Earnings Call: Q1 2021

Mar 22, 2021

Good morning. My name is Sharon, and I will be your conference operator today. I would like to welcome everyone to the SYNNEX Merger Discussion and First Quarter Fiscal twenty twenty one Earnings Call. Today's call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. At this time, for opening remarks, I would like to pass the call over to Liz Morelli, Head of Investor Relations. Liz, you may begin. Thank you, Sharon, and good morning to everyone. Thank you for joining us for today's call on short notice. With me today are Dennis Polk, SYNNEX CEO Rich Hume, Tick Data CEO and Marshall Witt, SYNNEX CFO. On this morning's call, we will review today's announcement of the merger between SYNNEX and Tech Data along with SYNNEX first fiscal first quarter results. Our earnings press release, the transaction press release and associated presentation can be found on our Investor Relations website at ir.synex.com. Before we continue, let me remind everyone that today's discussion contains forward looking statements within the meaning of the federal securities laws, including predictions, estimates, projections or other statements about future events, including benefits of the proposed merger to our various stakeholders, timing of the merger, anticipated ratings, capital structure and growth. Actual results may differ materially from those mentioned in these forward looking statements as a result of risks and uncertainties discussed in today's earnings release, in the Form eight ks we filed today and in the Risk Factors section of our Form 10 ks and our other reports and filings with the SEC. We do not intend to update any forward looking statements. Also during this call, we will reference certain non GAAP financial information. Reconciliations of GAAP to non GAAP results are included in our earnings press release and the related Form eight ks available on our Investor Relations website, ir.cinex.com. This conference call is the property of Cinex Corporation and may not be recorded or rebroadcasted without our permission. I will now turn the call over to Dennis. Dennis? Thank you, Liz, and thank you to everyone joining the call. Today is an important and transformative day for the technology distribution industry as SYNNEX and Tech Data come together. For over four decades, we have each worked to help our customers and partners grow and achieve their strategic priorities. We have both been leaders in the space and I and the entire SYNNEX management team have the utmost respect for the team at Tech Data and what they have created. Like us, Tech Data has established a reputation for excellence and we are thrilled to partner with its 14,000 plus talented colleagues. For SYNNEX, this combination is beneficial accelerates our strategic growth initiatives by multiple years versus what we could have done by acquiring several smaller geographically diverse companies. While on the surface, we appear to be similar companies, we're actually very complementary to each other from a geographic perspective, OEM representation, customer segments served and services offered. Thus the combined company will be able to bring additional services and capabilities to our respective partners. Even with a well planned and executed strategy, I'm not sure we could have achieved over time all that is accomplished with this merger. For our investors, we have the opportunity to create value by accelerated revenue growth, scale efficiencies, increased cash flow and greater earnings power. I am pleased to be able to partner with Rich Hume in the go forward combined entity. Rich is a talented leader with significant industry expertise and we're fortunate to have him as the CEO of the business going forward. I would like to now turn over the call to Rich at this point. Over to you, Rich. Thanks, Dennis. I, along with our shareholder, Apollo, believe combining our business with SYNNEX accelerates the momentum that was already underway to create growth that neither company could achieve independently. The combined company will deliver superior value for shareholders, offer our customers and vendors exceptional reach, efficiency, and expertise across the entire technology eco ecosystem, and be an employer of choice in the IT industry. Importantly, together, we have the portfolio, the financial strength, and the talent to enable us to achieve these objectives. The combined company will be a diversified global solutions distributor with significant breadth and depth of capabilities and the ability to accelerate technology adoption and attract the world's most innovative OEMs. We will have premier best in class end to end offerings through a broad diversified portfolio of more than 200,000 products and solutions. The combined company will be positioned to transform value creation from the linear model to the multipoint model, enabling collaboration among all of the ecosystem participants. This will enable us to drive effective go to market strategies that our vendors can capitalize on and help to deliver optimal business oriented solutions for their customers. Our ability to orchestrate the access, interaction, delivery, and services required to solve business challenges at scale is the foundation of how we will continue to grow. As you know, change is constant in our business, and this is a pivotal time in our industry. Technologies such as cloud, analytics, IoT, and security are changing our customers and their end user customers buy, sell, consume, and finance technology solutions, causing the IT ecosystem to evolve faster than ever before. This evolution has accelerated further due to the work and return to office trends, which are contributing to explosive growth in these areas and which we are additional ideally positioned to serve. The combined company will have a solid financial foundation, including an investment grade profile and strong free cash flows to support investments in our core growth platforms as well as investments in these next generation technologies. The breadth and diversification of the combined company extends well beyond our products and solutions. Together, Cynix and Tech Data will have a global footprint that serves more than 100 countries across The Americas, Europe, and Asia Pacific. This combination brings new market opportunities for both companies. For example, Cynix has a well established presence in Japan where Tech Data does not. Similarly, Tech Data is a well established business across Europe where Cynix has a more limit limited access. This meaningful reach across products, services, geographies will also provide increased value and purchasing efficiencies to the combined companies, customers, and vendors. Both Cynix and Tech Data have excelled at driving top and bottom line growth and has successfully acquired and integrated companies in the past. I have full confidence that our combined team will deliver on the exciting growth underpinning this transformational merger, especially given the complementary values of our organization. Dennis, thanks, and back over to you. Thanks, Rich. Very well said, and I am looking forward to working with you to achieve all these benefits and also to continue to drive and support the great cultures each of the companies bring to this transaction. I will now turn the call over to Marshall to walk through the terms of the transaction and speak to the highlights of our Q1 earnings release today. Following Marshall, I'll provide my normal quarterly update and then three of us will take your questions. Over to you, Marshall. Thanks Dennis. This transaction is valued at $7,200,000,000 including net debt and at close SYNNEX will issue 44,000,000 shares. Pro form a ownership will be 55% SYNNEX shareholders and 45% Tech Data shareholders. We expect the transaction to close in the second half of twenty twenty one subject to customary closing conditions, including approval by SYNNEX shareholders and regulatory approvals. From a financial perspective, the combined company will be on very solid footing with pro form a revenue of 57,000,000,000 healthy EPS, EBITDA and cash flow generation. We expect the transaction to be accretive to our non GAAP diluted EPS by more than 25 in year one. Given the complementary customer sets and geographic footprints, we see the opportunity to generate revenue synergies as a combined company. There is little overlap amongst our top customers and partners, and we believe SYNNEX' deep and narrow strategy combined with Tech Data's broad customer base minimize risk regarding diversification. From a cost perspective, we expect to realize $100,000,000 of net synergies in year one and $200,000,000 in year two. This transaction will be facilitated by a new capital structure that we will use to refinance debt at Volt Tech Data and SYNNEX. It will consist of a $1,500,000,000 Term Loan A and $2,500,000,000 of unsecured bonds at varying maturities, bolstered by a $3,500,000,000 revolving credit facility, which we expect to be undrawn at close. The expected cash balance at close will be approximately $1,000,000,000 We're also actively seeking to obtain our first investment grade credit rating and feel confident regarding the outcome. As many of you are familiar with, SYNNEX has a long track record of diligently deleveraging post acquisitions. We expect the same results with this transaction. The expected leverage ratio of approximately 2.7 times at transaction close is expected to decline to approximately two times within twelve months. With the combined entity generating LTM pro form a adjusted EBITDA of approximately $1,500,000,000 this will provide us with ample ability to delever quickly while also remaining focused on optimizing the core and driving organic growth. Now moving to Q1 fiscal results. Our team delivered strong results ahead of internal expectations to start off the fiscal year, driven by continued robust broad based demand. Total revenue for Q1 was $4,900,000,000 up 21% year over year. Gross profit totaled $3.00 $5,000,000 up 19% or $49,000,000 compared to the prior year. And gross margin was 6.2% consistent with the prior year. Total adjusted SG and A expense was $149,000,000 or 3% of revenue, up $9,000,000 compared to the year ago quarter and primarily due to COVID-nineteen related expenses. We continue to expect incremental quarterly costs at a minimum of $5,000,000 in 2021 and we did a good job of scaling SG and A to the growth of the business. Non GAAP operating income was $156,000,000 up $40,000,000 or 35% versus the prior year. And non GAAP operating margin was 3.2, up 33 basis points over the prior year. Q1 interest expense and finance charges were approximately $23,000,000 and the effective tax rate was 25%. Total non GAAP income from continuing operations was $99,000,000 up $25,000,000 or 34 percent over the prior year and non GAAP diluted EPS from continuing operations was $1.89 up from $1.42 in the prior year. Now turning to the balance sheet. Total debt of approximately $1,600,000,000 and net debt was less than 200,000,000 Accounts receivable totaled $2,400,000,000 and inventories totaled $2,600,000,000 as of the end of Q1. Our cash conversion cycle for the first quarter was thirty two days, twenty five days lower than the prior year and the decrease was driven by DSO improvements and better inventory turns. Cash generated from operations was approximately $25,000,000 in the quarter and including our cash and credit facilities, we had approximately $2,800,000,000 of available liquidity. We are pleased to report that our Board of Directors has approved a quarterly cash dividend of $0.20 per common share for the quarter. The dividend is expected to be paid on 04/30/2021 to stockholders of record as of the close of business on 04/16/2021. Now moving to our outlook for fiscal Q2. We expect revenue in the range of $4,700,000,000 to $5,000,000,000 Non GAAP net income is expected to be in the range of $94,900,000 to $105,000,000 and non GAAP diluted EPS is expected to be in the range of 1.8 to $2 per diluted share based on weighted average shares outstanding of approximately $51,800,000 Our non GAAP net income and non GAAP diluted EPS guidance exclude the after tax costs of $7,300,000 or $0.14 per share related to the amortization of intangibles and $4,800,000 or $09 per share related to share based compensation. For the full fiscal year, we continue to expect a healthy IT spending environment driven by gradually increasing investments in technology enablement. We expect full year fiscal twenty twenty one non GAAP diluted EPS of approximately $8 per share. Please note that these statements of our second quarter and fiscal twenty twenty one expectations are forward looking and that our actual results may differ materially. Now I'll turn the call back over to you, Dennis. Thank you, Marshall. I'm very proud of our associates and the excellent first quarter results that we have delivered. In Q1, we continued to navigate an unpredictable environment, but through it all, the team again showed flexibility, creativity and dedication to finding innovative ways to support our customers and partners with exceptional service. Our results above our internal expectations were driven by healthy broad based demand across all our businesses as remote capability and digital transformation investments continued. Similar to the past few quarters, we saw strong demand for client devices like notebooks and Chromebooks as well as continued demand for security, cloud, collaboration solutions and related services. We also saw improvements in areas like enterprise solutions, including server and networking. Our performance came from across all our customer segments with really no exception in the contribution to the growth in the quarter. From a geographical perspective, all regions performed well with Canada and Japan exceeding expectations by the most. Turning to our Q2 outlook. Our priority remains on the health and safety of our associates. Overall, we are encouraged about the IT and spending environment so far in 2021. As we move closer to a sense of normalcy, it appears investment, especially in IT is following. For our Q2, with ongoing execution, we anticipate our business will continue to grow better market as our guidance implies a mid to upper single digit year over year growth rate. Perhaps we're being a bit cautious with our expectations for the second quarter given the demand environment is fairly strong currently, evident by our ongoing high backlog and that on premise purchasing activity is picking up each quarter. However, given how much we overperformed in Q1 and how early we are in Q2, we will start with the current range we have provided. Overall, we are pleased with the trajectory of our business, evident by Marshall calling out our EPS expectations for the year. As I wrap up and touching again on the Tech Data merger announcement, those who have followed our space for many years know that M and A has been an important part of this industry. We and Tech Data have both participated in many transactions over the years and have built up a wealth of knowledge experience on how to have a successful outcome ensuring that value creation is delivered. I believe we are very well situated given the strong cultural fit, knowledge of the industry, customers and partners and a strong and talented combined workforce. We are developing a robust integration plan and we'll share more with you as we get closer to the transaction close. We are very excited by the possibilities that this deal creates for our combined company and look forward to realizing the significant value that it should produce for our customers, partners, associates and shareholders. In closing, we remain very focused on our core business. This focus along with strong partnerships with our customers, vendors and the communities we operate in and the talented SYNNEX team, who I can't thank enough for all that you do for our company, support my confidence in our business. With that, I'd like to open up the call for questions. First question comes from Ananda Baruah with Loop Capital. Thanks guys. Good morning. Listen, congratulations. Big move. Shouldn't be super surprised, I guess, even though you guys move fast because these two the not the two from your management team over the last ten years of distribution, but still don't want to think that thing. So you guys not, like, time it off. Two, if I could. And, Rich, welcome back to, you know, the financial community, you know, sort of into the public sphere here. Two, if I could. The first is you guys mentioned on the call that you expect you can, this is this is my language, share or power share inside of, inside the customers and suppliers. Do you think that at normalized, the combined company growth rate can be a higher growth rate longer term, normalized, than with the two separate companies? Hi, Ananda. Yes, a bit hard to hear you. I think I got most of your question there. And thanks. We appreciate your comments about the transaction. So as far as the combined company, yes, we do expect there's a significant opportunity to grow the company faster than market rates. As Rich talked about in his prepared remarks, we really are two very complementary businesses. We both have very solid go to market strategies with very good service offerings to our partners. But in each company's case, are some limitations to what is offered. And when we bring the combination of those services and offerings together, we think our customers will enjoy the benefit of the combined company and that will drive, we think, solid market growth for the combined co. Okay. That's great, Dennis. And I appreciate that. I'll just ask my follow-up quickly here. You mentioned strong IT spending through the balance of this year as businesses reopen. Are you able to get a sense of from those businesses what a structural ongoing impact could be from, you know, all things hybrid related, you know, remote work, hybrid work, things like that. And so any struct any and even anything anecdotal you could share, Dennis, would be great. Beyond the impact of businesses reopening, what structural tail may there be in the future years? That would be helpful as well. Thanks. Sure. Yes. So far, we've seen a very good demand in our So our comments were around the trajectory of our business so far through Q1. But for the rest of the year, Ananda, when it comes to businesses opening back up and workforces returning to the office, we do think that'll provide a tailwind overall because as I think we all know, the work environment going forward won't be like the work environment it was prior to the pandemic. So companies will have to invest in additional IT capabilities to handle the remote workforce either from home or at the office. And we think that's going to again be a tailwind for our business. And that should provide a good setup for us for the rest of the year and beyond. So that's part one to answer your question. Part two, just from a tactical day to day standpoint, we are seeing more on premise projects occurring this quarter and the current quarter that were in Q2 prior quarter Q1, excuse me, and now the current Q2. So that's a good tailwind as well for our business as we see some of these projects that were delayed or were halted during the pandemic are now occurring and we're able to deliver product and support our customers from that perspective. That's really helpful. If I could, Ananda, I'm giving you an industry perspective now, and it's my point of view. But as Dennis had said, what I would call the traditional data center deployments have been slowed in one category. And I believe that there are pent there is pent up demand there. And, you know, when we look towards the back half of the year, it's my opinion that that the pent up demand for those data center projects will will start to manifest itself in in demand. The second part of your question, I think, was around, you know, the hybrid nature of the world. And I think that, certainly, the the cloud delivered, capabilities, you know, seem are are clearly accelerated relative to the totality of the demand. And I would anticipate that that demand will continue to be accelerated relative to the rest of the category. It provides a great opportunity for IT distribution. Appreciate that, guys. Thank you, guys. Thanks. Thank you. Next question comes from Adam Tindle with Raymond James. Okay. Thanks. Good morning and congrats on a landmark transaction. I have a two part question on synergies and dis synergies maybe for Dennis. Just starting on the synergy side, you talked about $200,000,000 plus over two years. Maybe you could talk about the nature of those synergies. We just think of both companies as very lean operators. So color on the nature of the synergies and areas for upside beyond that $200,000,000 or what you didn't include? And then secondly, you talked about being similar from a geographic perspective, OEM, customers served. Are there any dissynergies contemplated? What's the OEM and customer response? Hi, Adam. Yes, this is Dennis. Yes, so from a synergy standpoint, yes, there are benefits from this transaction. You are correct. We're two very well run companies. But when we bring the two companies together, we have an opportunity to leverage our IT systems. As you know well, I think SYNNEX has its own internal ERP system that's been very beneficial to us. And we think that's a key area where we can garner a lot of synergy savings going forward. Additional areas are facility consolidations of the two companies. There's also quite a bit of corporate spend that will be saved as we bring the two companies together. So those are the three main key areas that we think will garner the synergies from. But as you know, of our companies, we're constantly working on our businesses, working on the core aspects of our operations and we consistently find ways to achieve efficiencies and gain savings there as well. And we think that will continue with the combined company, not just in the first and second year of the transaction, but beyond that as well. So we think there's a tailwind there from a synergy aspect on top of what we're going to start with from the bringing the two companies together. From a dissynergy standpoint, there really aren't that many. We're not really forecasting significant amount of dissynergies. There could be some customer overlap or situations where maybe we can't serve the customer in totality of the two companies individually together. But, again, we see those as very small and, the amount of dis synergies is not material to the transaction. Okay. And maybe just, Adam Adam, on the dissynergy piece, you know, as Dennis said, there might there might be some level of dissynergies. It it's it's somewhat minimized because of what he talked about earlier in terms of the complementary aspects of our business. So, you know, just to keep a simple example here, there certainly are things on on the SYNNEX line card that that tech data does not carry, and the reverse is true. So within our customer sets, we'll be able to serve sort of that incremental, capability, going forward. And as as he also commented, you know, our our sets are are quite complementary. So, you know, it's the the customer set in totality. Yes. There is some overlap, but, you know, it it isn't isn't as significant as one might think. So I think that there's a great opportunity to offset whatever, dis synergies might exist with with the complementary line cards. Understood. And and good to hear from you, Chuck. And just as a follow-up, maybe one from Marshall. If you could just talk about the financing and the transaction and different options that you've kicked around. If you one might say you're just 2.7 times net debt post close. You've got 200,000,000 of synergies on the come. Why not use more debt in the deal? And then secondly, your debt pay down implies about $1,000,000,000 of cash generation over the next twelve months or so. Are there one timers in there like a high change or anything like that? Or is that an accurate reflection of the combined entity's normalized cash flow? Thank you. Yes. Yes, Adam. So from a pro form a basis, we do feel pretty confident about cash flow generation. One time cost, think will be around, we'll call it, one to one and a quarter just in terms of the synergies gained. And then, yeah, we did look at the optionality of how best to structure from a capital perspective and felt like the term loan combination with the unsecured bonds and then having the dry powder made the most sense for us. We we expect to have a four and a half of liquidity ready and available to us and and felt comfortable that the two two point seven times leverage at close, being well below three was a good place to start with confidence to get below or at two within twelve months. Is that liquidity something that you're planning to do something with, or is there a need for the ongoing business? Maybe just, you know, what what the what the working capital needs of the business? Yeah. Given given working capital and as both Rich and Dennis said, you know, we expect to grow. We expect that the combined entities are going to be in position to to need that that extra dry powder to ensure that we've got what we need from a from a growth perspective in the business. Okay. Thank you all and congrats again. Thank you. Next question comes from Rupu Bhattacharya with Bank of America. Thanks for taking my questions and congrats on the merger announcement. Maybe the first question for Rich, when Tech Data went private, I think you had intended to invest $750,000,000 in digital transformation through 2025. Can you give us an update on where you stand on that? And do you intend to continue on that path? And how does this deal change that if it does? Well, thank you very much for the question. So yes, when you think about the investments that we had underway, when we get into the executory period, we'll have the opportunity to do some planning and, you know, at a top level, look at one another's assets and, you know, determine, as we combine those two two our two companies, you know, what what it is we might need going forward. But I would tell you that, our our joint vision is to provide, you know, the, leading customer and vendor as well as stakeholder I'm sorry, colleague and associate experience within our category. So the long story short is, you know, we'll continue to invest in our business, but it might not be aligned with what we originally planned to deploy because we might be picking up a lot of that capability from SYNNEX as we come together. Okay. Thanks for that, Rich. That makes sense. Maybe for my second question, I'll ask you about the combined line card for the company. I think from what I remember, Tech Data had about 50% of revenue from endpoint solutions like PCs and phones and printers. And advanced solutions was the other half of the business, which was storage and networking. I think, know, SYNNEX also has peripherals about, you know, 25% to 29 of revenues. So when you look at combined line card, do you have an overall initial sense of where you want, how much of revenues from, you know, where do you see like hardware versus software versus services? Any any any kind of any thoughts initially on on the combined line card, where your strengths would be and, what you might wanna add? Yes. So I I think you you have, an accurate portrayal of, you know, the characterization of tech data being nearly fifty fifty. When we take a look at, combining the line cards, the first and I think very, very critical point is we believe we'll have absolutely the most comprehensive portfolio within the market with over 200,000 offerings. As it relates to where our interests are going forward, first, we absolutely need to make sure that we're servicing our core business today as we know it, but we share a common vision in the future relative to where we'll incrementally invest. And that would be, as I said in my prepared remarks, in the area of cloud, business analytics, security, IoT. As you probably well know, within the IT market, they offer, accelerated growth opportunities. And, you know, we're we're going to make sure that we're able to support vendors and customers with those needs moving forward. So I would think of this in the context of continue continuing to invest to keep our endpoint and advanced solutions business, very healthy and robust, and at the same time really setting our targets towards these continued emerging market opportunities and invest maybe a little bit more heavyweight into those categories. Got it. Thanks for all the details and congrats again on the announcement. Thank you very much. Next question comes from Matt Sheerin with Stifel. Yes. Thank you. Good morning and hello Rich and the SYNNEX team. A lot of good details about the merger. One question, I guess, there just regarding the branding and go to market strategy for the company. Obviously, SYNNEX and Tech Data are well known, Tech Data specifically, obviously, in Europe. But could you talk about that? Also, in terms of conversations you've had with your very big vendors and very big reseller customers in the reception that you're getting or concerns you're getting from them? Sure. Maybe I'll take the first half and then Dennis can take the second half of the question. So as it relates to branding and headquarters and those type of matters, very honestly, we have not even embarked in those discussions. We're going to use the executory period to flush that out, and certainly, we'll rely upon market insights, market data, customer data, vendor data as we take those decisions. And that's really the time frame where those things will come together. And so maybe Dennis can comment on the back half of your question, Matt, and then we can go from there. Yes. Thanks, Rich. Thanks, Matt. Yes, Matt, we did have a chance through a diligence process and all the way through moments before this call to talk to a very good cross section of our partners, both customers and vendors. And the feedback has been overwhelmingly positive across the board. So we see a lot of excitement and support for this transaction from our customer and vendor base. Okay. Thank you. And then just a couple of questions just regarding the SYNNEX business, specifically in your guidance. One, regarding the ongoing PC supply constraints that we've been hearing about, is that impacting revenue at all? Or does it give you a longer runway here with this upgrade cycle, given the backlog? And then second, you've talked about, with the Hive business moving to, a consignment only model with your large customer there. Could you tell us the timeframe and the updates there? Thanks. Thanks, Matt. I'll hand the first part and turn it over to Marshall for the second. As far as the supply chain, the challenges are still there from a product shortage standpoint, from extended SLAs, from just being able to get product from our vendors in a timely manner. I think those are well documented and very well explained from our vendor partners. So right now our backlog is very consistent with what it has been the past three quarters. We talked about in the past, we rarely have much of a backlog. So that consistent and high backlog will tell you that there are still supply chain challenges in the market. But as always, we do our best to work through those and deliver a very good service to our customers. And you can see through our performance in Q1, we've done a very good job in doing so. And then, Matt, I'll take the second part. No change from what we said last time we connected. Still expect the the the highest customer to transition to consignment in Q3. It's reflected in our thoughts for the full year. And as we said, it's not a light switch. It'll turn on in Q3 and probably fully ramp for Q4. You. You, Annette. next question comes from Shannon Cross with Cross Research. Thank you very much for taking my question. I'm curious, I'm sure we'll get more information when the Form 10 comes out or proxy. But how did the transaction come about? What were the thoughts around the valuation and the split of ownership? If you can just sort of talk us through how Tech Data and Apollo versus Synix sort of thought about it and where you're coming out? Then I have a follow-up. Thank you. Hi, Shannon, this is Dennis. I'll start off with that one. So we've had conversations over the past few months, Tech Data and SYNNEX. Obviously, we are both always evaluating opportunities for growth in our businesses and enhancing the way we deliver value to our customers and vendors and colleagues and investors. Through the conversations that we've had, we realized the combination of these two companies could really deliver a lot of value. And that's why we're talking here today. We're very excited about this transaction and very excited to get to close and operating the two companies together. With regards to all the other details, proxy be filed and you'll see the roll up of how things got to where they are today. Okay? Okay. But I guess I'm just trying to figure out from an EBITDA multiple perspective how you thought about it and came up with it. I don't know if there's any other details you can give us in terms of the valuation and that given I mean Apollo was at $6,000,000,000 in June when they closed the deal. Right. Sure. So this Dennis, I can take that one again and I think maybe Rich will want to add some comments. From a multiple standpoint, the multiple that of this transaction is consistent with multiples that have been paid in similar transaction in our industry, including our most recent TS transaction, the WestConnCom store. It's also similar to the multiple that was paid for when Apollo took Tech Data private. I think the key thing to realize is that, since the announcement of Tech Data, and Apollo back in 2019, Tech Data has grown and improved its business since then. So that's added to the value of the company. And that's what we factored in when we had our negotiations with the company. Rich, over to you with any other comments. Yeah. I think, it's important to note, since Dennis had talked about the ownership of Apollo as a shareholder is approximately 45%. And so they they, view their, engagement with, IT distribution as as sort of a a journey here. And, certainly, you know, this is this is just part of that journey, and, you know, they'll continue to be a meaningful investor as we move forward. So, I think, you know, the comments Dennis made around the multiples, etcetera, are are, you know, accurate. And, I think the big message here is they they see this as a great investment opportunity, as well as they move into the future. Okay. And then that kind of answers my second question was which was, you know, Apollo is long term committed, obviously, with board seats. But, I think you you just confirmed that. Is that correct? Yeah. Certainly. They they they are meaningful investors and they do have some of the Board seats. That's correct. Okay. Thank you very much. Thank you, Shannon. You, Shannon. Good to talk to you again. Next question comes from Vincent Colicchio with Barrington. Yes. I'm not sure who this one is for, Marshall or Dennis. I missed what you said earlier on the IT systems. Will it be any complexity with that sort of that integration? Hi, Vince. Dennis here. Yes, with any large integration resulting from a merger, There is complexity around the integration of IT systems. But as we said in our prepared remarks, both companies have been through quite a few transactions over the years and have shown that they can transition IT systems very well. SYNNEX has a very, very good history of doing so and Tech Data has a similar one. So we realize it's a big job in front of us. But with our experience and know how, we're very confident that we'll move through this aspect of the integration very well. And then on the existing business, you mentioned all regions were strong and Canada and Japan exceeded expectations. Could you give us more color on that? Yes. So, really it was an across the board, every division, every country, strong performance to our expectations. Specifically in Japan, there's an ongoing, one PC per school age child. And that's been playing through our numbers throughout the past three or four quarters because we've been a big participant in delivering those PCs and Chromebooks to students across Japan. And that should play out for another quarter or so in our business. So that's why Japan had a nice solid performance. In Canada, it's just been really continued execution over the past year plus that's caused our Canadian team to deliver above expectations on a consistent basis. And that really again is just from the hard work that the team has done to build a very good base of solutions and offerings. And that's turned into significant wins with customers and produced the solid results that we're talking about today. Thank you. Thank you, Vince. And we do not have any telephone questions at this time. I will turn the call over to Mr. Dennis Folk. Thank you. So in closing, I want to thank the SYNNEXT team for all their ongoing efforts. I want to thank Rich and the Tech Data team for their help in making today happen. I have ongoing confidence in our business and look forward to the coming year and eventual combination and success of the merger with Tech Data. Stay well and thank you. This concludes today's conference call. You may now disconnect.