新聚思 (SNX) 2020 Q4 法說會逐字稿

Good afternoon. My name is Rob, and I will be your conference operator today. I would like to welcome everyone to the SYNNEX Fourth Quarter Fiscal 2020 Earnings Call. Today's call is being recorded. (Operator Instructions) At this time, for opening remarks, I would like to pass the call over to Liz Morali, Senior Manager, Investor Relations. Lynn (sic) [Liz], you may begin.

Thank you, Rob, and good afternoon, everyone. Welcome to the SYNNEX Fourth Quarter Fiscal 2020 Earnings Call. Joining me today to review our financial results are Dennis Polk, President and CEO; and Marshall Witt, CFO.

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, strategy, demand, growth, expenses, costs and service models.

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 8-K we filed today and in the Risk Factors section of our Form 10-K 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 8-K available on our Investor Relations website, ir.synnex.com.

This conference call is the property of SYNNEX Corporation and may not be recorded or rebroadcasted without our permission. I will now turn the call over to Marshall. Marshall?

Thanks, Liz, and thank you to everyone joining us for today's call. The consolidated Q4 and fiscal 2020 results I will present today include Concentrix as the spin-off was completed on December 1, which was the first day of our fiscal 2021. All go-forward financial discussion applies to SYNNEX on a stand-alone basis. Concentrix will hold a separate earnings call to review its results in greater detail tomorrow morning, January 12. So we will refrain from answering Concentrix-related questions on today's call in order to allow the Concentrix management team to directly discuss their business and results during tomorrow's call.

Before moving to the fourth quarter results, I want to acknowledge that 2020 was a year unlike any in recent memory. The COVID-19 pandemic altered the way that we all worked, lived and learned this year. Despite this, we successfully spun Concentrix, created increased value for our shareholders and are well positioned heading into 2021.

The remote work, learn and consume trends continued in the fourth quarter, which led to increases in demand for products and services provided by SYNNEX and Concentrix. And this dynamic led to record financial results for our fourth quarter. On a consolidated basis, total revenue was $7.4 billion, up 13% year-over-year. Consolidated gross profit totaled $823 million, up 4% or $29 million compared to the prior year, and gross margin was 11.1% compared to 12.1% the prior year.

Total adjusted SG&A expense was $503 million or 6.8% of revenue, down $23 million compared to the year ago quarter primarily due to continued Concentrix synergies related to the Convergys acquisition and lower Concentrix variable operating expenses. Consolidated non-GAAP operating income was $388 million, up $50 million or 15% versus the prior year. Non-GAAP operating margin was 5.2%, up 10 basis points compared to the prior year period.

Total non-GAAP net income was $271 million, up $51 million or 23% over the prior year, and non-GAAP diluted EPS was $5.21, up 22% year-over-year.

Now shifting gears to Technology Solutions' Q4 operating performance. Technology Solutions revenue was $6.1 billion, up 14% or $745 million over the prior year quarter. Technology Solutions gross margin of 6% was 30 basis points lower than the prior year quarter primarily due to product mix. Operating income of $200 million was up $34 million from the year ago period. And non-GAAP operating income was $216 million, up 22% or $38 million year-over-year. Non-GAAP operating margin was 3.5%, 22 basis points higher than a year ago.

Technology Solutions' COVID-19-related incremental expense decreased in Q4, as expected, driven by a reduction in the amount related to doubtful accounts. The cost associated with staffing and remote work increased quarter-over-quarter. We expect incremental quarterly costs at a minimum of $5 million in 2021, with the goal of creating other efficiencies to offset the majority of these impacts.

Interest expense and effective tax rate for Q4 reflects SYNNEX and Concentrix consolidated results and were consistent with expectations. Technology Solutions' Q1 interest expense and finance charges are expected to be approximately $22 million to $23 million, and the effective tax rate is expected to be 26% for the quarter and also for fiscal 2021.

Given our spin, for comparison to prior year, we believe it's best to compare Technology Solutions at the non-GAAP operating income, operating margin level provided in prior releases and filings. This is due to the fact that below the operating line, Technology Solutions and Concentrix were under a consolidated capital and tax structure. This, along with stranded corporate costs of approximately $5 million, which we expect to lower over time, make the comparisons difficult. For those who would like to produce a pro forma comparison analysis to the prior fiscal year, we suggest that, along with the stranded cost, to use an assumed debt of $1.5 billion at approximate 4.5%, plus other financing costs of approximately $7 million per quarter and a tax rate of approximately 25%.

Please note that the Q1 2020 pro forma tax rate is approximately 15% due to stock-based comp tax benefits and FIN 48 reversals. Please note that these are only suggested amounts for pro forma analysis and in no way should be construed as GAAP or equivalent numbers.

Now turning to the balance sheet. In today's press release, we have provided both a consolidated balance sheet and a pro forma SYNNEX balance sheet. Post spin, Technology Solutions' debt is approximately $1.6 billion, and net debt is just above $200 million. Accounts receivable totaled $2.8 billion and inventories totaled $2.7 billion as of the end of Q4. Technology Solutions' cash conversion cycle for the fourth quarter was 25 days, 16 days lower than the prior year, and 8 days lower than the prior quarter. The decrease was driven by DSO improvements across Technology Solutions and better inventory turns.

Cash generated from operations was approximately $297 million in the quarter, with approximately $205 million attributable to Technology Solutions excluding intercompany settlements. For the full year, we generated $1.84 billion in operating cash flow, with $1.36 billion attributable to Technology Solutions. At the end of the fourth quarter, including our cash and credit facilities, Technology Solutions had approximately $2.8 billion of available liquidity.

As a result of our improved financial performance and liquidity, our Board of Directors has approved the reinstatement of a quarterly cash dividend of $0.20 per common share. The dividend is expected to be paid on January 29, 2021, to stockholders of record as of the close of business on January 22, 2021.

Going forward, we intend to utilize 30% to 35% of our free cash flow for capital return programs either via dividends and/or share buybacks. We believe this level allows us to adequately invest in our business while maintaining our commitment to driving long-term shareholder returns.

Now moving to outlook for fiscal Q1. We expect revenue to be in the range of $4.5 billion to $4.8 billion. Non-GAAP net income is expected to be in the range of $81 million to $91.5 million. And non-GAAP diluted EPS is expected to be in the range of $1.55 to $1.75 per diluted share on weighted average shares outstanding of approximately 51.8 million.

As previously announced, beginning in fiscal Q1, we've made the decision to exclude share-based compensation from our non-GAAP results. Excluding share-based compensation is consistent with the practices of many of our partners, competitors and customers, and we believe this more accurately reflects our operating performance.

Our Q1 non-GAAP net income and non-GAAP diluted EPS guidance exclude after-tax costs of $7.3 million or $0.14 per share related to the amortization of intangibles, and $3.4 million or $0.07 per share related to the shareholder-based compensation. Please note that these statements of our first quarter fiscal 2021 expectations are forward-looking, and that our actual results may differ materially.

Lastly, we previously shared that one of our customers would be moving to a consignment service model in 2021. We now have more clarity regarding the timing of this change and expect the transition to occur in our fiscal Q3 2021. As previously indicated, we expect this change to reduce revenue by approximately $600 million per quarter, although it may take some time to fully ramp up to that level.

Moving into 2022, we expect further consignment with this customer will take place, increasing the quarterly run rate to something greater than $600 million per quarter. On a go-forward basis, margins related to this customer will be based on product and service mix.

I will now turn the call over to Dennis.

Thank you, Marshall, and thank you to everyone joining our call. I am very proud of the accomplishments of the SYNNEX team in 2020, especially so against the backdrop of a very challenging environment. I would like to thank all our associates for their hard work and dedication this year in helping us deliver outstanding service and solid financial results.

I would also like to thank both the SYNNEX and Concentrix teams for their diligence in completing the spin-off on December 1. A big congratulations to Chris and the Concentrix team, and we look forward to continuing to work with them as a customer of Concentrix. Thanks as well to our shareholders for the support of the spin transaction.

Now to our Q4 results. As Marshall noted, Concentrix will discuss its results tomorrow morning, but I would like to say how proud I am of all the associates of Concentrix for delivering solid top line and operating income results in Q4. Despite the pandemic and other challenges, Concentrix accelerated into the spin, and we look forward to watching their execution and growth going forward.

For the SYNNEX TS business, our record top line performance in the fourth quarter was driven by broad-based demand across all our platform as the remote work, learn and consume trends continued. Our revenue growth, along with seasonally high Q4 leverage benefits, drove solid profit and returns as well.

Consistent with Q2 and Q3, demand remained strong in products such as notebooks, Chromebooks, cloud, collaboration and security. This was evident in both our commercial and retail distribution businesses. As expected, COVID-19 continued to impact enterprise office demand in Q4 with office desktop, print and other products experiencing lower volumes. We did, however, see the signs of a continuation of the return of on-premise projects in Q4 that we started to experience in Q3.

From a geographical perspective, U.S., Canada and Japan all performed well and better than internal expectations. Latin America was essentially flat compared to the prior year, but overall positive given the obvious challenges in the geo.

In our Hyve business, Q4 was stronger-than-anticipated with continued demand from our largest customer to support its data center needs. Part of our overall margin strength during the quarter was also from Hyve. Leveraged and improved efficiencies due to the spike in business and recoveries from investments made throughout fiscal '20 were the drivers.

Our Q4 guidance anticipated high revenues to be at the lower end of our range of expectations. This was due to the strong Q3 performance and visibility at the time of our Q4 outlook. In the end, revenue was above the high end of our internal range as we performed very well in servicing the significant increase in demand in the quarter. As we have consistently noted regarding this business, it is lumpy, and continue to be challenging to predict quarter-to-quarter.

Turning to our outlook. Our priority remains on the health and safety of our associates. Overall, we are optimistic about fiscal '21, given the start of vaccine rollouts, and we are hopeful our world returns to a closer sense of normalcy over the next year. With this occurring, we expect that business investment will increase especially in IT. At the same time, we are cognizant of the fact that while economies around the world should begin to normalize, much is still uncertain about the pace in solving all the challenges of the pandemic and the timing of consistent economic recovery. This is evident by additional lockdown actions taken recently in most major countries we operate in.

For our Q1, with continued execution, we anticipate our business will grow slightly better than the market for the quarter. Continued demand for our products and services related to remote work, learn and consume, combined with the remaining backlog we have provides us a base level of confidence in our forecast. Like the last few quarters, we have estimated our Hyve business at the lower end of our internal projection.

For fiscal '21, using our Q1 forecast as a base, we expect the rest of fiscal '21 to progress in line to the seasonal patterns of 2018 and 2019. This assumes market conditions and demand improve throughout the year, and there's no significant change in our current mix of business among other traditional assumptions. Lastly, I am pleased that we were able to restart our capital return program with our dividend announcement today and Marshall's comments about our share repurchase program.

In closing, our strategy of optimizing our core business, investing in organic opportunities and targeting strategic M&A to enhance our portfolio, will continue to provide us with opportunities to grow moving forward. This strategy, along with the drive, determination of the SYNNEX team, coupled with the excellent partnerships with our customers, vendors and the communities we operate in, support my confidence about the future for SYNNEX.

With that, I would like to open up the call for questions.

(Operator Instructions)

Your first question comes from the line of Tim Yang from Citi.

I want to ask about margin expansion on a year-over-year basis. If we use the midpoint of your guidance and includes share-based comp, I think you are guiding February quarter margin expansion of roughly 10 basis points from last year with revenue up 15%. I think this expansion is lower than the margin expansion of 20 basis points you achieved in November quarter with single revenue growth.

Can you maybe just provide some color on that? Is it due to mix or extra investment you need to make in the quarter?

Tim, this is Dennis. So we are pleased to be able to expand our margins year-over-year, when you look at Q1 '21 versus Q1 '20. And that's primarily due to, as you said, the mix in our business, but also the additional leverage we get from the growth in our business.

Traditionally, in Q1 though, margins will decline a little bit from Q4, again because of the leverage we get in our business in Q4 which is seasonally high and to some extent, mix.

Got you. And then the -- if I remember correctly, I think you mentioned last quarter that your TS Q4 net debt should be around roughly $700 million. But it seems like Q4 net debt that you reported was less than $100 million. Can you maybe just talk about that. And how should we think about your debt returning or net debt going forward.

Yes. Tim, this is Marshall. You're right. We -- that was a fairly conservative number we estimated. We did have a strong Q4. Our cash conversion was extremely efficient. Our actual performance is very strong. I think the combination of those 3 drove to the cash being at $1.4 billion for TS.

Is it fair to assume that net debt going forward is similar to this level?

Yes. We're optimistic that as we go forward, Tim, and thinking about 2021, we'll continue to be cash flow positive and also free cash flow positive.

Your next question comes from the line of Ruplu Bhattacharya from Bank of America.

Dennis, can you comment on the strength that you saw in the different channels? Maybe just talk about what you saw in small, medium business and enterprise, hyperscale mid-market. And kind of as a follow-on to that, if you can give us your thoughts on the mix of the business as we go forward. PCs have been very strong. But from a management standpoint, are you focused on shifting the mix more towards the netted down items more towards software and cloud services? So if you can just talk about your strategy and your long-term outlook for the mix of the business.

Sure, Ruplu, thanks for the question. So as far as the strength in the quarter, I think that was your first question. It was really across the board. As you saw in our results, double-digit increase year-over-year. So that traditionally indicates benefits from all aspects of our business.

If you look at -- from a vertical perspective, we saw solid federal results in the quarter. We also saw continued education benefit in our business. And as also I indicated, our retail business was strong in the quarter. Traditionally, it's strong in Q4 given the seasonality aspects, but we even beat our internal expectations there.

From a product set standpoint, as I indicated, notebooks and Chromebooks were real drivers during the quarter. Obviously, we had a lot of data center business within our Hyve business that drove a lot of our year-over-year increase. But I don't want to take away really anything from all of our organizations and departments because it really was an across-the-board beat in every category. So that's your first question.

Your second question, as far as go forward. Of course, we're going to focus on areas that can enhance our business and grow our margins, but I don't want that to signal anything that we'd ever discount or go away from any existing business that we have. Our goal is to continue to grow the overall portfolio of our company and offerings, and be able to deliver and service anything along that spectrum and get the proper returns for the products we deliver in that spectrum. And that's our focus going forward. We've done very well so far. Our recent acquisitions have really helped benefit our company and the breadth of products we have. And that's part of our strategy going forward is to increase that breadth either through organic or inorganic means.

Just to follow-up on what you just said about inorganic growth. I mean maybe if you can just talk about the overall framework for your capital allocation strategy, how would you prioritize the return of capital through buybacks or with lowering of debt -- with debt reduction?

And then M&A, do you think that as we get past the academic, I mean, are you open to doing more M&A? Do you think this is the right time for that? And how should we think about inorganic growth going forward?

Ruplu, this is Marshall. I'll start and then hand it over to Dennis. In terms of capital allocation, as we mentioned in our prepared remarks, we're targeting 30% to 35% of our free cash flow to be focused on share repurchase and dividends. So we're pretty excited about that and how it -- we think it's a good balance of shareholder returns going forward. And then I'll turn it over to Dennis, just thinking about M&A and opportunities there.

Thanks, Marshall. Yes. From an M&A aspect, we'll continue our history, and that's really being opportunistic when it comes to M&A transactions. For the past couple of years, as you saw, we were more focused and some more of our capital towards the Concentrix part of our business. But now that we're stand-alone, clearly, we can dedicate the capital to the TS part of our business, and we'll do so when it comes to M&A opportunities.

Our focus on M&A is going to be on geographic expansion, vendor line card additions and other services that will help enable our customers and their efforts to deliver to their customers. But we're always going to stay focused on ensuring that when we do an acquisition, it has the right returns. The integration can be done in the right way within our company and the right culture and management team comes along with it.

Your next question comes from the line of Shannon Cross from Cross Research.

I was curious in -- your comments are you expect to go back to sort of seasonality that you've seen as we go through the year. But you also -- it sounds like things are getting better. So I'm curious, given the strength in PCs and what we've seen with the return of enterprise to doing some of the projects that were delayed, what some of the offsets would be, where you're anticipating maybe some weakness or maybe some deceleration from current levels. And then I have a follow-up.

Shannon, thanks for the question. So we wanted to try to allow for analysts to have an idea of what we're thinking about for fiscal '21. We're obviously only guiding to the first quarter, but we want to give some flavor to you for the rest of the year.

Looking at 2020, clearly, the seasonality of the fiscal year was like no other. So we went and looked back at fiscal '18 and '19. And if you average the 2, we think that is a good projection for the rest of the year.

As far as how the business will play out for the rest of the year, as I said in my prepared remarks and as you indicated, there'll be some ups and downs as we make our way through each quarter. But we believe when some of the business that was better in 2020 starts to move down in 2021, we'll see the comeback of other businesses that weren't so positive in 2020. And that should balance out again to a more traditional seasonality period, again, using the averages of '18 and '19.

Okay. And then I'm curious, with regard to the SolarWinds pack or whatever -- however to describe that. Have you heard of renewed focus on security? Maybe customers need to reevaluate their data centers to make sure that they're not still susceptible. I'm just curious if this is something that's been a driver or do you think will be a driver of demand this year.

Sure. Thank you for the question. So I believe there's been a heightened sense of concern over security. We've seen a definite increase in our business in security over the past, call it, 12 to 24 months. But I do think when you have these major events occur, it causes folks to think even more about their security environment. And that traditionally means more investment in the security aspects of individual businesses.

But you haven't seen anything that's like specific necessarily to SolarWinds itself in terms of rip and replace or thoughts on that way. Is that fair to say?

I think it's fair to say we've seen a lot of activity. But I really can't comment on any specific customer situation for you.

Our next question comes from the line of Adam Tindle from Raymond James.

I just wanted to start on the capital structure. Marshall, net debt to EBITDA, I think, is around 1x now. I think you also mentioned that you expect to continue to generate positive cash flow, so that number is only going to go down.

So maybe just touch on now that we're post separation, what the optimal capital structure looks like in your view. And you can imagine where the next line of questioning goes to Dennis. On use of proceeds, you talked about opportunistic acquisitions. If you could just follow-up with Marshall's comments. And you talked about geographic footprint as kind of the bullet point number one when you talk about that. Historically, we think of SYNNEX as much more focused, narrow, deep specific geographies relative to others. So I'd be curious, your gating factors on assessing a particular geography and how you think about geographic expansion in a profitable manner.

All right. Adam, I'll tackle the tactics first and then hand it over to Dennis for strategy. We do think 2021 will be a decent year for free cash flow. We're anticipating roughly about $500 million in free cash flow. And with that, we anticipate about 30% to 35%, as I said earlier, of that to go back into dividends and share repurchases. So we like that, call it, collective balance. It does leave us with a lot of dry powder with liquidity that we have going into 2021 to be in a really good position to take advantage of, as you were referencing, if it's geography, is it line card or is it something else. But I'll flip it over to Dennis now.

Thanks, Marshall. Yes, traditionally, Adam, you're right. We've been more targeted in the acquisitions that we've made, either from a geography standpoint and really, to some extent, from a vendor and other service standpoint. But at this point in time, we've built a company that has a pretty sizable base. So we do feel more comfortable targeting larger geographic entry, if you will, and/or just overall larger transactions. That doesn't mean we're going to only chase larger deals. We'll do smaller or more tactical ones if they make sense. But given our confidence and the larger entity we have today, we do feel we have the ability to execute well basically on any size transaction at this point in time.

Okay. That's fair. Maybe just as a quick follow-up and clarification on the Hyve customer change. I think if I have it correct, you previously said that you weren't expecting a material change to earnings should volumes with the customer continue at existing levels. It sounds like, today, we're hearing that there's going to be more volume decline. So hoping for an update on the statement on how much earnings headwind we should be thinking about as this unfolds, starting to approach what could be about a $3 billion annualized revenue headwind. So I just want to set proper expectations on the associated earnings headwind as that unfolds to the extent that you have visibility.

Yes. Adam, it's Marshall. A couple of things. And then again, I'll have Dennis also comment. As you know from previous conversations, when this does transition to consignment, it does spin off cash from that in terms of reduction in working capital. So that will free up cash for us to go do more things with.

And two, just to get back to your question on the overall volume and profit associated with this customer, we still anticipate profit dollars to be the same. But certainly, will be contingent upon ongoing growth, product mix. As you know, within Hyve, we have design-related services. We have integration services, and we have a lot of [disti-like] services. So when you blend that that has a different mix or margin profile as we're thinking about 2021.

And what I would add, Adam, is just a good point by Marshall, with the reduction in top line from the consignment aspect, it's going to bring a lot of capital to our business. So we have to make sure that we invest that capital wisely back into the business to generate more returns.

Your next question comes from the line of Matt Sheerin from Stifel.

Another question, if I can, regarding the Hyve business. Now post-spin of Concentrix, it's even a bigger part of your business, both from top line and profitability. And I know a lot of investors ask about more granularity, a little bit more transparency about the business in terms of margin structure, customer mix. And then it seems like you're doing more services and more volume or, rather, margin-enhancing kind of services for the company. So it would be great to get a little bit more visibility in terms of that business going forward.

Okay. Yes, Matt, we do appreciate that feedback, and we recognize as our company has changed with the spin-off that investors will be looking for additional information about our operations. And we'll take your comments to note and come back with the best we can moving forward with the right amount of disclosure for our investors.

Well, maybe just as a follow-up, maybe just give us an idea. You said you had double-digit year-over-year growth in TS in the last quarter. Can we assume that both the core business and Hyve, both grew double digits? Or has Hyve been growing faster than the core business?

Yes. We're pleased with the growth across all TS landscapes, if you will. And with LatAm being the only one that was somewhat flat, the rest showed strong results. We anticipate that to happen moving forward into '21. And then, Matt, back to the reference of that '18, '19 seasonality. If you use Q1 as the marker and then flow from there, you'll find that that mid-single-digit ends up being where you get to. And we can certainly offline walk you through that to get to where you need to be for thoughts on 2021.

Thank you, Marshall. And Matt, just to add, just to be very clear, our non-Hyve business grew very well in the quarter.

Understood. And then just as a follow-up to that, if I can. You did talk about strength in those product areas, client devices, particularly. Is there any concern about very tough comps and maybe a wind-down of that cycle that we've seen both from remote -- work from home and then on the education market? Or do you see legs going into the second half of this year?

Yes. I do think the momentum we have and the backlog we have will take us into at least Q2 and possibly Q3 of 2021. So there's a decent tailwind there. If that business starts to transition to a lower growth rate, I do think, as I mentioned before, we'll start to get a bit of a tailwind from the on-premise enterprise infrastructure investment side of our business. And that should pick up -- or replace any reduction in the current run rate of the notebook, and Chromebook and other products I mentioned that have done quite well.

All that being said, Matt, I do think even with any transition, we're set up with a very broad portfolio to manage through any type of volume environment in 2021.

Your next question comes from the line of Ananda Baruah from Loop Capital.

Congrats on getting the deal done. Two for me, if I could. Just real quick, Marshall. Can you remind us what leverage ratios you're comfortable taking the stand-alone -- well, you and Dennis are comfortable taking the stand-alone -- and the newco company too, in an M&A situation?

Sure. Yes, we finished the year all in at 2.21. And that's with Concentrix. Without -- if it's the TS measure is 2.5. So very comfortable liquidity, 2.8. Ananda, as you know, with the right opportunity and the right accretion, we've been a size -- a little over 4x. So we've got quite a wide range of acceptability and ability to cover those with the right investment or acquisition.

Okay. Excellent. And just -- I guess just, Dennis quickly, going back to your PC comments. Can you -- you have backlog, so I guess you're sort of in a constrained posture right now. Can you just confirm that? And then do you think you're more or less constrained in the industry?

And then just clarification -- well, not clarification, I guess, sort of like I've got a follow-up here, your remarks a moment ago. Do you -- if -- when this changes, from sort of COVID backlogs more on-prem, does your mix improve in that situation in that maybe there's fewer Chromebooks, so you could have like a revenue handoff or the mix improvement as you move on-prem? Just high-level thoughts on this thing.

Sure. A couple of questions there, Ananda. So as far as constraints, or shortages, challenges in the market from an SLA perspective, at a high level, I'd say, the second half of the year is better than the first half of the year. Although we still are in an environment where we do have longer SLAs. Our backlog is made up of product that is constrained, but there's also just a healthy backlog and business we produced as well. So I just want to be clear on that as far as where we're at in our overall backlog perspective.

As far as going forward in the mix of business, yes, it should change as the backlog runs out and we fill it up with what will hopefully be a return to infrastructure on-prem investment. And as we also bring more services that go with on-prem and infrastructure, we should benefit from that as well.

Your next question comes from the line of Vincent Colicchio from Barrington Research.

Dennis, can you give us some color on where supply chain constraints may be holding, get back at some?

Well, I think it's in several places, there's capacity constraints. There's component shortages. I believe there's also geo-balancing challenges going on. And it does depend on which vendor you're talking about. But in general, those are the 3 main categories I would call out.

At this time, there are no more questions. I will turn the call back to Dennis Polk for closing remarks.

Great. Thank you. I want to thank the SYNNEX team for all their ongoing efforts. I have confidence in our business, and look forward to executing on our strategy in 2021. Please stay well. Thank you, and good evening.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.