Welcome to the Ingram Micro Second Quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to your host, Willa McManmon, Vice President of Investor Relations. Thank you. You may begin. Thank you, operator. I'm here today with Paul Bay, Ingram Micro's CEO, and Mike Zilis, our CFO. Before I turn the call over to Paul, let me remind you 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, statements about our strategy, demand plans, and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our future expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements because of risks and uncertainties discussed in today's earnings release and in our filings with the SEC. We do not intend to update any forward-looking statements. During this call, we will reference certain non-GAAP financial information. Reconciliations of non-GAAP results to GAAP results are included in our earnings press release and the related Form 8-K available on the SEC website or on our Investor Relations website. With that, I'll turn the call over to Paul. Thank you, Willa. Good afternoon, and thank you for joining today's call, which comes on the heels of the ransomware attack we experienced in early July. While no company wants to face the increasing reality of such an attack, our response reflects the way we do business as a platform company. Although some uncertainty remains regarding the potential impact on our business and future results, which Mike will address in more detail during the Q3 guidance discussion, I want to emphasize that the incident had no impact on our Q2 results. To recap, in early July, we identified ransomware on certain internal systems, and we quickly took our systems offline, launched an investigation with top cybersecurity experts, and notified law enforcement. With respect to the incident, certain data was exfiltrated from our systems in conjunction with this incident. We have engaged a third-party data analysis firm to assist us in reviewing the relevant data. This process is ongoing and complex. Should we determine that personal information was affected, we will provide notification based on relevant regulations. In terms of our response, we approached the incident as a business challenge, and the entire organization mobilized to address it. Due to our scalable and modular platform architecture and the tireless coordinated efforts of our team, we restored secure operations within days, minimizing disruption to our customers and our partners and the overall business. The investigation into the cyber incident remains ongoing, and we continue to monitor our systems closely. While this attack was unanticipated, our rapid response reinforced the critical importance of our Xvantage platform architecture and the strength of our overall teams and partnership. I'll talk more about Xvantage in a minute, but first, let me discuss some key highlights of the second quarter. We were pleased that we exceeded the high end of our net sales guidance and landed towards the top end of our gross profit and earnings per share guidance ranges. We had growth across all lines of business, particularly in client and endpoint solutions. We also saw incremental year-over-year improvement in advanced solutions and continued growth in cloud. Geographically, year-over-year, the lower cost to serve and lower margin Asia-Pacific region demonstrated the highest net sales growth in the quarter. We also saw double-digit net sales growth in North America, single-digit net sales growth in EMEA, and return to growth in Latin America. India performed as we had expected, with some continued impact on gross margins from the heightened competitive market and business improving as we progressed this Q2. From a customer perspective, we saw growth across all categories, with enterprise again outperforming. We were also encouraged by the return to modest growth in SMB. Since our last call, we began the divestiture of two non-core pieces of the business. First is a divestiture of assets related to an underperforming operation in our North America region, which closed in late July. The second is CloudBlue, which is expected to close in Q3. Both of these divestitures were a result of our ongoing portfolio review, as we focus on continually improving our operational effectiveness and amplifying our core strength. As a reminder, I've talked about the more than $600 million investment that Ingram Micro has made in cloud, which has been strategic to our long-term vision and enabled us to be the first to launch a comprehensive cloud marketplace and learn early on from our cloud business. CloudBlue was part of the initial foundation for the strategy, and we have retained the relevant IP from it. Instead of building fragmented marketplaces, we have unified our cloud marketplaces within our Xvantage platform ecosystem to provide a single pane of glass for hardware, software, cloud, and service solutions. This strategy is designed to provide our customers with speed, scale, and service, and is core to our evolution into a platform company, which we are executing upon through our Xvantage platform. We think about this evolution for Ingram Micro and the subsequent transformation of our customers' journeys in three phases. The first phase, which we are already delivering upon, is to remove friction, to streamline operations, and drive OpEx efficiency. The second phase, which we are in the process of rolling out, leverages AI to automate and optimize demand signals, enabling more proactive go-to-market strategies and accelerating top-line growth. The third phase will unlock greater value for our customers and our vendor partners by matching supply and demand more intelligently, using data to drive growth and further enhance margins and operating leverage. It is during this phase that we expect to fully realize a flywheel network effect. Though this takes time, we continue to grow and remain profitable as we move through these phases. In July, Sanjib Sahoo, President of our Ingram Micro Global Platforms Group, showcased the progression and discussed the way in which Xvantage is reshaping the IT distribution landscape. During the presentation, he walked through the platform's building blocks to underscore why its unique real-time data mesh architecture and custom AI factory are foundational in building a truly single pane of glass platform. He explained how Ingram Micro's more than 45 years of experience in IT distribution gives us not only deep expertise but significant business data to power our AI factory, which uses AI to redefine the customer journey through intelligent automation. This automation is the basis for our intelligent digital assistant, or as we call it, IDA, which helps our customers win more business and deploy their resources more effectively and efficiently. Sanjib showed real-time examples of how IDA uses advanced AI and machine learning models to analyze our data across more than 50 attributes and help our customers identify and prioritize the sales opportunities most aligned to them. This moves them from reactive inbound order taking to proactive outbound order making. As a proof point to this, in Q2, through IDA alone, we brought in tens of thousands of opportunities to our partners valued at hundreds of millions of dollars, up nearly 50% sequentially. Some other real-world examples of how Xvantage is delivering to our customers and partners include a leading solution provider in the public sector space who is focused on expanding into higher value solutions offerings while maximizing operational efficiency. Using Xvantage's capabilities, the solution provider was able to execute a multimillion-dollar solution with a fraction of the effort previously required and is now looking to create the same efficiencies with other vendor partners. Another illustration of the way customers are embracing Xvantage is a large new customer in France, whose CEO engaged directly with Xvantage and converted his company's entire go-to-market and customer relationship process onto the platform. The move to Xvantage enabled the company to generate and convert quotes into orders in under three minutes, a process that previously took up to a half a day, leading to significant revenue and market share gains. Of course, our customer success is the best reflection of our success. Last quarter, we discussed a few of the many other platform metrics we use to gauge the way in which Xvantage is adding value. These include self-service orders, which in the second quarter grew nearly 200% year over year. During Q2, we also saw a near doubling in quotes created on the platform versus the prior year, driven by ongoing enhancements of advanced search, quoting, product data, and other capabilities. In the quarter, Xvantage also helped us reactivate nearly 2,000 dormant customers who generated approximately 40% higher sales compared to their prior engagement. The second quarter brought with it solid business performance and entering Q3 a unique set of challenges that demonstrated the strength of our platform. I'm incredibly grateful for the outpouring of support we receive from our customers and our partners and proud of the resilience shown by our team. As we move into the back half of the year, I'm increasingly encouraged by the impact of our platform strategy and what it's having across our entire ecosystem. By delivering a holistic platform for B2B, we are not just modernizing distribution, we are reimagining how we can help our customers solve real business problems. Thank you for your continued support. With that, I'll turn the call over to Mike. Thank you, Paul, and good afternoon. Our second quarter results demonstrated solid performance with strong top-line growth across our primary lines of business. We are encouraged by the continued momentum in our client and endpoint solutions, but also by mid-single-digit growth in both advanced solutions and cloud. As we look ahead to the third quarter, we expect continued year-over-year top-line growth enabled by strong execution across our core businesses, which I'll cover more in our guidance discussion shortly. Now to discuss the quarter in more detail. Net sales of $12.79 billion were up 10.9% year- over- year in U.S. dollars and 10.2% on an FX neutral basis. We saw sales of client and endpoint solutions grow most robustly at nearly 14% on an FX neutral basis, which continues to be driven primarily by strength in desktop, notebook, and smartphone categories. Our mid-single-digit growth in advanced solutions was driven by servers, storage, and cybersecurity, along with strength in sales of GPUs used in emerging AI solutions, particularly in Asia-Pacific markets. Geographically, net sales grew across each of our regional segments. Our mix was similar to what we saw in the first quarter, with continued strength in Asia-Pacific followed closely by North America, both of which grew in the mid-teens year over year. We also saw a return to growth in Latin America, which increased by more than 6% year over year on an FX neutral basis. From the perspective of our customer categories, large corporate and enterprise sales again outpaced higher margin SMB sales. While we are seeing some growth in SMB in some of our markets, overall, this higher margin customer category remains more muted than large enterprise, as near-term macro uncertainty and inflationary trends continue to bear more on this type of customer. Overall, these mixed factors, coupled with an improving but still very competitive India market, continue to put pressure on margins. All of these factors, including an eight-basis point one-time impact that I will elaborate on shortly, contributed to our gross margin decline year over year. While we have a generally heightened competitive environment in many markets in which we operate, when we look at like-for-like sales across a product or a customer category, we are not seeing any notable deterioration in margin profile. Furthermore, these concentrations of mix also favor lower cost to serve business, which, coupled with efficiencies and automation from our Xvantage platform and our cost reduction actions taken over the last year and a half, yields solid leverage on operating expenses and flows through to our bottom line. Turning to our regional segments, North America net sales were $4.98 billion, up 13.8% year -over- year on an FX neutral basis, driven by strong growth in servers, storage, and cybersecurity, but also continued robust demand in the desktop notebook product categories, with the pending Windows end of life continuing to spur the refresh cycle. As a result, client and endpoint solutions grew nearly 13% in the region. Sales were also more concentrated in large corporate and enterprise customers, though we also saw some positive momentum in SMB, which is quite encouraging going forward. EMEA net sales of $3.48 billion were up 4.8% year over year on a US dollar basis and were essentially flat on an FX neutral basis. We saw continued strong double-digit growth in cloud, which was offset by flat client and endpoint solutions and a low single-digit decline in advanced solutions. Asia-Pacific once again had strong growth, with net sales of $3.48 billion, up 16.2% year over year in U.S. dollars and up 17.3% on an FX neutral basis. Net sales were driven by very strong double-digit growth in client and endpoint solutions, primarily from lower margin mobility device sales, particularly in China. Advanced solutions sales were down approximately 8%, as strength in networking was more than offset by declines in server and storage. Latin America net sales of $853 million returned to growth this quarter, increasing 0.8% in U.S. dollars and up 6.4% in constant currency. The increase in net sales was primarily driven by growth in client and endpoint solutions, particularly in smartphones and tablets. This sales growth was partially offset by a decrease in advanced solutions, primarily in servers, specialty products, and networking. Second quarter gross profit came in at $839 million, or 6.56% of net sales. Included in this result is a one-time impact of $10.5 million, or 8 basis points of net sales, associated with the held-for-sale accounting for the planned sale of assets of the underperforming non-core operation in North America that Paul Bay touched on a few minutes ago. This divestiture closed in late July. The remaining year-over-year decline in gross margin was driven by a mix shift towards lower margin but generally lower cost to serve businesses, as I've already discussed, from a customer, product, and geographic perspective. Q2 operating expenses were $696 million, or 5.44% of net sales, compared to 5.61% in the same period last year. Q2 2025 operating expenses included a write-down of $32.8 million, or 26 basis points of net sales, related to the held-for-sale accounting on the two divestitures we've discussed, incurred to write down the carrying amount of the assets of the disposal group to their estimated fair value, less the cost to sell. From a regional perspective, both the $10.5 million gross profit charge and the $32.8 million operating expense charge related to held-for-sale accounting appear in our North America region. The year-over-year improvement in OpEx leverage reflects the cost actions we have taken over the last one and a half years, the impact of the Xvantage platform in driving leverage and productivity gains, and the mix factors associated with a higher concentration of lower cost to serve sales in client and endpoint solutions and in the APAC region, as I have just covered. Adjusted EBITDA on the quarter was $294 million, up nearly 6% in U.S. dollars and 5% in constant currency. Non-GAAP net income in the quarter was $142 million compared to $120 million in Q2 of 2024, an increase of over 18% in U.S. dollars and more than 17% in constant currency. The non-GAAP net income measure benefited from a decrease of $14 million, or 16%, in net interest expense, resulting from more than $600 million in debt repayments we have made since the beginning of 2024. Our non-GAAP diluted EPS was $0.61, up 12% from the prior year and at the higher end of our guidance for Q2. Our current year EPS also includes the impact of approximately $0.02 from a higher tax rate in the quarter, resulting from heightened U.S. withholding taxes on sales from our Latin America export business. Turning to our balance sheet, we ended the quarter with net working capital of $4.6 billion compared to $3.9 billion to close the same period last year. The higher investment in working capital this year is driven by the increase in net sales and investment needed to capture these opportunities. On a day's basis, our net working capital in Q2 2025 was 30 days versus 31 days in the same period of 2024. On a similar note, adjusted free cash flow was an outflow of $263 million, again reflective of investments to grow the business, including some strategic buy-ins of inventory again this quarter to get ahead of potential tariffs. We returned $23.5 million to stockholders through dividends paid during Q2, and we announced a 2.6% increase to our quarterly dividend to be paid in Q3. We ended the quarter with $857 million in cash and cash equivalents and debt of $3.7 billion. Our gross leverage ratio was 2.8 times, and our net leverage ratio was 2.2 times. Shifting now to our guidance for Q3, I want to start by framing our current view in light of the ransomware incident we experienced in early July. The timing of the incident over a long U.S. holiday weekend and in the early days of a new month and quarter, coupled with the speed of our response to get the majority of our go-to-market systems back up and running in a matter of days, may have limited the impact on our financial results. Even if minimized, there is still an impact from the days we were unable to transact, which we are still working to quantify. Thus, our guidance reflects some conservatism, which we think is prudent to account for any potential loss of business, which would include, for instance, potential bids or quotes we were unable to participate in when our systems were down. I can say quite positively that we've seen good indicators of business returning to more expected levels since bringing our systems back online. With this in mind, we are guiding net sales of $11.88 billion to $12.38 billion, which represents year-over-year growth of more than 3% at the midpoint. We expect third-quarter gross profit of $815- $875 million, which would represent gross margins just below 7% at the midpoint. Due to the expectation of more tempered growth than we experienced in the first half of this year in client and endpoint solutions, paired with improving growth rates in more profitable advanced solutions and cloud businesses, as well as continued improvement in the SMB customer category, we expect non-GAAP diluted EPS to be in the range of $0.61 - $0.73 per diluted share. This guidance assumes a potential $0.02 - $0.04 impact related to the ransomware incident. Our EPS guidance assumes approximately 235.5 million weighted average shares outstanding and a non-GAAP tax rate returning to a more expected rate of 30%. In closing, we expect continued year-over-year top-line growth enabled by strong execution across our core businesses and the progress we are making in our platform transformation. With that, operator, we will now open up the call to take questions. Thank you. At this time, we will conduct our question-and-answer session. If you would like to ask a question, please press *1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press *2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the * keys. One moment, please, while we poll for questions. Our first question comes from Michael Ng with Goldman Sachs. Please state your question. Hi. Good afternoon. Thank you for the question. I just have two. First, just as you think about the third quarter, I was wondering if you could provide some color on your expectations related to endpoint and advanced as you think about the revenue growth for the third quarter. Secondly, just on the strength in mobility in China, how much of that was primarily driven by the consumer subsidies given by the government? Is that a key driver of the kind of deceleration in top-line growth as we head into next quarter? Thank you. Yeah. This is Mike. Michael, thanks for the question. I'll answer the first one first. I think on the guide, where our midpoint is at about 3% growth, our top end is about 5% growth year over year. I'll talk about more of the top end because that's really where, if we didn't have a little bit of an impact to the cyber incident, which is probably about 1% - 2% maybe on the top line, that's where we probably would have landed, I guess, as more of a midpoint. If you think about that, what we baked in there is certainly, as I said in my prepared remarks, a little bit more tempered growth in the client and endpoint. We grew double digits, as we said, but we're assuming something more like mid-single digits. Honestly, where the bigger drop is, we're still seeing strength and should see strength on refresh of desktops and notebooks as we look towards the end of life of Windows and so forth, carrying out into even the early part of Q4. We still see that as being fairly strong, but it's really more the smartphone growth that we see less of as we look into Q3. Call it roughly mid-single digits at the high end of our guide on client and endpoint, probably low to mid on advanced solutions, which continues to be probably stronger servers and storage. Networking is rebounding to growth, but a little bit more modest, and it depends on the market you're in. Higher single digits on cloud, which we're excited about that returning. We had a harder compare in Q2 of last year and a little bit of that in Q1 of this year as well compared to last year. We're excited about that returning to a little bit more robust growth. That's sort of the mixed story. On your second question on China, it's hard to gauge. I think there probably is a little bit that's pulled forward by some of those stimulus plans as well as some of the potential for tariffs and retaliatory tariffs playing across that market. I think our growth there certainly was more geared towards that smartphone category, as well as a little bit in some of the high-end GPUs, which we add across other parts of Asia-Pacific as well. That's what I would say on that. It's hard to gauge exactly. The only other thing I would add to it as it relates to the mobility is we've had strong growth in mobility all of last year in Asia-Pacific and into the first two quarters of this year. Nothing that was way over the top relative to what we've been seeing in terms of demand in that market around the smartphone business. Thanks, Mike. Thanks, Paul. That's really helpful. Thank you. Your next question comes from Samik Chatterjee with JPMorgan. Please state your question. Hi. Thanks for the question. This is actually Joe Cardoso on for Samik. I guess maybe my first one is more of a clarification point. Obviously, you guys talked about the mobility and maybe that not continuing through the second half. If we focus on North America, strong sequential growth this quarter there. Just curious, I don't think you guys necessarily talked about it at all, but are you seeing any demand pull forward across any of the hardware products that you guys are shipping? Specifically, can you bifurcate that between devices and infrastructure? Whether you've seen any of the pull forward on that in the first half and some of the goodness going through and some of the conservatism going into the back half is just related to not a continuation of that trend? I have a quick follow-up. We don't break out by the Americas. From a North America standpoint, I'll speak more on behalf of that. We didn't see meaningful pull forward in all the categories. If there was anything, there was still maybe a little bit around the desktop notebook refresh, but nothing that was material. Anything we built in A for Q2 and then really in our guide in Q3 also. Got it. Very clear. Maybe second question. Sorry for the second question. Maybe more of a big picture one. Obviously the big beautiful bill was passed like almost a month ago. We're just curious if that's coming up in any of the customer discussions you're having here in the States. If so, if you could provide any insights on how customers are thinking about any of the implications there, either positive or negative. Thanks for the question, guys. Yeah, absolutely. If you look at it, I think most of the impact from the big beautiful bill is going to be more wrapped around kind of the Fed-SLED area, so public sector, call it. Public sector for us is not a material piece of our business. I think you'll see, depending, you know, stuff moving from need from Federal that's going to local and/or state, stuff shifting back and forth. For us, I know there's conversations going on, but again, it's not a meaningful part of our business. We do play in all those categories. Maybe there's defunding in one area and there's areas that are shifted more to from Fed, maybe to state. We'll be able to participate in that. The one thing I would just add, that favorability on the CapEx treatment is certainly going to benefit some companies. It may benefit larger companies to larger magnitudes, perhaps. We're keeping an eye on it to see. We're certainly poised to capture that if it does drive some demand pull forward for sure. Thanks, gentlemen. Thank you. Your next question comes from Erik Woodring with Morgan Stanley. Please state your question. Hey, guys. Thanks so much for taking my questions. I have two as well. Maybe just to start, another kind of big picture question related to some of the end market comments that you guys made. It's just, you know, when you speak to your customers or you look at the pipeline to the degree that you have visibility into it, you've been kind of being clear on smartphones and PCs. Big picture, kind of where do you see the market for some of these various major products? Where do you see us at in the cycle right now? If we think about storage and servers and Netcom and PCs and smartphones, do you think big picture we're mid-cycle? Are we late cycle? I'm sure there's differences between each of those products, but I'm just trying to get a better understanding of where things could ultimately go again if there wasn't disruption from the multitude of factors that are obviously impacting the macro. I just have a follow-up. Thank you. Yeah, sure. This is Paul. I'll jump in. From an end market standpoint, I'll talk about it's interesting when you look at kind of categories as you've been following us and been looking and talking about the networking category for quite some time all of last year and how it was down. We're in a similar situation really from an end market perspective, or the, I'll use them generically, our customers, our solution providers around the SMB markets. We hadn't seen growth, and it's been down double digits since Q1 of last year, 2024. Q1, Q2, Q3, Q4, and Q1 of this year, and then seeing single-digit growth in Q2, this most recent earning. We're excited about that, that we're starting to see growth there. We've talked about how that market historically comes back a little bit more slowly relative to the investment and spend we've seen more around mid-market and enterprise. As it relates to the product set, we did see some, and Mike touched on it briefly, around some of the GPU activity that's going on really around AI. This is a global comment too, so it's not just necessarily driven around one territory that we're seeing across both networking and server. We saw good growth, double-digit growth this quarter in storage, server, and networking, some a little bit more growth than others, server being the biggest growth out of all those. I would say we're kind of, if I had to peg it, we're probably mid-ending on this as we're seeing, and then we'll see other services and capabilities kind of follow behind as those GPU products continue to get delivered in the full solution. Awesome. Super helpful. Thank you. Thank you. Thank you for that, Paul. Mike, maybe just turning to you, I know you referenced some cost actions and mixed factors that impacted OpEx. It was still up sequentially fairly strongly. I know, obviously, you had a larger revenue base. Maybe my question is, the sequential growth that we saw this 2Q in OpEx, which was stronger than the 2Q of last year, is that really just the higher revenue base, or were you able to pull forward any investments to take advantage of that top line outperformance and maybe just push a little bit of that through from a timing perspective? That's all I had. Thanks so much, guys. Just to bear in mind, $32.7 million of that one-time charge was flowing through our OpEx, which was a one-time held-for-sale accounting. I don't know if you're backing that out of the numbers you're looking at. Sequentially, there is a bit of an increase. Year over year, we continue to manage more to sales volumes and how we manage leverage on a percentage of OpEx because certainly with 10% growth year over year from a revenue perspective, you have that degree of variable OpEx. We have timing as far as how sort of annual merits kick in and so forth that start in Q2 as well. Lastly, there is a little bit of a pull forward where we saw opportunities, especially around some of the things we're doing on our investments in Xvantage that Sanjib talked about a couple of weeks ago in mid-July, where we saw opportunities to expedite some of that work in Q2. There's a little bit of timing there as well. Great. Thanks so much, guys. Good luck. Thank you. Your next question comes from Ruplu Bhattacharya with Bank of America. Please state your question. Hi. Thanks for taking my questions. I've got two, one for Mike and one for Paul. Mike, when we look at the guide for fiscal 3Q, revenues are down 5% sequentially, but gross margin is up 40 bps quarter over quarter. You talked about a lower mix of client devices that is helping. Can you also comment on the impact of the pricing environment? I think in prior quarters, you had talked about competitive pricing in some markets like India. How is that trending? Also, how are you seeing the mix of regions contributing to this? If Asia remains strong, how much of a headwind is this to gross margin? Yeah. Thanks, Ruplu. Good questions. I think the big overriding factor you called out, which is really just more of the mix normalizing a little bit between client and endpoint and advanced solutions, and then cloud being a little bit higher growth. You do have the 8 basis point one-time impact also in our margins in Q2 that wouldn't recur in Q3. That's another sequential differential that you just need to take into account if you weren't already. I think we are still seeing, and I said this in my prepared remarks, we're seeing a heightened competitive environment everywhere in this environment. When macro is a little bit more volatile or softer, you do see that heightened competitive factor. It's rational. Even in India, where we did call out in prior quarters a bit less rational behavior in some cases, that was most pronounced in Q1. Q2 really fell through exactly as we predicted in our last call, which was about half that level of impact in Q2. As we sit here now in Q3, we see it returning to more normal levels. India will always be a more competitive environment, just given the growth prospects there and so forth. I think that's what I would say on the competitive factors. I'll just reiterate what I also said in my prepared remarks. On a like-for-like basis, when we look across a customer category or a product category, we really aren't seeing any significant or notable deterioration in pricings or margins. It really is more that mix as we see as a whole. I think I hit on all your questions. Oh, no, you also asked about Asia-Pacific. We certainly still see Asia-Pacific as a higher growth opportunity. That's going to probably continue for the foreseeable future, whereas EMEA might be the opposite end of the spectrum, especially in some of the Western markets where we still see a more challenging macro environment. What we're most encouraged about is we're just seeing a return to double-digit growth in North America, which is a very good sign between that and Asia-Pacific as two of our biggest geographic segments. Okay, Mike, I appreciate all the details there. As a follow-up, Paul, can I ask you, are you seeing any AI-driven, specifically AI-driven hardware purchases from customers, either AI PCs or AI servers? If so, what% of your revenues this year would you say are AI-driven? Related to this, you talked in your prepared remarks, and Sanjib the other day also talked about Xvantage helping to drive sales. Is there a way to quantify how much revenue in a year you expect Xvantage to drive? Thanks. Thanks for taking my questions. Yeah. I'll start with Xvantage. I talked about, you heard, thank you, it sounds like you attended Sanjib's presentation. We continue to help do things like we talked about IDA. I talked about it in my prepared remarks of what we've done and kind of the three phases we're going through with Xvantage. In some countries of the 20-plus countries that we have, some are a little bit further down the road than others. We don't necessarily disclose in totality how much Xvantage, because if you think forward, where we're going to be is every country is going to be on Xvantage, and that's how we're going to run the company, through Xvantage as the platform of how the company is going to deliver. We are going to continue to give metrics around what we think are important metrics on Xvantage. The three I continue to go to are, we look at it three different ways. One is user engagement, two is financial and operational, and three is around the customer. For user engagement on this quarter, I talked about quotes created nearly doubled year over year as we continue to provide further enhancements around search, around quoting, around product, and other capabilities. Financial, we've talked about self-service. That means people are coming and using the platform and providing more orders self-service because it's ease of use. That was up over 200%. For three quarters in a row now, we've talked about how we brought forward almost 2,000 dormant customers that are, in this quarter, grew 40% higher than the sales that they were doing before. It's showing that people are coming to Xvantage, and effectively, I would say they're running their business in a way that we're really helping enable that. As you look at AI, to answer your second question around AI, I'll touch AI PC. A majority of the refresh on PC so far for us have not been AI-driven. I think we're in the early days of that, still early innings, as we talk to customers and kind of end partners in terms of that evolution. Most of that has been around just H systems and the Windows refresh and the Windows end-of-life. We did, and Mike touched on it briefly, we are seeing some opportunities, and we've been very opportunistic. One in North America, we had some pretty big one-time opportunities, and also in Asia-Pacific around GPUs and some of the GPU data that's enabling the AI capability. We're starting to see more and more of that than I would have said a couple of quarters ago. That's encouraging. I think, again, long-term, it'll be more around how do you service around those capabilities and services that are being delivered. Thanks for all the details. Appreciate it. Your next question comes from Adam Tindle with Raymond James. Please state your question. Okay. Thanks. Good afternoon. Mike, I just wanted to start on guidance for Q3 on revenue and understand there's a lot of moving parts here. If I look at the model, it's you're typically up sequentially in Q3. I know it's like a strong public sector quarter, among other things. If I look at the guidance that you provided here, it looks like it would be down a little over $0.5 billion in revenue dollars sequentially. Call it, you know, sub-seasonal relative to what we would typically expect. You've got some divestitures in there. You've got, obviously, the cyber incident that I think you're still trying to quantify. I guess any, you know, kind of framework you can provide for us as we kind of think about Q3 revenue guidance and the different buckets that are causing the below typical seasonality and any comments that you can give on public sector in particular. I don't know if Paul wants to weigh in on that given Fed fiscal year-end. Yeah. Come back to that at the end. Paul, I know we'll add, but I think you hit on a couple of main points. Obviously, the cyber incident being the biggest one. I think that does drive a little bit of variability from what would normally be seasonality. I think probably the single biggest thing would be, again, just the over-indexed growth we've seen in client and endpoint. The strong double-digit growth that we've seen in Q1 and Q2. Usually, we do start to see some of that peak more into Q3 and then certainly in Q4 on normal budgeting cycles. The refresh cycle really kicking in in full gear, going back to Q4 of last year and through the first half of this year, has created probably a different seasonal effect than what we would normally see. As we pointed out, while we've guided, our guidance assumes that the high end, more in the mid-single-digit growth for CES would be a little higher than that on the desktop notebook category, a little lower than that on smartphones. As you've seen in the last two quarters, if we continue to see that robust demand continue, we're set up to capture it. It would mean some dilution of margin rate because of the mix of the business, but it would also create quite a bit more leverage on OpEx given the low cost to serve for those kinds of sales. That's probably the biggest thing I would point out. You asked about public sector. I would just reiterate what we've said before. It's a pretty minor part of our business overall, single-digit% on public sector. Certainly, Fed is weaker right now in this environment. SLED is a little bit better overall, but that would create some comparative too, but it's not a massive impact for us. I don't know. Anything else you'd add? That's the only education we expect. We were down kind of mid-single digits in each of the categories, the high single digits in Q2, and we expect to be better than that in Q3 that we built into our guide. Got it. Super helpful. Maybe just a follow-up, Mike, on cash flow. If we were to, you know, kind of think about the environment that you're describing year to date, where client and endpoint is very strong, mobility has been very strong. We think about those businesses. We typically think of those as lower margin, but, you know, much better working capital dynamics, faster asset turns, etc. Yet if we look at cash flow year to date, it's more than $0.5 billion of cash use. If you could maybe just parse out, I know you mentioned buy-ins in there, but talk about, you know, sort of that mixing towards these areas and faster growth in these areas, yet how sizable the cash use has been year to date. If you could also, you know, maybe touch on cash flow from here. Do we reverse this out over the next couple of quarters and get to positive cash flow for the year? What does the cadence look like? Thanks. Sure. Yeah. I mean, our typical seasonality Q3 is a cash outflow mainly because we're procuring inventory for a bit of that hockey stick in Q4. It has been a unique result for the same reasons you just pointed out. Just higher, you know, double-digit growth year to date is requiring investment into inventory to serve. Both in Q1 and Q2, we did have some pull forward opportunistic buys. We're sitting on a little bit heightened level of inventory exiting Q2 because there are a handful of large deals that are closing in the early part of Q3 that we had to start stocking for that drove a little bit of an anomaly there, which will be, you know, that'll drive a positive offset in Q3. What I would expect, and I guess the last thing I would point out is, you know, on a day's basis, in Q1, we were about four days better on total net working capital year over year. In Q2, we were about a day better year over year in overall net working capital. We're still managing it on days around that growth, and that is really what is driving that outflow on a year-to-date basis. Q3, I would assume, you know, could be a little bit neutral to some outflow as we continue to invest in the working capital, perhaps offset by some of that inventory working through the cycle. Q4, as you saw last year, is where we spun off some cash, where we saw that inventory convert into receivables, much of which was collected before the end of the year. And w e overlay that with how we manage payables with all of our vendors. Okay. Got it. Thank you. Thank you. Your next question comes from David Paige with RBC Capital Markets. Please state your question. Hi, Mike. Paul, thank you for taking my question. I had two. Just following up on Xvantage, in terms of the small business growth you've been seeing in the quarter, I think a return to low single-digit growth, which is great. Do you think, is that the Xvantage driving some of that growth in the SMB market? As a follow-up, just in terms of portfolio rationalizations or any other moves, do you think the portfolio is right-sized here, or should we expect in either, you know, bolt-on M&A or more divestitures going forward? Thank you. Yeah. Thank you, David, for the question. This is Paul. I walked through and I talked about the three phases of where we're at. The U.S., and I would say North America to some extent too, is most mature on where we are and starting to get into that second phase, which is where we really start leveraging AI and automation to optimize demand signals, which allows us to be more proactive. I talked about our intelligent digital assistant, IDA. That is absolutely an area that the U.S. has taken advantage of, which is really shortening sales cycles. You can see it in their revenue growth that we said from a North America standpoint. That's really the ability to go to that SMB market. This is about self-service. It's about helping them be more educated as they go to their end users and shortening those sales cycles using AI to say, "This end user historically purchases within the X amount of days. You should go have a conversation with them because we can see the data relative to all the end consumption." It's a very good pickup on your point that, yes, it is being driven, and we believe that's helping spur some of the growth in SMB, specifically around North America. On portfolio rationalization, and Mike can jump into the divestitures, we continue to look at what's best for the company and the best return from a shareholder perspective. Although there were two here, we're going to continue to manage the business, but nothing specifically as we continue to manage the business that we're looking at as we continue to invest in our core capabilities and really around being a platform company. Mike, I don't know if you have anything else. Yeah. I mean, we remain well-capitalized to go after M&A if there's something opportunistic. As you've seen in the recent past, on the acquisition side of the equation, it's been smaller tuck-ins over the last several years, which have been very strategic because of the capabilities they bring. That's going to continue to be the wheelhouse unless something big is very opportunistic for us. Great, thank you so much. Thank you. Your next question comes from Ananda Baruah with Loop Capital Markets. Please state your question. Hey. Yeah. Thanks, guys. Appreciate the question. Two quick clarifications, if I could. Paul, just a couple of times, you made reference to AI in a couple of different product contexts. I think GPUs going into Asia-Pacific. In some context, you mentioned GPUs going into Asia-Pacific. In another context, I believe you were talking about some of your products. I think storage systems and server systems or maybe as part of the solutions going into customers. Can you just clarify that for us, put the context around it, where your guys' exposure is, and what are the avenues that you're getting into the marketplace for that? I have a quick follow-up. Thanks a lot. Yeah. You're welcome. Ananda, thanks for the question. I was relating to we have the GPUs that we've had and the ability to service. It was Asia-Pacific. We actually had some new authorizations and some new opportunities, specifically in North America, which we capitalized on. We had a very large deal that we were able to close here in North America. We're excited about that. As opposed to exposure, I look at it as more opportunity for us as we move forward. If you just look at the growth in networking, server, storage, and a combination thereof, there are GPUs that are going into that. We saw good growth, the highest one being in the server category, followed by storage and networking very closely. All three of those categories had double-digit growth for us. There's GPUs that are aligned in all three of those categories. That's helpful. Can you comment at all what the customer, like what sort of the customer segment set is? Is it NeoClouds? Is it enterprises? There's a big NeoCloud complex in Malaysia. Is it NeoClouds? Is it enterprises? Is it any other flavor? It sounds like you're getting going there in some context. That's exciting. Thanks. I'll stay on it for there. Yeah. Keep in mind our customer. I'm not going to speak on behalf of end markets of where our customers are taking it. These are our large mid-market and enterprise customers that are servicing those end markets. I'm not going to speak on behalf of where our customers are necessarily deploying those technologies. The ones that are procuring it from us, that are buying it from us from a solution standpoint, are really wrapped around mid-market and enterprise. I got one more for you in that couple. Are these VARs that you're talking about, your large, some of your larger VARs? Yeah. I mean, they're VARs, they're national solution providers, they're everybody. We kind of define it as the really big ones, the next ones, and then the mid-market and down below to SMB, all the way down to the S in SMB. I got it. That's super helpful. Thanks a lot. Thank you. A reminder to the audience, to ask a question, press star one. To remove yourself from the queue, press star two. Your next question comes from Amit Daryanani with Evercore ISI. Please state your question. I guess maybe to start with, you talked about growth in the SMB markets in your prepared commentary. Could you just talk about how broad that growth was from a product basis? Historically, I feel like the SMB market has been a bit of a leading indicator for the rest of the business. Should we see a better recovery on a much more broader level given what you see on the SMB side? Yeah. I think SMB, you know, it's still more muted, as we said, but we're excited that it's growth. Even if it is a bit more modest, that is a good indicator for sure. The mix has been not too dissimilar from what we've seen elsewhere, where it tends to be more into the server storage and certainly the desktop and notebook and even a little bit of the, not as much of the smartphone phenomenon is there, but certainly the desktop and notebook piece is more centered where those product sales are, which even in the SMB, while it typically drives higher margins for us when you have more of the technical solutions, multiple products, services that get embedded, etc., you know, these are not as much that kind of value-add sale that you would see that uptick. I think they're finally participating in some of the refresh that's happening too. Because if you would have looked at kind of Q1 and prior, as we talked about being down double digits for us, we actually saw growth in both advanced solutions and client and endpoint solutions within the SMB markets. Paul and Mike, your inventory dollars are up like $810 million since December to what you folks just reported in June. Off this uptick you're seeing in inventory very specifically, how much of this is strategic pre-buying versus positioning for what you think demand will look like in the back half? How do you get confidence that you don't end up with obsolescence risk or write-offs given the spike in inventory versus this will just flow through the revenue channel over time? Yeah. Really, no concerns about any material write-offs. As I said earlier in answer to one of the questions, I think we did have a little, we do have a little bit higher inventory than we normally would have coming out of Q2, which was more buying for specific large deals in a couple of cases that are going to close in Q3 with no expected risk on that front. Most of the buy-in stuff was just getting ahead of, you know, potential for tariffs and other factors. A lot of that is bought, you know, early in the quarter, sold through largely in the quarter. On a day's basis, I know I came back to that earlier too, but on a day's basis, we're basically flat year over year from a DIO perspective. We're absorbing that growth through the heightened sales, as you can see. Thank you. Thank you. Our last question comes from Karl Ackerman with BNP Paribas Asset Management. Please state your question. Yes. Thank you. I have two, please. First, you mentioned growth on server and storage. Comments have been limited on networking and cybersecurity. I guess our order trend is declining there. What are you seeing there in the SMB space specifically, given that tends to be a higher margin solution sale? Yeah. This is Paul. Cybersecurity actually got good growth for us. If you look at within our advanced solutions, the percentage of business that goes through the larger categories are more networking, followed by server and storage shortly thereafter. Our server business actually was very strong in the quarter, so we're pleased with the server growth that we had. Cybersecurity was strong also, just being a smaller portion of our overall advanced solutions business. Got it. You know, and then just based on the COGS and OpEx disclosure, it seems that CloudBlue couldn't sustain as a standalone entity. I guess, why do you believe that is, and how does the sale of CloudBlue impact Xvantage's system of records, if at all, and your ability to shift more of your sales toward services? Thank you. Yeah. If I take a step back and remind, CloudBlue was the foundation for our cloud platform that we had. I mentioned in my prepared remarks in early days the $600 million that we invested around cloud. We use that as the underpinning for our Xvantage team to build really a single pane of glass where you can now buy cloud solutions, hardware, software, and services all in one platform as opposed to having multiple different systems. As we looked at our long-term strategy, the capabilities that were there, and we retained the relevant IP that we've had within CloudBlue and the important pieces of that $600 million investment. We believed it was right from a strategic perspective to continue to invest in our platform strategy and the capabilities of CloudBlue moving forward was best to look at as a divestiture. Karl, just one quick last point on that. CloudBlue, that business has always been housed in sort of cloud results that we've talked about. It was a pretty, honestly, a pretty small part of that cloud result. Not as it's an immaterial ultimate go-forward impact when you think about that divestiture from a financial perspective. Got it. Thank you. Thank you. That concludes our question and answer session. I'll now turn the call over to Paul Bay for closing remarks. Thank you all for your questions and continued interest in Ingram Micro. As always, to our 23,000-plus team members, our customers, and vendor partners, as we continue to deliver on our short term and execute against our long-term vision of being a platform company and delivering a holistic platform for business to business. Thank you again for your interest and have a great night. This concludes today's conference. All parties may disconnect. Have a good day.