin - Consolidated (in thousands) (in thousands) Revenue $ 13,960,615 $ 15,356,085 $ 43,148,110 $ 46,095,853 Operating income $ 240,233 $ 241,534 (0.5) % $ 791,278 $ 716,711 10.4 % Acquisition, integration and restructuring costs 71,586 46,418 159,597 172,266 Amortization of intangibles 74,029 73,270 220,571 224,082 Share-based compensation 8,530 6,643 29,252 20,431 Purchase accounting adjustments 2,427 30,418 15,047 94,971 Non-GAAP operating income $ 396,805 $ 398,283 (0.4) % $ 1,215,745 $ 1,228,461 (1.0) % Operating margin 1.72 % 1.57 % 1.83 % 1.55 % Non-GAAP operating margin 2.84 % 2.59 % 2.82 % 2.67 % Consolidated operating income slightly decreased during the three months ended August 31, 2023, compared to the prior year period, primarily due to the decline in revenues in our Endpoint Solutions portfolio, costs incurred related to the VSP and higher personnel costs, offset by an improvement in gross margin due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and margin expansion in high-growth technologies, and a decrease in purchase accounting adjustments related to the Merger. Consolidated operating income increased during the nine months ended August 31, 2023, compared to the prior year period, primarily due to an improvement in gross margin due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and margin expansion in high-growth technologies, and a decrease in purchase accounting adjustments related to the Merger, partially offset by the decline in revenues in our Endpoint Solutions portfolio and higher personnel costs. Consolidated operating margin increased during the three and nine months ended August 31, 2023, compared to the prior year period, due to an increase in gross margin due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and margin expansion in high-growth technologies, 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 and higher personnel costs. Consolidated non-GAAP operating income decreased during the three and nine months ended August 31, 2023, compared to the prior year period, primarily due to the decrease in revenue in our Endpoint Solutions portfolio and higher personnel costs, partially offset by an increase in gross margin due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and margin expansion in high-growth technologies. Consolidated non-GAAP operating margin increased during the three and nine months ended August 31, 2023, compared to the prior year period, primarily due to an increase in gross margin due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and margin expansion in high-growth technologies, partially offset by higher selling, general and administrative expenses as a percentage of revenue due to the decrease in revenues in our Endpoint Solutions portfolio and higher personnel costs. 36 Table of contents Three Months Ended Percent Change Nine Months Ended Percent Change August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 Operating Income and Operating Margin - Americas (in thousands) (in thousands) Revenue $ 8,879,585 $ 9,900,779 $ 26,217,631 $ 28,751,985 Operating income $ 192,606 $ 180,471 6.7 % $ 559,370 $ 511,813 9.3 % Acquisition, integration and restructuring costs 60,393 33,545 122,682 102,964 Amortization of intangibles 42,437 43,523 127,233 130,619 Share-based compensation 6,325 5,036 21,076 16,126 Purchase accounting adjustments — 19,564 — 56,132 Non-GAAP operating income $ 301,761 $ 282,139 7.0 % $ 830,361 $ 817,654 1.6 % Operating margin 2.17 % 1.82 % 2.13 % 1.78 % Non-GAAP operating margin 3.40 % 2.85 % 3.17 % 2.84 % Americas operating income increased during the three and nine months ended August 31, 2023, as compared to the prior year period, primarily due to increased gross margin in the region due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and margin expansion in high-growth technologies, and a decrease in purchase accounting adjustments related to the Merger, partially offset by the decrease in revenue in our Endpoint Solutions portfolio, costs incurred related to the VSP and higher personnel costs. Americas operating margin increased during the three and nine months ended August 31, 2023, compared to the prior year period, primarily due to increased gross margin in the region due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and margin expansion in high-growth technologies, 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 in our Endpoint Solutions portfolio, costs incurred related to the VSP and higher personnel costs. Americas non-GAAP operating income increased during the three and nine months ended August 31, 2023, compared to the prior year period, primarily due to increased gross margin in the region due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and margin expansion in high-growth technologies, partially offset by the decrease in revenue in our Endpoint Solutions portfolio and higher personnel costs. Americas non-GAAP operating margin increased during the three and nine months ended August 31, 2023, compared to the prior year period, primarily due to increased gross margin in the region due to product and customer mix, including an increase in revenue in our Advanced Solutions portfolio and margin expansion in high-growth technologies, partially offset by higher selling, general and administrative expenses as a percentage of revenue due to the decrease in revenues and higher personnel costs. 37 Table of contents Three Months Ended Percent Change Nine Months Ended Percent Change August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 Operating Income and Operating Margin - Europe (in thousands) (in thousands) Revenue $ 4,227,590 $ 4,681,797 $ 14,209,488 $ 14,914,196 Operating income $ 29,531 $ 44,260 (33.3) % $ 157,793 $ 150,117 5.1 % Acquisition, integration and restructuring costs 10,304 11,313 33,750 62,112 Amortization of intangibles 30,970 29,103 91,469 91,543 Share-based compensation 1,809 1,286 6,851 3,366 Purchase accounting adjustments 2,427 10,854 15,047 38,839 Non-GAAP operating income $ 75,041 $ 96,816 (22.5) % $ 304,910 $ 345,977 (11.9) % Operating margin 0.70 % 0.95 % 1.11 % 1.01 % Non-GAAP operating margin 1.78 % 2.07 % 2.15 % 2.32 % Europe operating income decreased during the three months ended August 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 nine months ended August 31, 2023, compared to the prior year period, primarily due to a decrease in acquisition, integration, and restructuring costs, the impact of lower purchase accounting adjustments related to the Merger and an increase in gross margin due to product and customer mix, partially offset by the decline in revenues in our Endpoint Solutions portfolio and higher personnel costs. Europe operating margin decreased during the three months ended August 31, 2023, compared to the prior year period, primarily due to higher selling, general and administrative expenses as a percentage of revenue due to the decrease in revenues and higher personnel costs, partially offset by improved 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 margin increased during the nine months ended August 31, 2023, compared to the prior year period, primarily due to a decrease in acquisition, integration, and restructuring costs, the impact of lower purchase accounting adjustments related to the Merger and 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 and an increase in personnel costs. Europe non-GAAP operating income decreased during the three and nine months ended August 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 margin decreased during the three and nine months ended August 31, 2023, compared to the prior year period, primarily due to higher selling, general and administrative expenses as a percentage of revenue due to the decrease in revenues and an increase in personnel costs, partially offset by an increase in gross margin due to product and customer mix. 38 Table of contents Three Months Ended Percent Change Nine Months Ended Percent Change August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 Operating Income and Operating Margin - APJ (in thousands) (in thousands) Revenue $ 853,440 $ 773,509 $ 2,720,991 $ 2,429,672 Operating income $ 18,096 $ 16,803 7.7 % $ 74,115 $ 54,781 35.3 % Acquisition, integration and restructuring costs 889 1,560 3,165 7,190 Amortization of intangibles 622 644 1,869 1,920 Share-based compensation 396 321 1,325 939 Non-GAAP operating income $ 20,003 $ 19,328 3.5 % $ 80,474 $ 64,830 24.1 % Operating margin 2.12 % 2.17 % 2.72 % 2.25 % Non-GAAP operating margin 2.34 % 2.50 % 2.96 % 2.67 % During the three months ended August 31, 2023, APJ operating income and non-GAAP operating income were relatively flat, compared to the prior year period. During the nine months ended August 31, 2023, APJ operating income and non-GAAP operating income increased, compared to the prior year period, primarily due to increased sales in the region due to high-growth technologies partially offset by higher personnel costs. During the three months ended August 31, 2023, APJ operating margin and non-GAAP operating margin were relatively flat, compared to the prior year period. During the nine months ended August 31, 2023, APJ operating margin and non-GAAP operating margin increased, compared to the prior year period, primarily due to lower selling, general and administrative expenses as a percentage of revenue. Interest Expense and Finance Charges, Net Three Months Ended Percent Change Nine Months Ended Percent Change August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 (in thousands) (in thousands) Interest expense and finance charges, net $ 67,703 $ 52,119 29.9 % $ 222,188 $ 142,430 56.0 % Percentage of revenue 0.48 % 0.34 % 0.51 % 0.31 % 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 nine months ended August 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 $12.5 million and $36.2 million in the three and nine months ended August 31, 2023, respectively, compared to $5.0 million and $11.9 million in the three and nine months ended August 31, 2022, respectively. Other Expense, Net Three Months Ended Percent Change Nine Months Ended Percent Change August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 (in thousands) (in thousands) Other expense, net $ 2,371 $ 1,852 28.0 % $ 6,691 $ 12,375 (45.9) % Percentage of revenue 0.02 % 0.01 % 0.02 % 0.03 % 39 Table of contents 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. During the three months ended August 31, 2023, our other expense, net was relatively flat, compared to the prior year period. During the nine months ended August 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 Change Nine Months Ended Percent Change August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 (in thousands) (in thousands) Provision for income taxes $ 30,897 $ 38,728 (20.2) % $ 123,030 $ 131,830 (6.7) % Percentage of income before income taxes 18.16 % 20.65 % 21.88 % 23.46 % Income taxes consist of our current and deferred tax expense resulting from our income earned in domestic and foreign jurisdictions. Income taxes for the interim periods presented have been included in the accompanying Consolidated Financial Statements on the basis of an estimated annual effective tax rate. During the three months ended August 31, 2023, our income tax expense decreased, compared to the prior year period, primarily due to lower income during the period along with a lower effective tax rate. During the nine months ended August 31, 2023, our income tax expense 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 nine months ended August 31, 2023 as compared to the three and nine months ended August 31, 2022, primarily due to the utilization of tax credits earned in certain jurisdictions and the relative mix of earnings and losses within the taxing jurisdictions in which we operate, partially offset by a tax benefit recorded in the prior year related to a capital loss carryback. 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 Nine Months Ended August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 Net Income - Consolidated (in thousands) Net income $ 139,262 $ 148,835 $ 439,369 $ 430,076 Acquisition, integration and restructuring costs 73,897 48,730 166,446 178,691 Amortization of intangibles 74,029 73,270 220,571 224,082 Share-based compensation 8,530 6,643 29,252 20,431 Purchase accounting adjustments 2,427 30,418 15,047 94,971 Income taxes related to the above (38,375) (39,419) (102,700) (121,827) Income tax capital loss carryback benefit — (5,053) — (8,299) Non-GAAP net income $ 259,770 $ 263,424 $ 767,985 $ 818,125 40 Table of contents Three Months Ended Nine Months Ended Diluted Earnings per Common Share August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022 Diluted EPS (1) $ 1.49 $ 1.55 $ 4.66 $ 4.47 Acquisition, integration and restructuring costs 0.79 0.50 1.76 1.86 Amortization of intangibles 0.79 0.76 2.34 2.33 Share-based compensation 0.09 0.07 0.31 0.21 Purchase accounting adjustments 0.03 0.32 0.16 0.99 Income taxes related to the above (0.41) (0.41) (1.09) (1.27) Income tax capital loss carryback benefit — (0.05) — (0.09) Non-GAAP diluted EPS $ 2.78 $ 2.74 $ 8.14 $ 8.50 _________________________ (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 0.7% of net income for both the three and nine months ended August 31, 2023, and was approximately 0.6% of net income for both the three and nine months ended August 31, 2022. Liquidity and Capital Resources Cash Conversion Cycle Three Months Ended August 31, 2023 November 30, 2022 August 31, 2022 (Amounts in thousands) Days sales outstanding ("DSO") Revenue (a) $ 13,960,615 $ 16,247,957 $ 15,356,085 Accounts receivable, net (b) 8,892,130 9,420,999 8,114,004 Days sales outstanding (c) = ((b)/(a))*the number of days during the period 59 53 49 Days inventory outstanding ("DIO") Cost of revenue (d) $ 12,989,342 $ 15,188,238 $ 14,440,055 Inventories (e) 7,462,162 9,066,620 9,755,228 Days inventory outstanding (f) = ((e)/(d))*the number of days during the period 53 54 62 Days payable outstanding ("DPO") Cost of revenue (g) $ 12,989,342 $ 15,188,238 $ 14,440,055 Accounts payable (h) 12,485,180 13,988,980 13,718,980 Days payable outstanding (i) = ((h)/(g))*the number of days during the period 89 84 88 Cash conversion cycle ("CCC") (j) = (c)+(f)-(i) 23 23 23 41 Table of contents Cash Flows Our business is working capital intensive. Our working capital needs are primarily to finance accounts receivable and inventory. 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. As a general rule, when sales volumes are increasing, our net investment in working capital dollars typically increases, which generally results in decreased cash flow generated from operating activities. Conversely, when sales volumes decrease, our net investment in working capital dollars typically decreases, which generally results in increases in cash flows generated from operating activities. We calculate CCC as days of the last fiscal quarter’s revenue outstanding in accounts receivable plus days of supply on hand in inventory, less days of the last fiscal quarter’s cost of revenue outstanding in accounts payable. Our CCC was 23 days as of August 31, 2023, which remained flat as compared to November 30, 2022 and August 31, 2022 as our net working capital balances declined on a consistent basis with the decrease in revenues in the current quarter as compared to prior periods. To increase our market share and better serve our customers, we may further expand our operations through investments or acquisitions. We expect that any such expansions would require an initial investment in working capital, personnel, facilities and operations. These investments or acquisitions would likely be funded primarily by our existing cash and cash equivalents, additional borrowings, or the issuance of securities. Operating Activities Net cash provided by operating activities was $1.2 billion during the nine months ended August 31, 2023, compared to net cash used in operating activities of $351.8 million during the nine months ended August 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 inventories and accounts receivable, partially offset by a decrease in accounts payable. Investing Activities Net cash used in investing activities during the nine months ended August 31, 2023 and 2022 was $113.2 million and $77.0 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 used in financing activities during the nine months ended August 31, 2023 and 2022 was $405.6 million and $159.2 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 $277.8 million during the nine months ended August 31, 2023 compared to $83.0 million during the nine months ended August 31, 2022. In addition, we paid stockholder dividends of $98.9 million and $86.2 million during the nine months ended August 31, 2023 and 2022, respectively. Capital Resources Our cash and cash equivalents totaled $1.3 billion and $522.6 million as of August 31, 2023 and November 30, 2022, respectively. Our cash and cash equivalents held by international subsidiaries are no longer subject to U.S. federal tax on repatriation into the United States. Repatriation of some foreign balances is restricted by local laws. Historically, we have fully utilized and reinvested all foreign cash to fund our foreign operations and expansion. If in the future our intentions change, and we repatriate the cash back to the United States, we will report in our Consolidated Financial Statements the impact of state and withholding taxes depending upon the planned timing and manner of such repatriation. Presently, we believe we have sufficient resources, cash flow and liquidity within the United States to fund current and expected future working capital, investment and other general corporate funding requirements. We believe that our available cash and cash equivalents balances, cash flows from operations and our existing sources of liquidity, including available capacity under our borrowing facilities, will be sufficient to enable the repayment of $700.0 million of our Senior Notes due in August 2024 and satisfy our current and planned working capital and investment needs for the next twelve months in all geographies. We also believe that our longer-term working capital, planned capital expenditures, anticipated stock repurchases, dividend payments and other general corporate funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities and future financial market activities. 42 Table of contents Credit Facilities and Borrowings In the United States, we have an accounts receivable securitization program to provide additional capital for our operations (the "U.S. AR Arrangement"). Under the terms of the U.S. AR Arrangement, we and our subsidiaries that are party to the U.S. AR Arrangement can borrow up to a maximum of $1.5 billion based upon eligible trade accounts receivable. The U.S. AR Arrangement has a maturity date of December 2024. 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. The TD SYNNEX Credit Agreement has a maturity date of September 2026, in the case of the TD SYNNEX revolving credit facility, subject to two one-year extensions upon our prior notice to the lenders and the agreement of the lenders to extend such maturity date. The outstanding amount of our borrowings under the U.S. AR Arrangement and the TD SYNNEX revolving credit facility may fluctuate in response to changes in our working capital and other liquidity requirements. There were no amounts outstanding under the U.S. AR Arrangement or the TD SYNNEX revolving credit facility at August 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 $589.1 million in borrowing capacity as of August 31, 2023. Our borrowings on these facilities vary within the period primarily based on changes in our working capital. There was $164.9 million outstanding on these facilities at August 31, 2023, at a weighted average interest rate of 5.78%, 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. We have no reason to believe that these and other arrangements will not be renewed or replaced as we continue to be in good credit standing with the participating financial institutions. We have had similar borrowing arrangements with various financial institutions throughout our years as a public company. We had total outstanding borrowings of approximately $4.1 billion as of August 31, 2023 and November 30, 2022. Our outstanding borrowings include Senior Notes of $2.5 billion at August 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 August 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. Accounts Receivable Purchase Agreements We have uncommitted supply-chain financing programs under which trade accounts receivable owed by certain customers may be acquired, without recourse, by certain financial institutions. Available capacity under these programs is dependent upon the level of our trade accounts receivable eligible to be sold into these programs and the financial institutions’ willingness to purchase such receivables. In addition, certain of these programs also require that we continue to service, administer and collect the sold accounts receivable. At August 31, 2023 and November 30, 2022, we had a total of $834.5 million 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 $12.5 million and $36.2 million in the three and nine months ended August 31, 2023, respectively, and $5.0 million and $11.9 million in the three and nine months ended August 31, 2022, respectively. Covenant Compliance Our credit facilities have a number of covenants and restrictions that require us to maintain specified financial ratios. They also limit our ability to incur additional debt, create liens, enter into agreements with affiliates, modify the nature of our business, and merge or consolid ate. As of August 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. 43 Table of contents Critical Accounting Policies and Estimates During the nine months ended August 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 For a summary of recent accounting pronouncements and the anticipated effects on our consolidated financial statements, see Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements, which can be found under Part I, Item 1 of this Report. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk For a description of the Company’s market risks, see “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended November 30, 2022. No material changes have occurred in our market risks since November 30, 2022.