So, I'm Melissa Fairbanks. Thanks for joining us on the first day of our annual conference here. For I cover analog semis and the IT supply chain. So, kicking off my track here at the conference, we are thrilled to have Arrow back again. We've got Sean Kerins, President and CEO. And also in the audience, we've got Brad Windbigler, who is Treasurer and IR. Thanks for coming back again, Sean. You've had a very eventful weekend, I believe. Yes, I have. Thanks for having me, Melissa. Good to be here. Great. Great. For those of you that don't know, Arrow is one of the sponsors of a couple of IndyCar teams. So, they had a fun weekend in St. Pete. Can't complain about the weather. It was a very good weekend. Lots of suppliers and customers joined us. The team didn't do so well, but that's okay. That's all right. Yeah. That's all right. Great. Great. So, for those that are less familiar with Arrow today, Sean, maybe could you provide a brief overview of the company, the two different segments, reporting segments? Sure. Sure, so let me maybe the best way to do this, because I'm sure some of you are closer to technology than others, but basically, you can think of Arrow Electronics as sitting in the middle of a pretty massive ecosystem. We work on behalf of the electronic component industry and the enterprise IT industry, and we really sit in the middle of all of those suppliers and ultimately all the customers that will consume their technology over time, so in that way, we're very much a platform-based business model, so we connect thousands of suppliers with hundreds and thousands of customers, right, and our job is to kind of do everything we can to help them get their products to market. That could involve design in at the printed circuit board level or beyond. That could involve configuration of data center technology. That could involve integration and build to get bespoke products to market. It certainly involves warehousing and logistics and all the great work our teams do with all of our supply chain assets throughout the world. But again, we represent thousands of suppliers, and help them get product to market for hundreds of thousands of customers in the electronic components in the enterprise IT space. As you know from the math, the electronic components business is roughly $20 billion in size. Our enterprise IT business is roughly $8 billion in size. And for our enterprise IT business, we actually enable a pretty significant channel of resellers, solution providers, managed services providers, cloud services providers. There's a whole host of names that describe the independent channel. And in that way, we enable this massive off-payroll sales force. We think of it as an off-payroll sales force. And the more of those customers that we can enable to go sell on behalf of their suppliers, the better we do. In our electronic components business, we are the channel. Most of our suppliers basically hire us to represent them and call on the mass market, which is tens of thousands of customers that they don't call on themselves. And in doing that, we point our sales force and our field application engineers at all of those OEMs throughout the world to help design in the technologies that we represent. So, one's a $20 billion segment. The other's an $8 billion. We'll get into this a little bit because I'm sure you'll ask me about our enterprise IT business. But funny enough, if you look at our enterprise IT business on a gross billings basis, it's $19.5 billion. So, if you look at it in terms of real point of sale activity, these two businesses are very similar in size. It's simply a function of just the way we account for, you know, software services as a function of agency accounting, that makes it look a little bit smaller, but it is still a substantial business for us as well. Okay. Great. We're gonna dig into that one in a little bit. But, I'd like to start with, because this is a generalist conference, I'd like to start with kind of a longer-term view. You just gave us a great overview of the company. But maybe talk about where you've been and where you're going in terms of the target model, how things have evolved. And then, of course, we're gonna get into how ECS, the electronics IT business fits in within that model. Sure. Well, you know, Arrow's been around since 1935. I love that. We opened up a small store on Radio Row in New York City, and we were in the industry in its very early days helping, you know, university professors and hobbyists start to exploit markets for things like transistor radios. So, we've been basically involved with electronics since the advent of the industry, and we've helped, you know, shepherd the evolution, and every turn of the crank that has come its way since. So, now we're a global player, you know, with global reach and supply chain assets throughout the world to help connect our suppliers and those customers. And, you know, beyond fulfillment alone, you know, our journey to the future, as you describe it, is really more about, you know, the value add that we can bring to bear alongside our core business. So, in addition to all the supply chain fulfillment work we do, throughout the world, we're now in the engineering services business. That's a great way for us to serve large OEM customers very differently. We're now in the supply chain management business where we serve large OEMs on an outsourced, supply chain management, basis, if you will. And, you know, we still continue to drive into new segments. The latest foray for us is to really penetrate the market for interconnect, passive, and electromechanical technology more deeply. You can think of that like, you know, you're walking in, the customer and, you know, you don't wanna walk past all the nickels and dimes just to pick up all the dollar bills. So, you know, when you're in the same account, why not do more on behalf of that customer and capture more of that electronic design? So our future, I think, will very much be in the value add space. Melissa, I think we'll continue to look for, you know, reinvestment opportunities that move us even further into the higher margin services business. Like engineering services, like supply chain management, and maybe a few other offerings beyond, and the same thing is happening in our enterprise IT business where we grew up, you know, as a hardware distributor in the enterprise data center to now a company that, you know, basically two-thirds of our mix is in the cloud, hybrid cloud, and managed services space where we represent all the enterprise IT suppliers that you might recognize on behalf of all of our channel partners, and you know, that is a much more recurring offering in nature, the recurring piece of our mix, is now over 30% of our total volume. So, that's the IT as a service. That's IT as a service a nd, you know, we like where that business is going as well, and we're gonna continue to point it at, you know, the more accretive ends of the enterprise IT spectrum. Okay. Great. How much, in terms of hitting maybe your own internal margin goals longer term, how much is tied to revenue cycles? We're all very familiar with h ow semiconductor cycles go, even though this most recent cycle is a little bit unusual. Yes. To say the least. But then also, ECS, you know, has a little bit of a different investment cycle going on. It does. So, in terms of getting to some of these growing the margin accretive businesses, how much is tied to, we need to wait for a volume recovery? Or how much of it is just purely structural? That's a great question. So, if I start with our electronic components business, those of you that have followed the space closely, you know full well that we're still in a pretty significant cyclical correction. You know, the upside in you know, 2021 and 2022 during the you know, the pandemic-driven shortage market era was pretty generous to all of us. And we probably could have expected it would be equally challenging on the downside. That correction has, as you know, been longer and deeper than we had expected. But we do think we're at the bottom, and we do see you know, recovery in the future. I know you're gonna ask me when. I'll come back. Give me an exact date. I mean, come on, Sean. I think, you know, look, the inventory levels are finally starting to normalize. That's not universally true. But the inventory levels throughout the ecosystem are finally starting to creep down to more normal levels. And that's improving the visibility that we're seeing from our OEM customer base. Again, on behalf of all those suppliers for whom we carry inventory, and I think that's gonna lend itself to a modest, you know, uptick throughout the year. What is less certain is really the economic catalysts for better demand overall. You know, we are well established in the industrial sector, in the automotive sector, in the aerospace and defense markets, especially in the West, and to a lesser degree, markets like medical equipment, renewable energy, and consumer devices, and we're always looking to, you know, look to the next vertical that will drive the growth for us in the future. It's not apparent that there's a big economic catalyst for demand in some of these markets. Markets like automotive are challenged, especially in the West. But we do think you know the piece of the correction that's been largely a function of excess inventory is coming to an end. A nd we would expect to see improving activity levels throughout the year. As you know, we haven't guided that way on a full-year basis because this environment is so uncertain. But we are expecting things to get a little bit better from here. And you know, that is also because we did a pretty good job last year really lining up to serve our large multinational customers pretty well. They have awarded us with incremental business that will start to fold into the business this year. We have been active on the line card development front, meaning. Build new supplier relationships, new suppliers, beget new customers, which in turn beget new suppliers, sort of the lifeblood of, you know, a successful distributor. We were very active in the last, you know, 12-plus months on that front. We'll start to see some of those volumes, you know, fold in over the course of the year. So, even beyond what you know, the market is gonna offer us, we've- y ou know, really, we've been determined to take matters into our own hands as well. So, I think, you know, we're well positioned there. I think the trick will be, to your question, above and beyond, you know, the sort of cyclical dynamics in our core business, how fast can we go with engineering services? How fast can we go with supply chain management? How fast can we further penetrate the market for IP&E, which, you know, is accretive to, the semiconductor segment? Those are all the things that are influencing the way we think about how fast we invest in organic growth. But those would be our organic growth priorities and we think ultimately, you know, keep us on a path that says we exit from this thing a little bit healthier than the way in which we entered it. And that's been, you know, our goal throughout this cycle. On the enterprise IT side of our business, we're not so big that we represent the market in total. So a lot of the improvements and the trajectory that we're now starting to enjoy in that business has largely been a function of what we've done. And what we're doing differently versus the way the market itself is playing out. So, that's a business where we said, "Boy, we got a really successful go-to-market model in Europe. It's largely a mid-market economy. We've got a healthy line card all pointed at cloud and software based on how they grew up." And we were well out in front of the move to cloud adoption in the channel. With the help of our digital platform to sort of lead the European market in that capacity. And last year, I put the leader of our European business in charge of our global business, so that we could replicate that same model in North America. And we've made a number of changes in that business, to kinda do just that. We like the momentum that we're now seeing in our North American business for enterprise IT, which we call Global ECS. And there's been some publicly reported wins that have come our way, you know, with the likes of a VMware, with the likes of a Citrix, you know, in support of what they see us doing. So, we feel good about, you know, the trajectory for that business, not just in this particular quarter but for this year. And again. We think because we're not the market in total, we can influence our outcomes. Regardless of where the overall market, you know, ends up on a s ort of CAGR basis. Sure. I think that's a key differentiator between Arrow and, you know, maybe some of the other bigger guys globally is that ECS business. I think so too. In fact, you know, we sometimes get viewed as a semiconductor distributor alone, and it frustrates me a little bit because I believe that there are other assets in the portfolio that, you know, we need to properly describe and, you know, frankly, get credit for from a valuation perspective, and so, if you paid attention to our Q4 earnings call, I did talk a little bit more about our enterprise IT business for that reason. I think it'll be a better contributor to the Arrow Inc. story in 2025 than it was in the past couple of years. Yeah. It's definitely something that's underappreciated. And so, I think having more focus on it, talking more about it is definitely going to be helpful. Now, you did mention this correction has been a little bit more prolonged than. Yes. You know, a year ago, we were sitting here and we thought, "Well, maybe, you know, things are starting to stabilize," a nd then, "Not so much." You have announced some restructuring r ecently and I think a lot of it is, you know, a lot of it has been underway. Mm-hmm. Maybe talk about, you know, you entered the supply chain crisis with a very lean organization and, you know, very efficient, and where are some of the areas that maybe some of this restructuring has been targeted? If you're willing to. Yeah. No. Absolutely. It's a good question. Well, as most of you might know, a market environment like this really gives you the opportunity to make changes that you wouldn't necessarily have the time to make when the market's a little bit healthier. So, you know, we did just that. And I would say it's a combination of multiple things, Melissa. On one front, it was just good old-fashioned, you know, portfolio housekeeping. We had some smaller underperforming or diluted businesses that weren't really in keeping with our strategic priorities. None of those were overly material in size or scope, but it was the right time to take care of those, and we did. We certainly had a couple pockets of the organization where, given the depth of the correction, we had to do some right-sizing. Mm-hmm. That was mainly from a management overhead and back-office perspective and t hat makes perfect sense given, you know, given the duration of this correction. But obviously, you know, we feel like that helped put some of those businesses in better shape for the future. Then this is what, you know, I would call the ongoing piece, we have always been in the business of, you know, redeploying OpEx from places where it's less effective to places where it can be more effective, given our strategic priorities. I can give you an example of that. As you might imagine, a distributor of our scale, you know, we execute, you know, millions and millions of transactions. Mm-hmm. A year, in support of all of our suppliers and customers, and so, managing that transactional workload more effectively, applying more tools and technology to help automate some of those processes is a way for us to free up capacity that we can then redeploy to more salespeople, more field application engineers, right? More, if you will, front-office capacity to help us grow. Mm-hmm. Especially in the areas that we would say are really critical to the accretive trajectory we wanna be on: more IP&E, more demand creation, and more of our value-added services in our global components mix. And the same thing in, you know, our enterprise IT business: more cloud, hybrid cloud, or I should say all things IT as a service, which is recurring in nature and ultimately accretive to that mix as well. So, this idea of, you know, not just taking cost out and dropping it to the bottom line, but in fact, redeploying and reinvesting it consistent with our growth priorities is exactly where we wanna be. And that's a motion I've told my team it's not going away, even though they all want it to stop, because I think it's a sign of a really healthy company and t hat's where, you know, we're gonna continue to go. I think it's important to point out this isn't just reactive. No. This isn't just, you know, we're in a downturn and then it's reactive. This is part of an ongoing process. It absolutely will be ongoing. This is really important. Yeah. Even when we see more normal market volumes again and growth patterns again, we have opportunities for what I call the enduring productivity gains that are available to us throughout the portfolio and having a sustained initiative at going after them. Again, not to take that to the bottom line necessarily, but to redeploy it, in ways that we think will be more accretive. Excellent. So, that kinda leads into, what are we seeing in the current, you know, maybe a shorter-term view? It might be helpful to review, you know, obviously, you touch a very long tail of customers. Mm-hmm. A very broad-based, customer and supplier base across a number of end markets. Maybe review what you saw in the December quarter. Sure. And then, what the March quarter outlook is kind of assuming 'cause not everything is terrible. Yeah. No. No. You're exactly right. It's easy to get distracted. And I don't wanna do that. But first, there's a distinction I wanna make about, you know, where our suppliers play versus where we play because one of the questions I get, for both operating segments is, "Hey, are you at risk of your suppliers taking your customers direct?" and the reality is, in the very largest of accounts, right, in our electronic components business, that's large OEMs, right, or in enterprise IT, that's large enterprise companies, you know, big banks and so forth. It's very true that our suppliers are much more directly involved in serving those relationships. Where they hire us to give them reach and scale and where they make our rewards most attractive is in the mid and mass markets. That's the tens of thousands of customers they're not gonna get to on their own. And so, we've pointed our models, our go-to-market models in both businesses, exactly to those pieces and parts of the market. And, you know, we think that that's resonating for our suppliers. And in turn, it puts us, you know, right in front of customers who value, you know, our offerings and capabilities the most. To the point of, you know, what's happening right now, I would say in Q4, you know, we were fortunate to overdeliver the guidance we set. We may have been a little bit cautious on the electronic components front just given all the uncertainty and all the guides that surrounded us, right, both from a supplier and competitor perspective. Visibility hasn't been as good as we'd like it to be. It turned out, you know, we overachieved our own expectations in Asia. We overachieved our own expectations in North America, and we did better than, you know, we had projected with our value-added offerings, which helped, from an operating margin perspective as well. I think as we looked at Q1 in that business, again, most of the guys in our space, you know, were down sequentially. You know, we thought that we were, for better or for worse, in good company. We've seen a guide or two late. That's a little more encouraging. Like I said, I don't think we're out of the woods. You know, we guided to something, that was down sequentially but less so than in Q4. Uh-huh. And I would just say so far, so good in the first quarter relative to our expectations. Again, I think what we're starting to see is, you know, improving visibility as a result of, you know, inventory levels that are finally depleting enough to warrant, you know, the mass market customer base to start to show us what their production requirements are gonna look like well beyond just the next 90 days. And that's, that's an important indicator for a player like us in terms of our long-term confidence. So, we'll have to see what the broader e conomic outlook tells us and then in our enterprise IT business, you know, we had an even better quarter than we anticipated in that business as well. That, unlike our components business, is very annual in nature so you wanna look at that business on a year-over-year basis each quarter, not a quarter-on-quarter basis but as you know, Melissa, Q4 in the enterprise IT world is the biggest of the year a nd we had an even bigger uptick than we expected. And it played out for us in, you know, the more valuable pieces of our mix. Okay. You know, where we can add the most value from a provisioning management support perspective when it comes to all these cloud environments that we use our digital platform to help manage. The outlook for that business is sort of typical seasonality in Q1, even though we don't typically talk about seasonality in that business. And I would say so far, so good for us in both markets, Europe and North America. So we think we're doing the right things, which is helping. And we're also seeing a little bit of renewed activity in the traditional data center in part because you've had, you know, some old sweaty assets on a lot of these shop floors for some time that are in need of an upgrade. but also, I think CIOs are now starting to look at, you know, what will the long-term implications be for how they embrace AI as an influence over their data center footprint as well. And that's stimulating some renewed activity levels. I think if you look more broadly at some of the players in the server storage and networking space, you'll see comments and data points that kinda reinforce that s o, we're optimistic about, you know, the outlook for that business as a result. Great. So, I know we don't like to look at a 90-day snapshot, but almost looking at a 7-day snapshot now, I have to ask about tariffs and, you know, some of the trade implications. One, how does that impact your business? Does that just pass through? Two, have you seen any pull-forward activity ahead of. You know, potentially some tariffs? And then the third aspect, and you can kinda wrap this all into one, but third aspect, how easy is it, is it for you to move inventories from one geography to another to maybe address your customers' needs? Got it. Okay. That's a great question. So, let me, let me come back to that last and maybe start with your middle question. I'll try to remember it. Yeah. Well, tactically, you know, as part of our Q4 result and our Q1 guide, we did get the question that said, "Hey, did you see any pull-forward activity in preparation for tariffs?" And our answer was, we saw nothing material. Where that would've been most likely was in China. For better or for worse, you know, we're already in the business of managing tariffs on Chinese goods, i n our business, so, we had those processes in place, you know, since five years ago or four years ago whenever they were first implemented. And so, we're simply tuning up, you know, that process, and that muscle memory now for additional volumes. And we know what that looks like, and we know how to execute. And we're not, in general, not worried about our ability to pass all that on. Okay. I think broadly speaking, because this has been such a dynamic and in some ways uncertain environment, I don't think the industry broadly knows exactly how this will settle out yet, w e're all in the same boat, and I think therefore, you know, customers, like it or not, will have to live with the reality that we're all passing this on, and that will exactly be our posture. I think, you know, I'm hopeful that there's still some negotiating going on relative to, you know, Canada and Mexico, even though we're, what, one day away from when some of these things become official. But we're already in place, ready to go, w e'll manage that as carefully as we can. Great. The point you make a great point about, you ask a great question about our ability to move inventory throughout the world. So, what I like to remind people of is that in a world of uncertainty, and tariffs being imposed, not just in one direction but also in reciprocity, large OEMs and the people that manufacture for them are all rethinking the configuration of their supply chains, meaning what do they do where? Well, a company that has the reach and scale that we have and the supply chain assets that we have throughout the world and the well-established processes around warehousing and logistics, not to mention tariff management, we're in a great position to help them do that. And so, we try and turn these conversations from "how do we contain the tariff exposure and pass it on?" to "how can we help you reconfigure your supply chains f or the long haul?" I don't think you'll see people make dramatic moves in the short term because everybody's still trying to figure out how this all settles out. [inaudible] -c onversation to help them think through, you know, the best way for them to set up their business models. Excellent. Excellent. Now, we're quickly running out of time, which is unbelievable, but I just wanna be sure, are there any questions in the audience? Okay. Great. I definitely wanna touch on capital allocation. You have been very active in buying back shares. And, maybe just remind me, or remind all of us, what are your priorities for cash use? I know that you've talked about reallocating some of the OpEx to areas where you see it's going to be more efficient, some growth areas, but maybe talk about the priorities for the cash use. Absolutely. So, well, first of all, they haven't changed. You know, priority one, and this isn't even a priority, but it's a given. You know, we are guided, you know, by debt ratios and ensuring that we do the right things to maintain our credit rating, such as it is. Mm-hmm. I think everybody knows what that dynamic looks like, but beyond that, our three priorities haven't changed. The first is to really, really invest in a healthy organic growth strategy, and I'll come back and talk more about the principles of that organic growth strategy. The second is to think about especially the more accretive aspects of our growth strategy and look for independent assets that we can bring in from an M&A perspective to help augment, complement, and accelerate those pieces of our strategy, so we're always actively exploring, you know, who we might be interested in, what might be in play, and I can talk to the priorities for that focus, and then barring that, though, as you know, M&A can be a little unpredictable, you know, we're all about returning cash to shareholders. Brad can give you a chapter and verse on what our history has been over the past, multiple years on that front. I think we returned maybe $250 million to shareholders last year. It was probably $750 million the year before that. Obviously, you know, with the correction in play, we weren't able to buy back at the same rate last year as we did, you know, the year before. But our appetite and our priorities for capital haven't changed, so just in commenting about the organic growth priorities, 'cause people say, "Well, what does that really mean?" There's really three facets to it. One is to, you know, make sure that we're scaling our core business for earnings growth and reinvestment capacity. That helps us redeploy. Mm-hmm. The other is to accelerate the growth of our value-added offerings, namely things like engineering services and supply chain management. And then the third is, you know, really leverage our platform, right, for both top-line synergies, and that really means cross-selling, right, and walking, you know, more customers into the rest of the Arrow portfolio as best we can, and then enduring productivity gains so that we create that flywheel for reinvestment as well. Those organic priorities are really clear across the company, and both segments know exactly what those three pillars look like for them. And then beyond that, it's all about, you know, making good use of cash, right, and hopefully one day finding, you know, the ability to earn a better multiple, right, that would ultimately comprise the longer-term investment thesis. That would be great. Yeah. Amazingly, we are out of time. We do have a breakout session downstairs in case anyone has some follow-up questions, and you can dig in a little more deeply on some of these topics. Absolutely. Thank you so much, Melissa. Thank you very much, Sean. Appreciate it. It was great to have you. Thanks, everybody.