Welcome back, everyone. I am Melissa Fairbanks. I'm the analog semiconductors and IT supply chain analyst here at Raymond James. We are thrilled to have the team from Arrow here with us today. We've got CEO Sean Kerins, CFO Raj Agrawal, and Brad Windbigler from Treasury. I think Sean has some prepared remarks. Just give us a brief overview of the company, and then we'll launch into Q&A. Sure, I'll be glad to. Thank you, Melissa, and thanks to all of you for devoting a little bit of your time to learn just a little bit more about Arrow Electronics. I'm gonna assume some of you know us quite well and maybe some of you, not at all, and I'll start there and just say, for those of you that, don't know us, we've actually been around since 1935. We were born on Radio Row in New York City. Believe it or not, that was the very early days of the electronics industry, and we were in the business of helping small job shops and hobbyists participate in markets like those for transistor radios, believe it or not. And there's probably some people in this room that don't even know what a transistor radio is anymore. But that's where we started, and electronics has more or less been our focus ever since. You can see by the numbers, it's been an incredibly special journey since that time. You know, we now operate in more than 200 locations throughout the world. We serve technology markets in over 80 countries, and I'm proud to say we're supported by close to 22,000 employees around the world, and they do that very well. I can tell you that, our role is complicated, yet very simple. The best way to think of it is, imagine that we sit in the middle of a massive electronics and a massive information technology ecosystem, and our job is to connect the makers of all those technologies with the OEM, large enterprise, and mid-market customers that rely on those technologies each and every day in the way that they go to market in their customer base. We're not just a typical distributor anymore. We like to think that we've evolved. W e have built value-added offerings and capabilities to wrap around the sale of those technologies, including things like design engineering, integration, supply chain management, digital enablement, and even post-sale support. I'll talk about some of those capabilities in the next couple seconds. In fact, we like to say that if something takes an electronic charge, there's a good chance that Arrow Electronics has something to do with either designing it, building it, or helping you get to it. That's the headline. M oving ahead, we go to market in two very distinct operating segments, each separately reportable. One called Global Components, which is the electronic arm of our distribution capability. And this business represent the leading semiconductor, interconnect, passives, electromechanical device makers throughout the world, across the electronics industry. It's a very global business, got major operations in Asia, Americas, and in Europe. In our Enterprise Computing Solutions business, this is our IT go-to-market arm, if you will, and we represent the leading hardware, software, and cloud providers that are most relevant in the enterprise data center throughout an extensive IT channel. What I was hoping that we could convey here in this chart is that given where we sit in these two respective value chains, we benefit from a very broad and diverse set of exposure to a wide variety of industry verticals and uses. That involves everything from things like, you know, industrial automation on the factory floor, to aerospace and defense, to medical devices throughout the healthcare industry, to consumer electronics, and certainly to include the data center itself, whether that's on premise, at the edge, in the cloud, or some combination of all the above. You know, the headline here is, Very Diverse Exposure to a Wide Variety of Markets and Use Cases. T he evidence for that is that no single customer, you know, comprises more than 2% of our total sales. That has served us well. T alking about, each of these a little bit further, in our Global Components business, in fact, we are the channel, for hundreds of suppliers, that rely on us to help them penetrate, you know, the mass market more deeply. That entails helping them find new customers and use cases for their technologies. That requires us to help design them into new product introductions, for example, whether that's on the printed circuit board or beyond, and it certainly involves helping them manage the demand associated with their technology on a global basis, at production scale, through a vast array of supply chain management assets and capabilities. I like to think that, you know, the things that differentiate us are the strength and depth of our supplier relationships, for sure, the extent of our customer base, that's where we offer them reach, because our customer base is in the tens of thousands throughout the world. It's certainly the depth of our investment in engineering resources and capabilities. That's what brings about this design- in motion I just referred to, as well as design services capabilities, where we function as an extension of some of our larger OEM customers' product design teams. Lastly, certainly a differentiator for us has been our ability to leverage our supply chain management capabilities on behalf of some large OEM customers, where we're in effect, managing high volume, highly complex supply chains on their behalf because we're so good at sourcing, staging, and managing complex electronic technology in a way that lets them go do the things that they're very good at, as well. In fact, when we talk about the long-term trends in this business, and I mentioned the wide variety of exposure that, you know, we get to participate in, it wasn't long ago that electronic technology was mainly relevant for things like compute, PCs, eventually smartphones, and a few other use cases. Well, today, the use cases are in the, in the hundreds and the thousands, and in the future, the use cases and the variety of places where this technology will be relevant is well into the hundreds of thousands and beyond. In fact, we like to call that the electrification of everything, and so we think the long-term outlook for growth, in this piece of our business is quite promising. Maybe just a word about our Enterprise Computing Solutions business, at the same time. In this business, we enable a very extensive and diverse network of channel partners, and you'll hear channel partners referred to as value-added resellers, solution providers, cloud services providers, systems integrators, et cetera. They're all channel partners. O ur job is to basically enable them to scope, to sell, and solution the IT requirements of their end user customers, and therein lies our ability to create reach in this business. You can think of the thousands and thousands of channel partners that we work with across North America and Europe, as really a large off-payroll sales force. T he more of them we find and enable, the more sales capacity we create on behalf of our suppliers, and the more business that accrues to Arrow Electronics and our ECS division. The distinction I would make in this business is that we have consciously chosen to focus on the more complicated end of the IT spectrum. That translates into technologies and solutions that have to be sold, they can't simply be bought. By the way, that lends itself to a very working capital-friendly model. But for us, that entails a line card that involves, you know, compute, storage, networking, and virtualization. It entails a whole host of infrastructure software for things like cybersecurity, data protection, and business intelligence, just to name a few. I t certainly involves all the major cloud providers as well, whether that's deployed on-premise, cloud, or more typically in some hybrid version of both. In this business, you know, the value add that we can bring to bear for our suppliers and customers is extensive. They can tap into our training and certification programs, so that they can be smarter and better at selling the technology that we represent. We have centers of excellence throughout the world that help showcase the technology that we help sell. We have systems engineering and configuration capabilities. We've got a range of programs and processes to help our channel partners accelerate sales cycles. We have beyond distribution offerings, where we're now engaging our suppliers to play roles in the market, like channel management and post-sale support. T hen lastly, and maybe, you know, most uniquely, would be our ArrowSphere digital platform. This is the digital distribution platform of our future. It's certainly relevant for all things in the cloud, and now even beyond. W hat that's doing is creating a path for us to help lead our suppliers and channel partners into the market for IT as a service, the byproduct of which is leading to a nice growth rate in the mix of our volume that we would call recurring in nature, and that will have good implications for our financials as well. A little bit of who we are overall, you know, sort of 25,000 feet, a click or two down on each of our two big operating divisions, and Raj and I will be very happy to take your questions. Melissa? Great. Yeah, that was a great overview. Appreciate it. I think, you know, we've often looked to the distributors as kind of a good guidepost for the broader industry because you do touch so many suppliers and so many end customers. I want to focus mainly on longer-term, you know, opportunities for you, but in the near term, we've had a little bit of an unusual cycle,- Yes. -if we can call it that. Maybe just give a quick overview of where you're seeing things in terms of supply constraints, availability, you know, shipping through, and market demand. It certainly has been an elongated, correction cycle, for sure, Melissa, I agree. If you think about the depth and breadth of the supply shortage that preceded the correction we're now in, it's kind of not a surprise that this correction is taking a little bit longer to play out than maybe some of the corrections we've seen historically. Having said that, you know, without getting too far ahead of ourselves, we are starting to see the patterns of normalizing behavior. By that I mean, you know, we're managing through excess inventories aggressively as we can. As you know, our inventories came down in Q4. We expect them to come down again in Q1, and that's contributing to, you know, positive operating cash flow. Our book- to- bill rates, still not where we want them to be because, as you know, parity is a really important metric for the industry. But we have seen them stabilize, have even seen some modest improvement, you know, versus where we sat in Q3 and Q4 of last year. Y ou know, from a supplier perspective, lead times have come in. I would say they've all but normalized. There's still some golden screw exceptions out there, but they're fewer and farther between. As a consequence of lead times normalizing, suppliers have become quite flexible in helping us work with customers to reschedule, and on occasion, cancel backlog, so that we have better visibility going forward. Good news is, having done that, having to do that on an ongoing basis, our backlog is still substantial, but we feel better about the predictability and visibility to it. H ard to call exactly where we are relative to the bottom, but we're starting to see the normal patterns emerge, that should emerge. In a correction, and obviously, if the broader demand environment improves, and that's kind of a wild card, that will help. Excellent. Are the end market trends that you're seeing in the components business, does that pretty closely track what your suppliers are also seeing? You know, we've had, obviously, consumer PC rolled over first. We started to see first phase of correction in industrial, you know, maybe now we're in a second phase of industrial. Auto, a little bit of softness now. Are you seeing a lot of those same trends? I think so, Melissa. A s you know, we represent, you know, sort of a wide variety of suppliers that, you know, play in different parts of the electronic component spectrum, and so they all have different verticals in which they're specialized. But it's playing out the way we'd expect. I think in the West, you know, many of the verticals that we serve are still soft to down, exceptions being medical, and aerospace, and defense. They've held up a little better than many other verticals. We're seeing things stabilize in Asia somewhat relative to normal seasonality, at least. Doesn't mean that we see a big spike in the demand environment in the near future, but it's good to see things stabilize on that front. As you might know, Melissa, and others that have covered, you know, the cyclical industry that semiconductor is for some time, you know, Asia typically leads you into a cycle, and it typically leads you out. Progression is Asia, then the Americas, and then Europe. W e've seen that same patterns generally play out. It's just taken longer to do so. W e expect, again, normal patterns are playing out. Most verticals are soft to down. Pockets of strength here and there, but, you know, we do need a catalyst from a macro perspective as well. I won't make you call a date for that. That macro recovery. You gotta try. Yeah, yeah. T he past few years of, you know, just kind of unprecedented supply disruption, has this changed your relationships with either your suppliers or customers, or the way that, you know, the broader industry is using distribution or looking at distribution longer term? I think it'll take some time to play out, but the short answer is yes. I think from a, you know, customer intimacy perspective, the depths of the shortage market got us really close to a whole lot of customers in a hurry, and it was an ongoing battle to work as closely with them as we can to best satisfy their production needs. I think from a supplier perspective, you know, they've seen the commitments we've made to things like engineering and design- in for demand creation. We've learned that that's going to be important to many of them going forward, maybe not all of them, but certainly many of them, especially in the mass market, you know, where our capabilities are most valued. I think the thing where we're going to see, you know, more significant change over time is going to be in the supply chain space. You know, companies that got really hurt by the depths of the chip shortage now taking steps to really rethink their supply chain so that they have better visibility, better predictability, better control. The good news is, we've got supply chain assets and capabilities throughout, including extensive resources devoted to warehousing and logistics. We've got people throughout the world that understand our suppliers, technologies, including engineering expertise, and we've got the processes in place to go serve these supply chain motions on their behalf. A s they rethink, you know, the way they want to manage their supply chains, we have a lot of assets that we can show up and basically help them take advantage in a completely different model, right? One that's separate from the typical go to market, buy, sell motion. One that allows them to do what they do best, but we specialize in managing supply chains, certainly for more depth. I think a lot of that value that you're bringing to the supply chain, you know, it's really showing in the margin front. You know, peak to trough cyclical margins, you know, it's much shallower than we would have seen in prior cycles. I think that speaks a lot to, you know, how you've kind of structured the business model. Maybe, Raj, if you want to talk about where some of the margin targets are longer term, and maybe how components and ECS differ in that way. Yeah. No, Melissa, that's a great question. I would say, you know, right now, we're sort of seeing the impact of negative leverage in the business, but if you look back at the last cycle of correction in 2019 or so, we're still sitting about 100 basis points above- Yeah. -where we were then. It's because of all the things that Sean just talked about. For Global Components, we see the margins longer term being in the 5.5%-6% range, in a normal environment. W hat we had two years ago was not normal. Right. What we have right now is not normal, but normal, in a normal environment, I think we can be higher than we are today, and that's really what our goal is. For ECS, we have not put a margin target out there, for that business. It hasn't really had the ups and downs of the components business. It's been a little bit more steady, if you will. Really been a focus on components. I would say a number of good questions from a lot of our buy- side engagements are focused on just that. The essence of the strategy to focus on the more accretive growth opportunities, especially in electronics, is a way to protect and even accelerate some of the structural margin contributors. We're going to stay on that path. I think it's interesting, we don't get to talk about ECS quite as much just because it's the smaller piece of the business. But, maybe talk about, you've got IT as a service listed up there on the slide. Yes. You know, to me, that's one of the more exciting, you know, longer-term accretive growth drivers. Maybe talk a little bit about that. I will, and it is. We agree. I mean, we've all seen the market starting first with the early days of cloud gradually migrate to things that will be based on OpEx assumption and deployment of IT in the data center versus on CapEx. W hether that's cloud or the software transition from, you know, perpetual to subscription-based licenses, it means that we have an opportunity to continue to drive growth in the recurring piece of our mix. In fact, Raj and Brad reminded me that on the last earnings call, as part of a Q&A follow-up, we did say that roughly a third of our total mix in ECS business by volume, billing spaces, is now recurring in nature. Wow! Along the lines of cloud and subscription-based software, as we just discussed, and that's why a good digital platform is so essential to helping us stay on that path. But economically, it means, you know, we can serve that piece of our mix differently, drive better contribution margins over time for more drop-through. That's the financial reason we like it. But you just look at market trends overall, that's where the market's going, both in the large enterprise and even market for sure. W e think it's a good part of our strategy going forward, and stay invested. Great. Before I move on to some of the capital and cash questions that I have for you, are there any questions in the audience before we move on? Okay. None yet. Good, good, good. W e have seen you were able to bring down inventories pretty substantially in the December quarter. I think it was, you know, very encouraging, you know, certainly among the conversations that I've had to see that happen and, you know, expecting it to come down a little bit in March. You're generating a substantial amount of cash flow. Please correct me what the target is for the year. What are your priorities for that cash use? You've been buying back a lot of stock. Yeah. Let me start, and then certainly, Sean, feel free. Our capital priorities really haven't changed, Melissa. We continue to focus on organic investment in the business, so making sure that we're driving enough working capital that's needed, CapEx, obviously, we're relatively light from a CapEx standpoint, and then any other investments that are needed. T hat's the top priority. We also are always on the side looking at M&A opportunities. Although we haven't done anything substantial in the last few years, we're always evaluating things that may fit strongly within our strategy. W e're always going to be very disciplined about how we deploy capital there. And then lastly, we've been buying back a lot of stock as you said. A s we generated over $700 million of cash flow last year, it gives us a lot of flexibility to do all the things that we want to do, and that's... We expect to generate more cash this year, and we'll have more flexibility in that regard. W e've got a lot of priorities, but t hey're going to be supported by all the cash gen that we have. I would just maybe reinforce a couple of things, Raj's point. Start with the organic growth, and you think about, you know, investment for organic growth in a correction market, you know, it's important to remember we're playing a long game. Sure. Even though we've got to do all the right things to be smart and prudent when it comes to our cost structure in this environment, we're also protecting our selling and engineering capacity f for all the growth priorities that we committed to, because we believe now is a good time to do the right things to get your house in order, if you will, for when market conditions do improve so you can emerge stronger for when that time comes. But on the M&A front, I get often the question about, well, what kind of targets would you be cultivating? A ll I really try and suggest is go back to what I said about things that will be accretive to us in the future. Y ou know, more engineering leadership for demand creation, potential, deeper penetration of the market for interconnect, passive and electromechanical. More value-add in the form of design services, supply chain management. That will inform how we think about a lens for M&A targets. I would say it's more about capability and differentiation than it would be just about scale. Maybe moving on to, I just lost my train of thought. My apologies. I have to bring up AI just because it seems like it's obligatory to talk about it. But how are some of the ways that you're using either machine learning or AI internally, helping you to drive some inefficient or some efficiencies and operational? You want to take that one to start, Raj, or... Yeah, I mean, from an internal standpoint, you know, we have a lot of transactional workload inside the company, and so we know that automation, AI, or other types of automation help to optimize that. That's going to be a long journey for us, and we're continuing to look at those opportunities, and you know, we've got some things underway, but nothing to call out specifically for you right now, but certainly something that we are looking at and evaluating. It's a journey that we've been on. Things like shared services, process automation, and now the ability to supercharge some of that with AI becomes more and more sophisticated. Clearly, on the roadmap, the way we think about that is we want to repurpose costs from, you know, parts of our operations so that we can invest it in, you know, creative growth t he other parts of our operation. T t ultimately isn't about savings just for the sake of being low cost to serve. It's ultimately about, you know, creating a flywheel for investment capacity that, you know, can pay dividends over time. Not gonna be a one-time event. Okay. For us. Maybe talk about how that's driving some competitive advantages and maybe how you see the competitive landscape today. It seems as though it's a far more sustainable or stable industry as maybe prior cycles. But then also from your supplier side, we've heard a lot of the suppliers come out and publicly say that distribution is a very important part of their strategy. How do you help differentiate and kind of win on some of those areas? I would agree. I mean, I think seeing it, you're hearing it, they're, they're realizing the enormity of the opportunity in front of them is not one that they own, especially some of the more specialized and smaller players who really rely on us to get to the mass market for them, and that mass market is huge. You know, there's some $200 billion at least sitting in the mass market today, so we know there's a whole lot more potential to get. But in terms of differentiation, I would go back to the same things I talked about, you know, upfront. It's our ability to lead with engineering. We believe from a, from a traditional distribution perspective, we've got the deepest and the broadest engineering that's resident around the world. We're always looking to bring more onboard to do so well. We think, you know, how well established our supply chain footprint and assets are. We think, you know, important to our suppliers who are looking for, you know, the sheer economies of scale, comes with pieces of their business that are fulfillment in nature, and more and more of that for them on their behalf. I think, you know, what we're doing in design services matters to our suppliers as well, because they see us as walking them into large OEM environments in a very different way than we are at the transactional level from a design perspective. W e think some of the assets that we haven't talked about as much in the past are in fact differentiating us. We're looking for the right ways in which we can break out the pieces and parts for you. Great. We just have a couple more minutes left, but.. I just.. I do wanna say one thing. Yep. Sorry, Melissa. Please,. N o, please. The first part of your question was also a good one in that... and I can, you know, kind of confirm. We've not seen any changes in the channel dynamics- That's important. -in recent quarters at all. We certainly don't anticipate any this quarter in our guide. T o your point about stability, I think while consolidation can occur, will occur, you know, both at the supplier level and in the distribution layer, we haven't seen significant changes in the channel. Great. Any closing remarks? Anything I didn't touch on before we finish up? You were thorough as always. Just great. Okay, perfect. Thank you, Melissa. All right. Thank you very much for joining us. We're gonna head downstairs for a breakout session, in case anyone has any specific questions. Great. Thank you. Thank you. Thanks very much.