Good day, and welcome to the Arrow Electronics third quarter 2023 earnings call. Today's conference is being recorded, and at this time, I would like to turn the conference over to Anthony Bencivenga, Vice President of Investor Relations. Please go ahead. Thank you, operator. I'd like to welcome everyone to the Arrow Electronics third quarter 2023 earnings conference call. Joining me on the call today is our President and Chief Executive Officer, Sean Kerins, and our Chief Financial Officer, Raj Agrawal. During this call, we'll make forward-looking statements, including statements about our business outlook, strategies, and future financial results, which are based on our predictions and expectations as of today. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors described in our most recent 10-K and 10-Q filings with the SEC. We undertake no obligation to update or publicly revise any of the forward-looking statements as a result of new information or future events. As a reminder, some of the figures we will discuss on today's call are non-GAAP measures, which are not intended to be a substitute for our GAAP results. We've reconciled these non-GAAP measures to the most directly comparable GAAP financial measures in this quarter's associated earnings release or Form 10-Q. You can access our earnings release at investor.arrow.com, along with the CFO commentary, the non-GAAP earnings reconciliation, and a replay of this call. We've also posted a slide presentation to accompany our prepared remarks and encourage you to reference these slides during this webcast. Following our prepared remarks today, we'll be available to take your questions. I'll now hand the call over to our President and CEO, Sean Kerins. Thanks, Anthony, and thank you all for joining us and for your interest in Arrow Electronics. Today, I'd like to discuss our Q3 performance, provide some color regarding the market overall, and then close with a couple thoughts as we look to the future. I'll then turn things over to Raj for more detail on our financials, as well as our outlook for the fourth quarter. Despite continued market softness, I'm pleased to announce that we delivered sales results for the third quarter in line with our expectations and earnings per share well above them. Now, included in our results are two items worth noting: one, a benefit, and one, a charge to our P&L. Raj will describe these in more detail, but even when normalizing for these items, our non-GAAP earnings per share were at the high end of our guidance. As I discussed last quarter, we're experiencing a cyclical correction in our Global Components business and a very mixed IT spending environment in our Enterprise Computing Solutions business. But as I also mentioned, we've seen corrections like this before, are confident in our resilience and ability to successfully navigate them, and remain optimistic regarding the longer-term outlooks, both in electronics and information technology. In the meantime, we continue to stay very close to our suppliers and customers and are taking all the right steps to emerge even stronger as market conditions improve. In our Global Components business, market conditions remain challenging, evident through softer demand across several verticals and elevated inventory levels throughout the ecosystem. Having said that, we again see signs that point to the underlying health of the business. Lead times have now largely normalized and will contribute to the service of our delinquent backlog and improved visibility to future demand signals. Book-to-bill ratios, though below parity, are holding steady, and the pricing environment remains relatively stable. In addition, and given what we can control, we remain steadfast in our focus on the initiatives that continue to benefit our structural margin health. Demand creation activity was strong in Q3, demonstrating our continued commitment to the role and value of our engineering investments. We made steady progress in the market for interconnect, passive, and electromechanical technologies, and accretive segment proving a little more resilient through the cycle, and we saw continued adoption of our supply chain services offering. As a proof point, our results and guidance for Global Components indicate operating margins roughly 100 basis points better than what we experienced during the cyclical downturn in 2019. Now, from a regional perspective, sales were soft across the board. However, we did see some pockets of relative strength. In the Americas, we were pleased with the increased traction in design-related activity as we continue to help our customers design end components for their next-generation products. Over in Europe, our focus on interconnect, passive, and electromechanical components appears to be paying off as we saw some improvement in IP& E booking activity during the quarter. And in Asia, while it's too soon to call for a broader recovery, we were encouraged by relative momentum in transportation, networking and communications, and to a lesser degree, computing. As we look to the near term in Global Components, we're confident in the stability of our supplier technology portfolio, the strength of our customer relationships, and our ability to generate cash as we continue to navigate correction territory. Now, turning to our Global ECS business. We were pleased with the relative strength we saw in infrastructure software, cybersecurity, and cloud adoption, all consistent with our strategy. This contributed to overall gross billings growth on a year-over-year basis. On the other hand, large Enterprise IT spending remained lumpy as customers proceed cautiously, given a more uncertain macro environment, creating headwinds for our high-end compute and storage offerings. In EMEA, we benefited from our broad exposure to the mid-market, the strength of our software and cloud portfolio, and the consistent execution of our European team. In North America, we saw strength in the public sector, and yet are still in transition to a model that better resembles both our line card and customer mix in EMEA. Given only modest investment to support this transition and an improving demand environment, we expect to see better performance in 2024. Despite the volume shortfall, operating margins were solid, and given typical seasonality, we expect them to be quite healthy again in Q4. Before I turn things over to Raj, just a couple thoughts. First, I'd like to reinforce that we remain optimistic regarding our long-term growth prospects and are taking this opportunity to further align around them. I have every confidence in our strategy and ability to execute, and believe that we will be well-positioned for a better market environment as demand conditions improve. Then I'd also like to take a moment and recognize our Arrow employees around the globe. Despite the challenges of an uncertain and sometimes chaotic world, they continue to serve our suppliers and customers with perseverance and dedication. Their well-being will always be paramount to our success, and I thank them for their continued commitment to Arrow and all of its stakeholders. With that, I'll hand things over to Raj. Thanks, Sean. Consolidated revenue for the third quarter was $8 billion, down 14% versus last year, or down 15% in constant currency. Global Components sales were $6.2 billion, above the midpoint of our guidance range and down 14% versus last year, or down 16% in constant currency. The primary drivers of the decline were softness in the Asia market and reduced shortage market activity in the Americas. Now that the shortage market is normalized, it had an immaterial effect on sequential results of the company. Enterprise Computing Solutions sales were $1.8 billion, down 10% versus last year, or down 13% in constant currency. This was partly a function of product mix and partly a function of softness in North America. Moving to other financial metrics for the quarter. Consolidated gross margin of 12.2% was down 30 basis points sequentially and 60 basis points versus last year. The primary driver of the sequential decline was softness in the business and unfavorable mix in Asia. The year-on-year decline was principally due to reduced volumes in the component shortage market in the Americas, partially offset by improved mix in the European Enterprise Computing Solutions business, where we continue to see strong demand for software and cloud solutions. Non-GAAP operating expenses were down $55 million from last quarter to $600 million, and included a legal settlement benefit of $62 million in our Global Components business and a partially offsetting $22 million charge in our ECS business to increase our accounts receivable reserve related to one customer. Even when adjusting for the legal settlement and AR reserve items, our OpEx declined quarter-over-quarter as a function of both the decline in variable expenses and our continued efforts to control spending. Non-GAAP operating income was $379 million, or 4.7% of sales, with Global Components operating margin coming in at 6.2% and Enterprise Computing Solutions coming in at 3.2%. Global Components operating margin benefited 100 basis points from the legal settlement, and Enterprise Computing Solutions operating margin incurred a loss of 120 basis points from the AR reserve item. Interest and other expense was $82 million, which was better than guided, due to lower than expected average daily borrowings in the quarter. Our effective tax rate of 21% was below our guided range as a result of utilizing certain domestic and foreign tax credits. Diluted EPS on a non-GAAP basis for the third quarter was $4.14, which was well above the high end of our guided range and based on a 56.3 million share count. Both GAAP and non-GAAP EPS included an $0.87 benefit from the legal settlement and a $0.31 negative impact from the AR reserve item, as described. As such, non-GAAP EPS, taking these items into account, was at the high end of our guidance range. Moving on to working capital. Net working capital was down from Q2 at $7.4 billion. Accounts receivable decreased from Q2 to $10.7 billion, with days of sales outstanding increasing to 121 from 118 last quarter. Accounts payable increased to $9.1 billion, with days of payables increasing to 112 from 111 last quarter. Inventory increased in the quarter due to an attractive and working capital neutral opportunity that we capitalized on as part of our supply chain services offering. Had we not entered into this opportunity, our inventory position would have declined quarter-over-quarter, similar to the inventory decline we saw in Q2. We remain confident in the quality of our inventory and our business model as it relates to inventory reduction in a down market. We expect to continue to reduce inventory in the coming quarter as we convert our backlog. Our cash flow from operations was a robust $322 million in the quarter, based on our operating results and a reduction in working capital. Net debt for the third quarter was flat to Q2 at $3.9 billion. Total liquidity stands at approximately $2.3 billion, including our cash balance of $333 million. Our balance sheet remains strong and provides us with financial flexibility to handle our working capital and other needs. In the quarter, we repurchased shares in the amount of approximately $200 million. At the end of the third quarter, our remaining stock repurchase authorization stands at approximately $622 million. Please keep in mind that the information I've shared during this call is a high-level summary of our financial results. For more details regarding the business segment results, please refer to the CFO commentary in the earnings presentation published on our website this morning. Now turning to Q4 guidance. We expect sales for the fourth quarter to be between $7.5 billion and $8.1 billion. We expect Global Components sales to be between $5.4 billion and $5.8 billion, which, at the midpoint, is down 10% from prior quarter. We expect Enterprise Computing Solutions sales to be between $2.1 billion and $2.3 billion, which, at the midpoint, is up 25% to prior quarter due to seasonality and represents a 12% decline year-on-year. We are assuming a tax rate in the range of approximately 23%-25% and interest expense of approximately $90 million. Our non-GAAP diluted earnings per share is expected to be between $3.61 and $3.81 on an average diluted share count of 55 million shares. We estimate changes in foreign currencies will benefit sales in Q4 by approximately $54 million and benefit EPS by approximately $0.02 compared to the prior year. Compared to the prior quarter, we estimate changes in foreign currencies will negatively impact sales in Q4 by approximately $82 million and EPS by $0.07. I will now turn the call over to the operator for Q&A. In order to ask a question, please press star, then the number one on your telephone keypad. Please limit your question to one initial and one follow-up question. Your first question comes from the line of Matt Sheerin with Stifel. Your line is open. Yes, thank you, and good afternoon, everyone. A question regarding your component guidance for down 10% sequentially, which is in line with suppliers and some of your peers. But could you talk about the regional expectations? Are you expecting all regions to be down in that range, or would Asia be better than that because of some seasonality and some of the supply chain engagements? And as you know, look to the next two to three quarters, particularly in Europe, which seems to be weakening after some super strong quarters, would you expect this correction to play out well into next year? Yeah, sure, Matt. Good afternoon. Let me maybe start with your, your second question first. I think what I talked about last quarter is that, you know, based on our experience, yeah, these kind of corrections typically take 2-3 quarters to play out. I think it's safe to say that if you looked at it strictly from an inventory perspective, you know, we're talking about this quarter and next, before we would start to see things begin to normalize. Obviously, the macro environment could either speed things up or slow them down. You know, that's the piece that's a little trickier to call, but we think we have line of sight around this as it relates to our ability to manage inventory. Regarding the outlook, you're correct. I mean, as you point out, yeah, a number of people in our space have already come out guiding down for the quarter. We think that signals an incrementally softer macro environment. I would say in the West, you know, we see the headwinds associated with elevated inventory levels. You know, demand trends, while softer, are a little bit steadier than as compared to Asia. Obviously, you know, the Chinese market has simply been fairly slow to rebound from the depths of the COVID restrictions. I don't think that's new news. But relative to the puts and takes from one region to the next, I can say that both in Q3 as well as reflected in our Q4 outlook, you know, the sequential decline in Asia is better than what we see in the West. So I think it's far too early to call for a recovery in that market, but we aren't seeing things get, you know, materially worse. Okay, thank you for that. And then, relative to the operating margin within components, without those one-time benefits, it looks like your op margin was around 5.1%, which is down sequentially and year-over-year, but as you said, you know, much better than where you bottomed out last cycle. And the question is, I'm looking to Q4, when all regions, particularly the Western regions, will be down, can you sustain the 5% margin? And, you know, what's the outlook over the next couple of quarters? You talked about some cost-cutting initiatives. Are there other things in place to keep that, the margin where it is? Yeah. So I'll certainly talk a little bit about Q4. You know, probably won't call operating margins, you know, beyond that at this point. But you're right, Matt, you know, once you normalize for the legal settlement, there was a sequential decline in operating margins. And given what I just said about regional mix, it really was more a function of relative changes in regional mix, i.e., more Asia, less West, and then the overall, you know, volume shortfall as expected, which was a headwind to operating leverage. I think the good news, you know, in that story, and Raj mentioned it, but I want to reinforce it, is that with respect to the declines we saw in the shortage market, you know, that was not a factor in the sequential decline, so that dynamic is now fully behind us. You know, we think where we're landing now relative to prior corrections is a good proof point for, you know, what we're trying to do with our structural margin initiatives. I could tell you that we're expecting a far less, or I should say, far more modest, decline in our Q4 guidance. But again, that's just a function of what we see in terms of incremental softness in the market, given the excess inventory. From a cost perspective, you know, I think we're being prudent. And for us, that's really an ongoing discipline. It's not just something that we focus on when the market is down. You know, our posture has always been to concentrate on structural costs that we can repurpose over time in favor of our growth priorities, and that's exactly what we're up to now. But we're otherwise in it to win it, and so, you know, we don't intend on anything too dramatic. Okay. Thank you very much. Thanks, Matt. The next question comes from the line of Joe Quatrochi with Wells Fargo. Your line is open. Yeah. Thanks for taking the question. Maybe just to follow up on that, I guess, as I think about, like, the iomponents margin for the fourth quarter, and I think about that regional mix, has anything changed in terms of the way that you're thinking about, you know, the rate of change within the geographic regions, maybe from a quarter ago? Is the weakness that you're seeing in the West maybe more than you had anticipated, or it sounds like maybe Asia is a little bit stronger? Just kind of how do I think about that? Well, if you think about these corrections historically, and they're all a little bit different, you tend to see the challenge first in Asia, and then over time in North America, and then eventually in Europe, and that's more or less what we see playing out. Again, the severity of the shortage now indicates that you know, the severity of the correction is probably somewhat equal to that. So the timing of you know, how long it will take to play out is a little bit of an unknown, but I think we're seeing you know, fairly consistent regional patterns as we navigate this cycle. Got it, and then maybe one for Raj. On the accounts receivable charge that you took in the quarter, is there an opportunity for that to reverse at all? Just trying to think about that as we go forward here. Yeah, I mean, Joe, we always, f irst of all, I think it was really just an isolated situation with one customer, and that's a unique amount for the ECS business. We obviously will go after collecting all of it over time. So, I can't tell you when that might reverse, but just because we've taken a reserve doesn't mean that we're not gonna go collect all that money that's owed to us. Joe, I would just add to that and say we feel fairly comfortable with the rest of the AR portfolio in that business, so this was an isolated experience. Thanks, Sean. I appreciate that. Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Hi, thank you for taking my questions. Sean, I want to ask you first a higher level question. With respect to Global Components, when we think about this inventory correction in the semiconductor market, has your expectation for how long that correction is gonna take, changed over the last 90 days? I mean, do you think it's gonna take longer or shorter? And then when we think about the excess inventory, are there some verticals that have more inventory? Does it differ by end market? And if I can add another part of that question, can you talk about the backlog? Has it normalized or is it still elevated, and how do you see the firmness with that versus how much of that do you think can be delinquent? Sure, Ruplu. Maybe, maybe I'll take the answers to your questions in a little bit of a different order. But I would first say that, look, we don't think anything differently now about, you know, how long these things typically take to play out than we did 90 days ago or so. You know, I would just kind of go back to what I said, you know, with the first set of questions, and I think, you know, this is playing out more or less as we would have seen historically. And again, the macro environment could obviously speed things up or slow things down. It's a little too tricky to call that. But with respect to inventory, you know, Raj touched on it, but I kind of want to reinforce that, yes, our inventories came up in Q3, but that was very much the result of us leaning into an accretive, supply chain services opportunity, a decision that was very consistent with our, you know, the value-add piece of our strategy, is something for which we, we enjoy a fee, for the value-add and the services provided. It's not anything that we do in pursuit of, fulfillment revenue. And, you know, we'd otherwise expect, inventories will again decline in Q4. I'm sorry, they would have declined in Q3, they will decline in Q4, and we will again generate cash. So I think we're getting our arms around, you know, what's necessary to manage through the working capital and specifically the inventory piece of the question, all the while trying to be very mindful of, you know, our evolving customer needs and making sure that they get what they need when they get it, you know, given their production pipelines. I think, remind me of the third part of your question. Sorry, Ruplu. Backlog. Yeah, sure. Yes, backlog. Yeah. Yeah, so backlog is still. It's certainly come down from, you know, the all-time highs, but it still sits at multiples of, you know, where we were pre-pandemic. Our team is doing a good job working with our customers and our suppliers to, you know, reschedule to their production requirements as they change. Again, I would say it's more about reschedule activity than it is cancellation. And, you know, we think we've got, you know, pretty good line of sight to the backlog we still have to go serve in the next couple of quarters. Okay. Thanks for all the details there, Sean. Maybe I'll ask Raj one question. The fourth quarter is typically the strongest quarter for ECS margins. Given the macro environment we're in, has your expectation for that relative strength of margin in the fourth quarter changed since 90 days ago? And, you know, given given your expectations for that, have have your expectations for free cash flow changed? And what are your thoughts on capital allocation? Yeah, on the first part of your question, our expectations have not changed for the ECS business. We still expect a typical fourth quarter for the ECS business, both for the billings and top line as well as the margins. So no real changes there. And then, you know, from a free cash flow standpoint, we sort of walked through all the various pieces, but we expect to generate cash again in the fourth quarter. Our inventory levels will be down again in the fourth quarter. You know, we generated now year-to-date $420 million of cash through Q3. So I think, you know, we'll continue on that. So we expect a good amount of cash generation in the fourth quarter. You know, it's very much in line with our expectations, given the point in the cycle that we're at. Got it. And capital allocation, any, any changes to your thoughts there? No, I mean, our capital priorities stay the same. You know, if I just reiterate those, we will keep investing in the business with you know, that to drive organic growth and expansion. So whether it's working capital or CapEx, we also have you know, always evaluated M&A opportunities, although we've not done anything material in a few years, and we've used our excess cash to return back to shareholders through the form of buyback. And then we wrap that all around with you know, managing to an investment-grade credit rating profile, and that's you know, that whole perspective hasn't changed. So we're going to make sure we take into account all those factors as we look at capital return. Okay. Thank you for all the details. Appreciate it. Sure. The next question comes from the line of Toshiya Hari with Goldman Sachs. Your line is open. Hi, thank you. My first question is on the pricing environment. You guys noted that, you know, pricing remains relatively stable, which is consistent with what we're hearing from your partners, your suppliers as well. But curious if you're seeing any differences across different geos, different end markets, different device types? And more importantly, you know, given all the capacity that seems to be going into the ground, whether it be TI, whether it be some of the newer suppliers over in China, are you concerned at all that 2024, you know, pricing could potentially deteriorate? Thank you. Sure thing. So yes, you're right. We do see the pricing environment as fairly stable. I would say, you know, that's probably a little bit more so true in the West. We did see a little bit of pricing concession activity in Asia in the quarter, which helped us, you know, move product. But, you know, we're pretty diligent about that. Our expectations are in Q4, unless demand were to drop precipitously, transactional margins will again remain fairly stable as well. I think we talked about in prior quarters that if you think about all the new capital investment as well as the elevated cost for things like raw materials and packaging, I think from a supplier perspective, that's likely to help, you know, keep some upward pressure on pricing for some period of time. So even if overall inflation is slowing, I think input costs are still elevated. At this point, we're not, you know, we're not foreseeing, you know, big changes to that as we look to the new year, but it's a little too early for us to call, you know, well beyond Q4. Got it. That's super helpful. And then, as my follow-up, one on the, the margin of creative initiatives, you talked about, demand creation, IP&E, and supply chain services. As a level set, can you describe how meaningful those three are collectively as a percentage of your business today? And how does that compare with, you know, a couple of years ago? And more importantly, how do you see, you know, this, this sort of group of businesses growing into 2024? Thank you so much. So if you look back over time, what I can say without breaking out the pieces and parts, is that collectively, they are a little more material to our overall mix, than they were a couple of years ago when we were in the midst of the shortage market and the pandemic, and certainly, you know, more material in terms of mix, if you look back, say, three or four years. You know, we're not quite ready to break out those pieces and parts, but we do continue to point as much investment at them as possible. We see good potential in all three spaces, be it, you know, more demand creation in the mass market. You know, there's tens of thousands of mass-market customers for us to still go after. I think from an IP&E perspective, I think in our 10-K, we talked about that as maybe 13% of our total sales in GC. So we know that, you know, we still have potential to penetrate that market further. And then, as you point out, you know, our value-added services and supply chain and design engineering are becoming more meaningful. So the long-term margin over time is continuing to increase as a percent of our total mix. And that's, you know, what gives us a reasonable amount of confidence when we think about, you know, the longer-term operating margin guidance we set for this business. Thank you so much. Thanks, Toshiya. There are no further questions at this time. Anthony Bencivenga, I will hand the call back over to you. Okay. Thank you. And thank you all for joining today's call. We look forward to meeting you at upcoming investor events, events in the future. Have a great day. This concludes today's conference call. You may now disconnect.