TD SYNNEX Corporation

Good morning. My name is Brent and I will be your conference operator today. I would like to welcome everyone to the TD Cinex first quarter fiscal 2022 earnings call. Today's call is being recorded and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. At this time, for opening remarks, I would like to pass the call over to Liz Morali, Head of Investor Relations, Lynch, you may begin.

Thank you, and good morning, everyone. Thank you for joining us for today's call. With me today are Rich Hume, CEO, and Marshall Witt, CFO. Before we continue, let me remind everyone that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events. including statements about integration progress, strategy, demand, free cash flow, capital distribution, leverage, backlog and supply, macroeconomy, and investments. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release in the Form 8K we filed today and in the Risk Factors section of our Form 10K and our other reports and filings with the SEC. We do not intend to update any forward-looking statements. Also, during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8K available on our Investor Relations website, ir.sinex.com. This conference call is the property of TD Sinex and may not be recorded or rebroadcast without our permission. I will now turn the call over to Rich. Rich?

Good morning and thank you for joining our call. I want to take a moment up front to acknowledge the ongoing devastation and human suffering occurring in Ukraine. We join governments, businesses and the global community in condemning the unprovoked invasion of the sovereign democratic state of Ukraine by Russia. While we do not have a presence nor direct business in Ukraine or Russia, in normal circumstances, we do make very limited shipments on behalf of our customers into Russia and Belarus. In addition, at this time, we have suspended any new transactions with or shipments of products to entities or individuals located in Russia, Belarus, and the DNR or LNR regions of Ukraine. Importantly, we do have Ukrainian co-workers throughout Eastern Europe and in the U.S., and we are committed to supporting them through this difficult time, including making financial contributions to humanitarian aid efforts such as UNICEF's Protect Children in Ukraine campaign. Corporate giving has and will continue to be an important pillar of our overall environmental, social, and governance framework. From a broader ESG perspective, there is a lot of exciting work happening at TD Cynics, and we look forward to sharing more details on our goals and initiatives at our Investor Day next week. Now I'd like to comment on our quarterly results. Q1 provided a strong start to our fiscal year, with top and bottom line results ahead of our expectations. The benefits of our enhanced global end-to-end portfolio are clear, and we saw a strong and broad-based demand across technology types and geographic regions. Our customers are quickly adapting to the new normal hybrid work environment, which is creating the need for additional IT infrastructure, devices, and services to support both return-to-office and work-from-home setups. Based on the breadth and depth of our portfolio, we are able to deliver a comprehensive array of technology solutions that customers both small and large require. In addition, the need for IT infrastructure solutions, whether on-premises or in the cloud, gained momentum throughout the quarter. With businesses opening back up, we saw our customers responding to stronger end-user demand. From a regional perspective, all three regions performed at or better than our expectations, despite selective lockdowns in some countries due to the COVID Omicron variant. The ongoing supply chain disruptions continued as we anticipated in Q1, though we began to see some early signs of marginal improvement in our backlog. Despite these indications, our total backlog level continues to be elevated, and we believe it's comprised of both current customer needs as well as future orders based on expended lead times. From a strategic perspective, we are executing well on our plans and look forward to sharing more with you at our Investor Day next Tuesday. At that event, you will hear much more about our strategic framework and views on the evolution of the IT distribution ecosystem, with presentations from many members of our executive leadership team. Our integration efforts are executing as planned, and we are on track to achieve our merger-related synergy targets. Our Americas ERP system migration is proceeding according to plan, and we've begun to migrate some of our Canadian vendors and some net new U.S. vendors onto the legacy Cinex platform, which we call CIS. We are taking a measured approach to this project to ensure a seamless experience for our customers and vendors. Additionally, we have made very good progress on aligning our global policies across a variety of areas. And as I frequently said, aligning our one global TD Cynics corporate culture is critical, and we have made very good progress there too. We have introduced a servant leadership model across the organization and are looking forward to bringing over 100 of our top leaders together for an in-person leadership seminar next month. We see this as an important journey and are very pleased with the progress we've made so far. As we look forward to the fiscal Q2 and beyond, there are a variety of inputs informing our views. We continue to believe in the technology adoption trends fueling IT spending in 2022 and beyond. At the same time, we are cognizant that IT spending has historically been correlated to GDP. We recognize that more vendor partners understand the value of IT distribution, and we believe they are choosing TD Cynics because of our extensive global footprint and broad portfolio, which creates unique capabilities and market opportunities. Some offsetting headwinds to this may be potential impacts to the macroeconomy and supply chain from the war in Ukraine and recent COVID-related lockdowns in Asia. We are closely monitoring developments in both areas. One thing is for certain, our teams have proven their capabilities in navigating a challenging and unpredictable environment over the last two years, and we will continue to remain singularly focused on enabling success for our customers and vendors. I will now pass it over to Marshall, who will provide additional details on our financial performance. Marshall?

Thanks, Rich, and thank you to everyone today for joining us on our call. We had a strong start to the fiscal year, with results ahead of our expectations. We continued to see a challenged supply environment. As expected, and given excellent focus and execution, our teams were able to deliver performance at or better than we anticipated across all three geographic regions. Total worldwide revenue came in at $15.5 billion, up 1.5% from the prior year when normalizing for the merger. When adjusted for constant currency and the ASC 606 revenue policy alignment related to the merger, revenue grew approximately 6%. Gross profit was $969 million, and gross margin was 6.3%. reflecting a favorable mix of products and good execution by our team. Total adjusted SG&A expense was $562 million, representing 3.6% of revenue and in line with our expectations. Non-GAAP operating income was $432 million, and non-GAAP operating margin was 2.8%. Non-GAAP interest expense and finance charges were $41 million, and the non-GAAP expected tax rate was approximately 24% and in line with our expectations. Total non-GAAP net income was $292 million, and non-GAAP diluted EPS was $3.03. Now turning to the balance sheet. We ended the quarter with cash and cash equivalents of $510 million and debt of $5 billion. Our gross leverage ratio was 3.1 times and net leverage was 2.8 times. Accounts receivable totaled $8.7 billion and inventories totaled $7.7 billion. Our net working capital at the end of the first quarter was $4.3 billion. Our cash conversion cycle for the first quarter was 24 days and higher than Q4 fiscal 21, which was 14 days. Cash used in operations was approximately $1.3 billion in the quarter. This use of cash was primarily due to a temporary increase in networking capital to support revenue growth and strategic inventory purchases that are expected to sell through in the next three to four months. From a shareholder return perspective, for the quarter, our Board of Directors has approved a cash dividend of $0.30 per common share. The dividend is expected to be paid on April 22, 2022, to stockholders of record as of the close of business on April 8, 2022. As we mentioned in our last earnings call, we are employing a capital allocation framework that targets both dividends and share repurchases as shareholder returns vehicles. We intend to do share repurchases of about $100 million in fiscal 22 and have already bought back $25 million in Q1 and expect to repurchase another $25 million in Q2. As Rich mentioned, our integration efforts are going well, and we continue to make good progress on realizing merger cost synergies that are in line with our plan. As I've mentioned previously, these opportunities span a variety of areas, including optimization and efficiency improvements via the legacy tech data GBO program, as well as traditional deal-related synergies across the spectrum of IT systems, corporate costs, facilities rationalization, and taxes and interest. As we contemplate the full fiscal year, we expect revenue growth approaching mid-single digits, which includes an approximate $1.1 billion of headwind due to the alignment of accounting policies, and a headwind of approximately $1.2 billion due to FX impacts from the weakening of the euro. We now expect non-GAAP EPS to be $11.15 to $11.65 per share, which is an increase from $10.80 to $11.20 provided in our last quarterly update. Our updated forecast also reflects an expected $0.18 headwind from FX. Given our upcoming Investor Day, we wanted to provide you with an updated view of the full year. Historically, we provide quarterly guidance and will return to our historical precedent next quarter. Looking more specifically at fiscal Q2, it's a bit more difficult to forecast with precision given the increased level of macroeconomic uncertainty due to the war in Ukraine, potential COVID impacts, rising inflation, and the continuing supply chain constraints. Against that backdrop, our view encompasses our current estimates given the information we currently have for Q2 and the full year. For fiscal Q2, we expect total revenue to be in the range of $14.8 billion to $15.8 billion, which, when adjusted for currency impacts of approximately $300 million and ASE 606 revenue policy alignments related to the merger of approximately $300 million, this equates to growth of around 3% on a year-on-year basis. Although we begin to see some stabilization in our backlog in Q1, the level continues to be elevated compared to historical levels, and we estimate the impact to fiscal Q2 revenue will be approximately 4% to 5%. Non-GAAP net income is expected to be in the range of $231 million to $270 million, and non-GAAP diluted EPS is expected to be in the range of $2.40 to $2.80 per diluted share Based on weighted average shares outstanding of approximately $96 million, non-GAAP interest expense is expected to be approximately $37 million, and we expect the non-GAAP tax rate to be approximately 24%. Please note that these statements regarding our expectations for our fiscal second quarter of 2022 and full year of 2022 are forward-looking and that our actual results may differ materially. We now will take your questions. Operator?

At this time, I would like to remind everyone, in order to ask a question, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. In the interest of time, we request you limit yourself to one question and one follow-up question. Your first question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open.

Hi, thank you for taking my questions. Rich, I was wondering if you can comment on the margin differential between the Cinex side of the business and the text data side of the business, and how quickly do you expect that gap to close? And specifically, you've talked about $100 million this year of deal synergies, and some of that is from the GBO2 initiative. So I was just wondering, like, how much of these are helping to harmonize the margins between the two sides of the business? So any comments you can provide on that would be helpful.

Sure. As a generalization, when you take a look at the margin differentials between the legacy businesses, you'll find that the Americas margins are not very different, but rather it's the regional mix of the margins that, you know, drive some of the difference that you've seen between the two companies. For many companies within the IT industry in Europe, the margin profiles are a bit lower when compared to the America's profiles. And that generally is due to cost driven by complexity of regional, I'm sorry, country structures within that region. So that's kind of the way we think about the margin differentials. And from a European perspective, just to close it out, So we are really happy with our European financial model. The return on invested capital attributes of that model are quite good. And so, you know, that's the way we think about it. And in addition to that, one last thought around Europe is there is more intensity around the, what I would call the endpoint part of the business, We do business in Europe and actually carry some mobility lines that are fairly significant. And those mobility lines, again, although they are lower margin attributes, the return on invested capital attributes of those segments are really, really good. So that's sort of the summary. In addition to that, from a synergy perspective, again, just to recap what we had committed to at time of deal, $100 million in year one, $100 incremental in year two for $200 in total. We feel good about where we're at from the execution of that overall plan. Call it on track, actually, tactically running a bit ahead relative to our expectations there.

Rupu, this is Marshall. Just to add a little color to the $100 million synergies for year one, just as a reminder, an element of that is below operating income in the form of better taxes and interest. So your question to how do margins benefit, they certainly do from an SG&A perspective and from a GBO2 initiative, but there's also below-the-line benefits as well.

Okay. Thanks for all the details on that. I appreciate it. Can I ask you, Rich, you've also had time now to look at the line cards for the two companies. Are there parts of the line cards that you want to enhance, or similarly, are there parts that you would like to prune?

So let me move on to the enhanced piece for just one moment. There are always parts of the line card that you would like to enhance, and it usually has to do with the emergence of new entrants, if you will, into the market. So we're always focused in carrying out the business development to make sure that we capture our fair share of those new entrants. overall but we're very satisfied as a generalization with our line card but always looking to approve it is the best way to net it as it relates to uh pruning you know i know that uh in the past when tech data was a public company we talked about some portfolio activities that were taking place as a generalization most of those portfolio activities uh you know I would say that were material have been completed in the past. So right now we're kind of full speed ahead relative to, you know, executing our business. And there are no anticipated significant prunings, if you will, that we foresee at the current time.

Okay, thanks for that. And if I can just squeak or squeeze one more in. Marshall, you talked about strategic inventory purchases. Looks like inventory was up 17% sequentially, but it is an environment where you need to plan for future revenues. So maybe can you just talk about how you see the cash conversion cycle going forward and how should we think about free cash flow this year?

Sure. So it was elevated. We did call out that it was temporary. The cash conversion landed around 24 days for the quarter. We thought coming out of Q4 we'd see a two- to four-day deterioration to about 16%. Think about this, Rufu, every day is around 175 in terms of just cash generation or cash usage. So that's about six to seven days of increase that we saw. We still believe, as we think through the rest of 22 and our thoughts on 23, being our second year of being together, that the $1 billion of free cash flow is still our target, and we expect to be able to achieve and hit that. The other aspects to that, as we referenced earlier in our prepared remarks, is our capital allocation strategy and how we plan to deploy that. We think that there are still significant opportunities for us from the overall program management on various customer and vendor supply financing. Those synergies and benefits to us we think are significant and will continue to be brought into the overall management of our programs going forward.

Thank you for taking my questions, and congrats on the strong execution in the quarter.

Thank you. Your next question is from the line of Ananda Barrow with Loop Capital. Your line is open.

Hey, good morning, guys, and congrats on the strong results, and thanks for taking the question. I guess, yeah, just a couple for me, if I could. You guys mentioned a couple of times that the results were above your expectations or ahead of your expectations for top line. Can you talk about what you saw, you know, as being the drivers there and including anything that's Cinex specific? And then I have a follow-up. Thanks.

Yeah. So, Ananda, good morning to you. Hope you're doing well. A couple of thoughts. You know, we had provided a point of view early on, uh that we we as we move through this year that we would see an acceleration within the data center we call that segment advanced solutions and then maybe a little bit of a moderation as it relates to the pc ecosystem which we call endpoint and in fact um You know, it's playing out that way. Obviously, there's a lot of backlog still to be worked off within the endpoint segment, but as we had stated in the prepared comments, You know, moving through the last quarter and into this quarter and throughout the quarter, you know, we've seen more strength within the advanced solution segment. And, you know, the theory behind that is obviously with COVID and people being remote, the project-based business was a bit delayed. You know, people weren't coming in to deploy those projects. And, you know, now I think they're beginning to take root. So that's what I would state relative to how we had seen. So to be specific, a bit of the overachievement that we're talking about was primarily due to that advanced solution segment.

That's super helpful. And I guess on the follow-up, just going over to the PC business, two things. Could you just give us what your view is? sort of like throughout the year from your current baseline business, like what you're seeing. So I guess it's more of like a sequential, you know, kind of through the year view. Do you think things are stable here from a shipment go forward basis? I know the year over year might look a little bit different, but from today's current baseline book. And then just any color on Hive would be great too. And that's it for me. Thanks, guys.

Yeah, so I'll handle the PC piece and then maybe hand it off to Marshall to give his comments around the hive piece. But on the PC piece, again, I apologize for being a little bit repetitive, but the expectation was first half of the year, you know, moderate – I'm sorry, a bit robust moving to moderate and then sort of maintaining that moderate, you know, through the rest of the year. And, you know, I think that that still is the way I would – would couch it as you know there there there still are um things which are sort of driving uh demand within that space as we come through the operating system transitions and you know, every company is very conscientious or more than ever about security and some of the attributes in the new operating systems, applications, et cetera, tend to help drive continuous refresh. So, but, you know, allow me to kind of put it in sort of moderate category as opposed to the robust category sort of moving forward to the back half of the year. And then expectation would be that the advanced piece, as I said earlier, would have some pretty good growth attributes moving through the next couple of quarters. Marshall, on the Hive piece.

Ananda, Hive had a great quarter. Broadly speaking, hyperscale infrastructure continues to grow in the double-digit category. That's an industry comment, and Hive is certainly benefiting from that. In the quarter, we saw similar distribution-like strength, and what that represents is our capability to provide fares, lose, replacement parts to our hyperscale players on a global basis that continued to show strength in Q1. And as we spoke to previously, Hive has done a tremendous job of enabling their overall end-to-end solutions portfolio to further increase current customer business and also expand to new customers.

marshall that's super helpful any any anything that we should be aware of uh as to why if hyperscale build outs continue this year to be robust that hive wouldn't be a beneficiary of that certainly they're correlated you know as you know it's a lumpy business so speaking of lumpy and q2 i've had a very strong prior year q2 so it's a tougher compare

But if you think about the first half, high revenue and operating income grew, and we'd expect, as you look out on an annual basis, that there will be a correlation between hyperscale infrastructure growth and high opportunities.

I think it's a good reminder that our feeling relative to that segment is that, as Marshall had just stated, I'm reiterating, that we expect to have really good growth attributes within that business annually. But, you know, there are ups and downs, quarter, quarter, quarter, you know, depending on the ebb and flow of, you know, requirements. And, you know, sometimes you run into compares that are a bit stronger. But we like the fundamentals of that business.

Thanks a lot, guys. That's super helpful.

Thank you, Ananda. Appreciate it. Your next question is from the line of Keith Housem with North Coast Research. Your line is open.

Good morning, guys. Good to talk to you again. Just as I look at your second quarter guidance, it seems like there's perhaps a setback in terms of the operating margins from the first quarter. And you may perhaps have answered this question in part by the high response, but anything we should think about in terms of the second quarter operating margin setback?

Good morning, Keith. I hope you're doing well.

Hey, Keith, this is Marshall. I'll take it first, and then Rich can provide any other commentary. Keith, what we're seeing just in terms of the seasonal behaviors of the collective organizations coming together is that Q4 and Q1 are behaving very similarly, meaning revenue profiles, margin profiles are fairly consistent. You can see that in the numbers we just posted for quarter one. We're also seeing some seasonal relationships between quarter two and quarter three. In Q1, that has typically been a stronger legacy tech data quarter, where AS, demand, and business is higher. That has a higher margin profile. In Q2, what we're seeing is a more balanced profile between AS and ES, such that margins, historically what we're seeing, traditionally come down 30 basis points, plus or minus. So most of that is just the seasonal relationships we're starting to see as a combined organization coming together. Nothing in terms of structural changes in gross profit or gross margin, and nothing in terms of structural changes in what we're seeing in terms of operating margins.

All right, that's helpful. I appreciate it. And then in terms of the inflationary environment, right? I mean, we've had a lot of price increases from the vendors over the past year. And you guys, I'm sure seeing some inflationary wage pressures. But can you talk a little bit about the balance that you guys are seeing in terms of the pricing pressure versus wage inflation? And how are you thinking about for the remainder of the year?

Yeah, so let me start, and then I can hand it off to Marshall Keith. So let's take it a piece at a time. First, as it relates to vendors and pricing, there are continuous price changes all moving, you know, in an upward direction as we move through time. So that has not abated. And obviously, the things that you talk about, all the way from more expensive components to more expensive labor to more expensive freight, I believe are all contributing to that. We, as you know, depending on the circumstance, can benefit from increased vendor prices, and it basically is – in those situations where we have inventory within, you know, our system and, you know, as they take their prices up, we take our prices up. So, you know, we'd anticipate that that's like a 5 to 10 BIP sort of, you know, margin advantage for us when that type of activity occurs. Then to kind of get closer to home, obviously the inflationary impacts that are happening through the world are happening to us as well. So we see our labor increasing a bit more than it has historically. In addition to that, cost of freight has been going up as well. And we are pretty determined to make sure that we stay on top on top of that and make sure that we're pricing that in um you know as we see it unfold and we try to make sure that uh you know we're staying uh aligned with those changes and and that's the way we sort of execute the business

And, Keith, the only thing I'd add to that is from quarter to quarter, we may see ebbs and flows where we may have a little bit higher cost associated with any of those inflationary pressures. But typically over the period of a year or more, we have effectively been able to cover whether that's through pass-throughs or productivity enhancements such that it doesn't erode our margin.

Great. Thanks, guys. Appreciate it.

Well, thank you. Your next question comes from the line of Matt Sheeran with Stifel. Your line is open.

Yes, thanks. Good morning, everyone. I have some follow-ups to the questions that were asked. Just one concerning the backlog commentary, Rich, that it sort of stabilizes. Could you differentiate that between the client device side versus the infrastructure side? Because we're still hearing very long lead times for things like networking and storage products. So could you parse that into those two segments?

Great question, Matt. It is the tale of two cities. So, you know, the marginal improvements that we're seeing in the backlog are clearly coming from the endpoint segment. However, we still have a growing and elevating backlog in the advanced solutions piece. You know, just about across the board, we see issues there, but in particular with the newest technologies, you know, the lead times are the longest. So it is the sale of two cities within the backlog for sure.

Okay. That's helpful. And then just regarding the question, the previous question on margins, you're sort of backing into gross margin. It looks like that's going to be down. Is that also a function of mix? And it looks like you had a really nice mix that helped drive that margin upside in the

into q1 matt just as a reminder and i should have said this earlier uh we have a great q1 investor deck in the td cynics investor website it helps show pre-merger consolidated results assuming that we were um together as of december 1st i just want to let you know that that helps having an apples to apples comparison We do expect gross margins and gross profits to improve, and that's a year-over-year comment for Q2 as we see it. And also, as I spoke to earlier with Keith or about Keith's question, the margin for op margin does come down sequentially, but year-over-year, we also expect it to improve.

My question was sequential. I get the year-over-year, but it looks like on a sequential basis, gross margin will be down. And so my question is, is that a seasonal mix issue? It is.

That's exactly right. It's back to the commentary I had with Keith that we do see just an overall play in AF versus ES between Q4 or Q1 and Q2, and that's what we're experiencing. Okay. All right. Thank you. You're welcome.

Your next question is from the line of Jim Suva with Citigroup. Your line is open.

Thank you, and good morning. I had one question, and that is on your full year outlook. It looks like you're taking it up very materially, if my memory's right. You're talking about 1115 to 65, and before I think it was like 1080 to 1120, so it looks like it's taken up materially. Can you, A, let me know if my math is right, but B, what are the main drivers behind that? Is it You know, better margins, better mix, because it seems like even three months ago, the backlog was, you know, really elevated and lengthening, giving you good visibility. So it seems like something materially has really improved here. And so I'm just kind of curious about that improvement, which is a positive. Thank you. Hi, Jim. This is Marshall. I'll start and let Rick finish with the end of the commentary. Yeah, we're very pleased to be able to raise the overall guidance for the year. I'll start with the backdrop of our confidence around mid-single-digit growth rate for the full year, and that's adjusted for AFC 606 and FX. I think the goodness that we're experiencing is in two categories. One is just the affirmation and ability to realize our synergies that we spoke to earlier. The second is the the better than performance in regards to the combined entities. So our teams working together, and I touched on this a little bit earlier, we are discovering and finding even more ways to be efficient that aren't being tracked through our synergies. Hard ROI to go after everything that we see that is beneficial, but we're seeing continued goodness at a better than expected rate in regards to our two enterprises coming together.

Yeah, Keith, I just wanted to provide some comments on that as well, if I could. I believe the midpoint of the margin that we had arranged that we'd given before was like $11, and if you go to the midpoint currently, it's $11.40, right? So to give you some confidence in the full year, You know, we delivered a, if you just go back to that baseline, we delivered a material portion of that in Q1, you know, relative to the 303. So I just want to make sure you have that perspective.

That's great.

And as a follow-up, you've talked a lot about your milestones for your cost synergies being on track, and then you gave the little, if not slightly a little bit better, which is good to hear. On the revenue side, you've not talked a whole lot about revenue synergies. Is that still... a discovery process? Is there something there? I'm just thinking about, you know, some approved vendors or some synergies or better rebates or better buying purchasing power. Again, the focus was a lot on the cost synergies. I'm just wondering about the revenue side of things, or is that something more that, you know, potentially we'll be hearing about next week at your investor day?

So we believe that the revenue, there are revenue synergy opportunities. And just the quick recap is You know, Legacy TD had a broader base of a data center business. Legacy Cinex, just to pick one category, had a stronger security practice. So we go in both directions with that, right? Now, what you have to remember is our ERPs are not yet consolidated. So whenever one of these opportunities show, there's a bit of a manual engagement, if you will, in a one of the legacy reps having to engage the other side to get it loaded into the system, et cetera. So it's our speculation that the unlock for that revenue synergy really comes to life when we get aligned in the ERPs. And then a salesperson will naturally be able to engage and then, you know, work with it within the system that they – in the common system that, you know, they have all their visibility to. So, you know, long story short, we see them, we hear about them, we take advantage as we can, but, you know, the unlock will be once we get to a consolidated platform.

And that consolidated platform, ERP, I know you mentioned you're going to do it very slow so there's no hiccups. It's kind of North America first and such. What's the timeline on that again?

Yeah, so, you know, we are already underway. We... have began to migrate customers and vendors in Canada. You know, we're getting, we'll get through Canada or a big segment of Canada, if you will, sort of April, May. Then we've already also started to board some of, you know, the mismatches in the line cards to the CIS system in the U.S., and then we'll get underway in the U.S. And we'd expect it to, as I said in the last call, be a rolling thunder. And by the time we get to the end of this year, if everything goes as planned, we'll have a pretty significant portion of the business moved over. You know, the entirety of getting the business moved over consistent with what we said during the integration will be, you know, within that total two-year horizon. But, you know, expect it to be material piece by year end and then, you know, close out the rest in the first nine months of 23.

Thank you, and congratulations to you and your team in such a challenging time. Good job.

Hey, thank you. Thanks very much, and hope you're having a great morning.

Our final question comes from the line of Vincent Colicchio with Barrington Research. Your line is open.

Yeah, Rich, I was wondering if you could talk about what areas of the business where you're seeing the most wallet share gains?

So from an overall market perspective, you know, obviously the market, you know, all of those insights don't, they follow the close of the quarter, if you will. But I would say that, you know, we have had questions in the past relative to larger wallet shares with some vendors and whether we had concerns that they would be taking action, you know, perhaps to, you know, move away. There's been none of those indications. We have had enthusiastic engagement with our vendors and, you know, feel as if we have a lot of headroom with all of them. because of, if you will, the transitions to the new technologies, cloud, analytics, security, IoT. So we're building AR, VR is another example, and a lot of edge solutions. So, you know, we're building out plans to, you know, engage with them in those high-growth areas. And, you know, I would expect that, you know, we'll – will grow consistent, if not ahead of the market as we move forward, and that's kind of how we think about it.

And it sounds like the integration is going well, but I need to ask, you know, given the tight labor market and the disruption from a big integration, has there been any pickup in turnover at TechData?

Well, I think like the rest of the world, the turnover is a bit elevated relative to what the historical norms have been. However, I wouldn't say that there's anything that is unprecedented or seriously concerning. Our focus is to make sure that we're providing great career opportunities, a fair and competitive set of financial opportunities and benefits. And we say keep a close pulse with our teams to sort of understand where we're at. But to be direct and answer your question, within the current environment, there's nothing that's really out of the norm for us currently.

Thanks for answering my questions. Nice quarter, guys. Thank you very much. We appreciate you joining.

At this time there are no more questions. This concludes today's call. Have a nice day. Thanks, everyone.