Hi, very good day and welcome everyone to the Arrow Electronics Third Quarter 2018 Earnings Conference Call. During the presentation, your lines will remain on listen-only. I would also like to advise all parties this conference is being recorded for replay purposes. And now, I would like to hand over to your host for today, Steve O'Brien. Please proceed.

Thanks, Mark. With us on the call today are Mike Long, Chairman, President and Chief Executive Officer; Chris Stansbury, Senior Vice President and Chief Financial Officer; Andy King, President Global Components; and Sean Kerins, President, Global Enterprise Computing Solutions. As a reminder, some of the figures discussed on today's call are non-GAAP. You can access our earnings release at investor.arrow.com along with the CFO commentary, the non-GAAP earnings reconciliation and a webcast of this call. Please note prior period figures have been adjusted for the adoption of new accounting standards. We will begin with a few minutes of prepared remarks which will then be followed by a question-and-answer period. I will now hand the call to our Chairman, President and CEO, Mike Long.

Thanks, Steve, and thanks to all of you for taking the time to join us today. The third quarter was another great quarter. We again showed that our strategy to be the foremost lifecycle solution provider is working and working well. Our position in the marketplace is stronger than ever. Our cross-enterprise solutions have never contributed more to the bottom line. Compared to two years ago, we're generating 21% more sales and 33% more profit. That's not a cycle, that's differentiated scale. We achieved record third quarter sales, gross profit, operating income and earnings per share. We said that our investments in engineers and working capital would bear fruit and the results are proof. Leverage was exceptional, operating income and earnings per share grew two times faster than sales, returns on invested capital and return on working capital increased significantly, and we also generated $0.5 billion in cash. This quarter we reached several key milestones. We announced an expanded collaboration with wireless carriers to develop industry-specific digital transformation solutions. This collaboration takes advantage of the emerging technologies like 5G, artificial intelligence, software-defined networking, and the Internet of Things to drive successful outcomes for manufacturing, retail, finance, healthcare, and the public sector. We announced plans to open our Colorado Open Lab next year and we're working with 19 municipalities and agencies along with private businesses, universities and research institutions that make up the Colorado Smart Cities Alliance, and we're going to use the lab as a place to showcase ideas such as data-driven smart street lighting, smart parking, and connected automated vehicles. The Open Lab will also be a test head (03:24) for suppliers establishing standards on edge computing and artificial intelligence. We also announced an alliance with the world's largest infrastructure services firm. This firm is a leader in construction,…

Thanks, Mike. Third quarter sales of $7.49 billion were near the high end of our prior guidance range. Sales increased 9% year-over-year and 10% adjusted for changes in foreign currencies. Acquisitions and divestitures did not meaningfully impact the consolidated sales growth rate. The actual exchange rate for the quarter was $1.16 to €1, slightly below the $1.17 rate we previously used for our forecast. This had a very small negative impact on growth rates. Third quarter global components sales of $5.38 billion, increased 11% year-over-year. Sales were above the midpoint of our prior expectation. We had record third quarter sales in all three regions. In Europe, sales increased 13% year-over-year adjusted for changes in foreign currencies and increased 11% as reported. Europe sales have increased year-over-year for 22 straight quarters adjusted for acquisitions and changes in foreign currencies as we continued to gain share in the marketplace. In the Americas, sales increased 13% year-over-year and increased 12% adjusted for acquisitions. Demand continues to be strong across our base of industrial and manufacturing customers. Asia again produced strong growth this quarter, Asia sales increased 8% year-over-year. Transportation and IoT continued to be growth drivers for the region. But we are not immune to economic conditions. We believe our large geographically diverse customer base with no significant industry vertical concentration, helps insulate our performance. Global components operating income increased 28% year-over-year and increased 2.5 times faster than sales growth. Operating margin increased 70 basis points year-over-year to 5.2% and increased in all three regions. Record third quarter enterprise computing solutions sales of $2.11 billion increased 9% year-over-year, adjusted for changes in foreign currencies, the divestiture of the unified communications business in the Americas, and both a small acquisition and a small divestiture in Europe. Sales increased 6% year-over-year as reported. Billings increased…

Thank you, Chris. Mark, would you please provide the instructions and open up the call to questions at this time?

Thank you. Your first question comes from the line of Steven Fox, Cross Research. Please go ahead. You're live in the call.

Thanks. Good afternoon. Mike, I was wondering just if we could step back a little bit and talk about how you guys determine when to make investments like you highlighted in the ECS business today. It seems over the last few years, you have taken the opportunity to reinvest some of your profits in terms of building up scale and services. And I'm curious how we can think about that over the long term going forward. Do we expect to see every few quarters that we have a dip down for further reinvestments? Where do you think you are in that path? And then, if you could just directly talk more about when the margin headwinds from some of the models that you just laid out start to abate? That would be helpful.

Yeah. Thanks, Steve. I'll really separate the businesses. First off on the ECS side from a high level, if you remember, we went out into the market and brought in several VARs over the course of the last year after there were some changes in the marketplace. Those VARs came in and largely were in as of the third quarter. And so, what we saw was a faster mix in hardware sales versus software. And as you know, the software sales is the more profitable piece – software and services are the more profitable piece of our business on a go forward basis. So, we've put in investment to help those VARs to bridge the gap into software sales and we're now starting to see some benefit from that. But it does take those businesses time to get up to speed, get their infrastructure in place, get the technical knowledge they need to add software to their portfolio and we've seen that. We believe that the ECS business will actually bottom in the next quarter and we believe that from there, we'll see some sustained growth out of those investments. On the components side, if you remember, we spent the last couple of years bringing in volume that was primarily supply chain-type business and we have been improving that. So really, the ECS story is the same story as the components in many ways and from what you can see this time, the components business just gave another record, by the way, of 5.2%, I believe it was for the quarter, surpassing where we even thought it would go over the course of this year. And largely that's because the design win year-over-year activity has helped tremendously and that's up 15% year-over-year. And I think we're going to continue to see that because the demand and the engineering business is continuing on into the fourth quarter with growth which is another reason we expect a soft landing. Largely, the investments are in. We don't expect any more investments around things that we've talked about today. And we do expect it to improve from here. Albeit the guidance for the fourth quarter is yet one more record for the company. So, I might want to point out that with the investments that we've given, Arrow Electronics is going to deliver one more record next quarter, which puts us well past the two-year mark of continuing to develop record profit and earnings and sales records. So hopefully, Steve, that answers your question.

Yeah, it does, and sorry for burying the lead on your record profits. And then just as a follow-up, maybe given what's going on in terms of some of the capabilities you're adding at these VARs, does that mean that when we look at your ECS business right now, it's not a true reflection of what you're seeing in terms of end markets or maybe you can just comment on where you're lining up to end demand versus maybe things are a little skewed? Thanks.

Yeah. Well, first off, I think what we're seeing is really record levels of hardware growth because most of the VARs that we brought in were selling hardware. And we're also seeing record levels of hardware growth in what I would say our industry-standard servers, services, networking and software, but software is growing at a less rate than the hardware. What we said is that that creates a mix issue for us. And while software is growing at market right now and starting to grow above market given some of these VARs coming on, we need all of the VARs to be selling the software which will help increase the profitability of that business. And again, it's just like when we brought in the fulfillment business on the components side and then started to do the design activity, you saw that business go up. We think it's going to be exactly the same. And I'm not expecting any big changes in that business coming into next year.

Great. That's all, very helpful. Thank you so much.

You bet.

Thank you. Your next question comes from the line of Matt Sheerin of Stifel. Please, go ahead you're live in the call.

Yeah. Thanks. Good afternoon. Just regarding the strong margins in the components business, Mike, you talked about design activity being a contributor, so more value add. Are you getting any lift at all just in terms of gross margin because of the, as you said, lead times are normal but there has been tight supply certainly in a lot of areas. And we've seen mostly from suppliers that there's been less ASP pressure than normal. Are you benefiting at all from that now given where we are in the cycle?

Yeah, Matt, there's still – on the margins side, fulfillment business is fulfillment business. There's sort of a bid-ask on pricing there. While it is elastic it's not overly elastic. If you remember, when we went into sort of, what we would all call, allocation mode, our contracts are out as such, and you don't have the price elasticity that you used to have in the business because you've guaranteed that you're going to supply that part over a certain period of time, which is one reason you see the inventory go up. Then, when you do more design work, that design work is much more profitable than is the fulfillment work. And what we're seeing now is the margins increased largely because of the design activity in those customers, just like we said that would happen in the beginning. And if we can continue to grow our mix on the design side, there's no reason that it shouldn't continue and you wouldn't continue seeing that type of leverage. And if you look at the number of engineers we have out there, which is a lot. We made big investments over the last few years in engineering. We expect that piece to keep going. And I guess you saw some evidence of that this quarter. And it'll keep going through next quarter from what we can see and all indications are for a soft landing. The design win activity shows for a soft landing. The backlog is still up. Cancellation rates remain normal. So, we're not seeing the quick drop-off. I might also note, we're not hugely big in wireless, and the wireless activity is one of the big reasons that you've seen some changes in the marketplace. We're more demand-driven, industrial-type accounts, and that type of thing. So, anything we would see would come from more of what I would say an economic downturn than we would see from a cycle in wireless or a refresh or anything like that. So, hopefully that helps.

Yeah. That's helpful. And two other quick questions, if I may. Just one on the inventory. You're still about a turn higher in terms of inventory turns than you were a year or so ago and given at least slower growth as you talked about, if not a full-blown correction. Do you think you can get that down and see accelerated cash flow next year? And then the second question unrelated. Your commentary, Mike, about seeing a lot of activity from customers potentially moving manufacturing and you helping them with that. Are you actually seeing that now or is it – it just seems like companies are talking about it, but we're actually not seeing full-blown manufacturing move out of China into other areas yet?

Yeah. So, the tariff piece, we are seeing companies that are already set up in other locations increase their production in locations that are non-tariff locations. So, if a company has a factory in the U.S., in Mexico, and in Asia, they may decide that their mix of production is going to be in Asia and in Mexico, and they're going to drop down the amount of what they're manufacturing in the U.S. So, we are seeing those supply chain. There was about a third of business that came in here, shipped out of here, about a third of that has gone down and been rerouted at this point. So, the answer to your question there is, Matt, yeah, I mean manufacturers are smarter than you think. They got to make a buck too. And these kinds of tariffs makes the difference. And so, everybody is going to do what they have to do to improve their situation profitable way and you guys would be all over them if they didn't. So, they are doing it. As far as the – I guess, the other one on...

Inventory turn.

...on the inventory. Yeah, the inventory is in there because we're largely seeing the same lead times that we said we were seeing before. As those lead times abate, yes, that will convert to cash. The second reason we'd convert to cash is as business slows, we find ourselves as you suggest into what we might consider an over-inventory position, I don't believe we're there now. Although at these rates, the inventory will follow it down probably one quarter behind just like if you remember the last downturns we've been through with you, then our strategy is pretty much not changed. It will be about a quarter behind and then you would see accelerated cash flow from that just like history. That cash flow model is intact and as the business slows, you'll see a lot more cash flow.

Yeah. Okay, that was quite helpful. Thanks a lot.

Great.

Thank you. Your next question comes from the line of Param Singh, Bank of America. Please go ahead, you're live in the call.

Great. Thank you. So, just want to – looking at the operating income in ECS this quarter, if I exclude the divesture and the $6 million expense you're talking about, you're still down a lot year-over-year. How much of that is your investing piece versus other revenue segments being down? I mean are you generating less profitable revenue from the individual segments itself not just mix? And I mean, what – go ahead.

Yeah, I would say that what you're looking at, I think, is about an additional $3 million roughly that you're talking about, and I'm going to say two-thirds of that is mix and about a third of that was investments.

And then Mike, in what revenue level within ECS would you get to year-over-year operating income growth within that segment?

The expectation for us is to start improving in the January and the March quarters and we expect that mix. We're seeing it now. The question becomes how fast will the resellers implement it, how will their business change as a result of it. And as I said, we expect the December mix – the reason the December mix is going to continue like it is, is if – don't forget about the year-end flushes that happened in this business and have happened for the last 30 years. They are less than what they used to be, but they are still there. So, as we brought in more hardware guys, the December flush is going to cause high-grade sales to run up faster than our software. And then, the market will return to a more normal mix in the January and March quarters and that's what we're expecting. Mostly that gets you where you want to be.

Got it. Thanks. And then, as my follow-up on the component side, obviously, you're seeing better end market demand and sort of your competitors versus, say, what TI and Maxim have openly reported. So, what do you attribute that disconnect to? And then, the other concern I've heard from investors is how much channel inventory do you think is above normal levels given the current demand environment, i.e., looking at prior cycles, do you think there's some compression factor that might play out over the next few Qs?

Right. If you take one of the worst downturns which I think was back in 2009 right around in there, the inventory came down nicely and it followed the sales one quarter. So, that was the difference you saw in the inventory. That's about where you are right now. We're not expecting that downturn, so we wouldn't expect the same type of decline. But if you take one of the worst, then unfortunately, yes, I was here during that one too. So, I guess, it shows my age a little bit. But the truth is, the inventory is acting normal. I'm not worried about the inventory because the inventory is basically cash, that's convertible cash. And as it goes down, the more it goes down, the more cash it throws off. So, I like the fact that the market looks like it's going to grow single digits in the next year. That's where we'll produce cash flow, and that's where the business will have its best balance and it looks like the year is shaping up for that thing to happen.

Got it. Thank you so much, Mike.

All right.

Thank you. Your next question comes from the line of Adam Tindle, Raymond James. Please go ahead. You're live in the call. Adam Tindle - Raymond James & Associates, Inc.: Okay. Thanks and good afternoon. I hate to beat the dead horse, but I want to start on ECS. I know there's always a ton of moving parts here, but profit dollar growth has been the metric that you've rightfully conditioned us to focus on. You've got a year-over-year mix issue on hardware, but if we look at a two year basis profit dollar growth has been elusive for this time period. I know there's been some divestitures along the way, but you do this based on returns framework and pre-tax ROAs, also tracking down about 100 basis points during this time. So, long-winded question, but how do you measure success over the next two years? What changes over that timeframe to enable profit dollar growth and better returns in that business?

Yeah. Right. Adam Tindle - Raymond James & Associates, Inc.: Is there a timeline you put on thinking about strategic optionality that doesn't (33:59) if current trends continue.

Well first off to that last quarter that's all we can see. That's never been off the table whether there's strategic things that we do or whatever that is. So, that's a given if we don't see a balance there. Let's also remember what happened in the overall marketplace over the last few years. You had the HP split. You had IBM with their struggles in purchases and products coming in. You've had the Dell going private. You have the EMC being purchased by Dell. You've have the solid state storage piece go from rotating. There have been a ton of technical changes in the computer business over the last couple years. So, most people would think that that's pretty good performance compared to what you've seen with others in the same space. So, I think the question is, if you believe the IT space is here for the long haul, then that's – last couple of years shouldn't be something that you're overly worried about, but you should actually be saying, wow, they converted their business, they pivoted their business to where the business was heading, not where it was. So, that's the question you're free to ask. That's the question you're free to put pressure on us. But right now, we believe that we're getting a place of normal growth in the computer business, so we're – we think that can come back some time during the first half of next year, so we're still bullish on the business. That doesn't mean we don't ask those questions every quarter ourselves. That doesn't mean that I don't put internal pressure on my management team to deliver growth. But right now, I think we have a plan that will be good for the IT business. So, we're sticking with it right now. Does that answer your question? Adam Tindle - Raymond James & Associates, Inc.: It does, and I think the frustration comes from the valuation and maybe lack of recognition of what you've done over that timeframe that's baked into the stock right now. But I...

We got to tell you, the frustration is ours too because you come off of two years quarter-on-quarter record every single quarter in earnings per share, sales growth, margin, and so I got it. But my job is to put profits on the board, which we've done; your job is to report on it; and I guess it's the Street's job to buy the stocks, right? Adam Tindle - Raymond James & Associates, Inc.: Fair enough. If I could ask a follow up for Chris real quick on capital allocation.

Sure. Adam Tindle - Raymond James & Associates, Inc.: Cash flow was obviously strong, and I know you've talked about wanting to buy back stock given valuation that we just talked about. Maybe it was a little bit too late to accelerate buybacks in the quarter, but there was no additional authorization and maybe hoping you can touch on that point. Or are there perhaps things in the ECS business where you'd be better off making acquisitions there to fortify trends?

Yeah. I mean, on the latter part – again, we're always looking at that landscape, but I would just reiterate again what our capital allocation strategy is and it is. We will do organic investment first, which we've done a lot of over the last couple of years and that's obviously bearing fruit. We'll do accretive M&A where it makes sense. And I think we have said that there's not as much of that available right now and then everything else goes back to shareholders through buyback. A lot of our cash flow was late in the quarter. There's been a lot of focus on driving positive working capital metrics, which we did, but it did come a little late in terms of our ability to buy back. But the capital allocation remains the same, so you know what our next move is. And we'll talk more about it with our Board in December about authorizations and where we are at that point. Adam Tindle - Raymond James & Associates, Inc.: Got it. Thank you.

Thank you. Your next question comes from the line of Shawn Harrison, Longbow Research. Please go ahead. You're live in the call.

Hi. Good morning, everybody. Were there any regions where the book-to-bill dipped below parity for the September quarter? And not to be extremely shortsighted, but have you seen a continued moderation of the book-to-bill through the month of October, or has it been more just a stabilization dynamic?

Actually, it's been more of a stabilization dynamic. It was Asia that had the negative book-to-bill coming off of just huge growth year-over-year that we saw. And I'm not even going to speculate whether it's tariffs or anything else, but we do see continued growth there, but the growth did abate and moderate from a bookings points of view. I will tell you though the design win activity went up. So, we're expecting it to be sort of a blip right now and we'll see where that goes. But all in all, the other two regions we're still very strong and very strong in design win and that being North America and Europe, which we view as positive.

Got you. And then just kind of a follow-on, they are tied together, Mike, on the demand creation of the supplier share gains that you'd picked up last year. Where are you at on that curve? And then, Chris, I think you said the EBIT leverage in the components business is about 2.5 times for this quarter. Is that the peak of the EBIT leverage and we should start to see that normalize a bit over the next several quarters or can we continue to see that type of leverage going forward?

I think as you see, increases in volume and an increase in design win mix which is what we're driving for, you'll continue to see increased profits. And that's the same story we've been saying all along. We don't see anything to change that. We also believe that as the market goes the other way that, that will provide a little more of a soft landing for us too, if there was a downturn. Because having a better balance in your business and increasing – this is just Economics 101, you increase the higher margin portion of your business with your mix, you make more money and that's really our goal.

Yeah. And I would just add, Shawn, to your question. I wouldn't want to predict a high point. Again, our focus is on continuing to drive value added for customers and differentiated growth for suppliers and we're doing that. I think, when you look at the kind of implied guidance for components in Q4, we're showing significant margin improvement year-over-year again. So, that's our focus and we're going to push it every quarter.

Okay. That's it. Thanks and congrats on the results.

Thank you. I think just an interesting comment is, we do look at the returns, are very important to the business. And so, our investments that we make are always towards the high-margin business to try to improve the higher margin business mix of the business.

Thank you. Your next question comes from the line of Joe Quatrochi. Please go ahead – from Wells Fargo. Please go ahead. You're live in the call.

Great. Thanks for taking the questions. First on the component side, if I could, I was wondering if you could kind of talk about customer inventory levels and how you think about that relative to the tariffs going up to 25% at the first part of next year. Have you seen, or any of your conversations with customers indicated that they're looking to kind of hold higher levels of inventory in anticipation of that?

Well, first off, we're not seeing a change in customers saying that they don't have enough inventory, which is good. We do have some customers that don't have enough of certain types of inventory. So, there's still a push there. We like where they are right now because we've seen their inventories, sort of mitigate as ours are also which shows for more appropriate supply-demand which we all – we'd rather have, because you have less shortages, the business has become more efficient, they make more money, because they don't ever have a slowdown of products they are trying to get out the door. I will tell you right now that these tariffs have not substantially hurt our business because most people are reacting to them as they should. And anything that is artificially created we're against. We believe that tariffs are a bad thing in general. But if one government anywhere in the world decides that they're going to increase tariffs, don't be surprised that worldwide manufacturers don't move their manufacturing around. I don't see why that would be a surprise to anybody. And unfortunately, that sneaks up later in terms of jobs and things like that. But the bottom line is everybody needs to make money, manufacturers need to make their money. They're all smart enough to manufacture anywhere in the world. Most of them are manufacturing in more than one place as you know and upping their manufacturing in those places is pretty easy, declining it in others are pretty easy. So, I don't see it as an activity that frankly doesn't happen all the time anyway.

No, that's perfect. And then just a follow-up kind of bigger picture, Mike. You talked about in your prepared remarks you're moving into fulfilling virtual GPUs, data center fulfillment. I was wondering if you could kind of talk about your opportunity there and how that opens up maybe a different type of customer base and maybe your ability to leverage your ECS business as it exists today.

Yeah. Joe, it's Andy. First of all, yeah, the opportunity around GPUs basically come from a couple of areas actually. Firstly, the whole drive of autonomous machines into the industrial segment which firmly fits my side of the house. And then of course the increasing data center penetration that we're seeing from high-performance compute which firmly fits Sean's side of the house. So, one of the reasons we're able to pursue these opportunities is that we have this kind of unique go-to-market model that enables us to get those technologies deployed into multiple end markets. And that's really been the uniqueness of our capabilities and why those people want to partner with us.

Yeah. I would just add to that, Joe that from a traditional IT perspective that this is no different than other next gen technologies that we've brought to our channel partners, both our existing partners as well as the new ones that we're onboarding, we're very familiar with how to help them ramp up into a new demand trend and a new technology. And as things like machine learning go mainstream in traditional corporate environments, this is going to be a great opportunity for those partners to build their businesses going forward.

Perfect. Thank you.

Thank you. Your next question comes from the line of Jim Suva of Citi. Please go ahead. You're live in the call.

Thanks very much and I have one question for Mike and one for Chris. And I'll just ask them both now and you can answer them however you want the order. But Mike, in your prepared comments you mentioned about some efforts for operating margins and things like that again in your prepared comments. Can you give us a little bit more details about the kind of timing and magnitude and what some of those efforts are just so we can better understand those? And then for Chris, regarding cash flow, your year-over-year revenue growth projections will likely moderate like you'd mentioned many times about a soft landing and things like that. In doing so, I would assume that as in past cycles you'll generate a lot more cash flow. And given the stock price performance of the stock year-to-date, did that kind of put stock buyback up there a little bit higher than maybe it would have in past cycles? We're just trying to get a grasp on that allocation. Thank you.

I'll answer the last one first and just say, yes.

Yeah. I think, Jim, the truth is at things change, I would think you would see us react just like you did the last time. The playbook hasn't changed here. We've been very clear on what we do with our cash, and I would expect that you're going to see buybacks increase. I wouldn't suspect – I'll just tell you they're going to increase from where they were a whole lot more, just given the marketplace and how the market is growing. That's where we use it. If you remember, the last two years have been what I would consider pretty explosive growth around here, has taken every dime of cash that we have to support that growth, plus try to build the engineering and try to build a bigger technical type business which right now, I think we're the world's largest engineering company for electronics that's out there. You don't just build that without putting some cash for it. I would expect that what you're going to see is a bigger improvement of what I would say edge computing-type activities here, whether that's building those products, designing those products, supplying the parts for those products. The stuff that's being done now, I'm expecting some of the early things I talked to you about start having impact on the second half of the year. And that's why I'm fairly confident in the year itself that I believe the year is probably going to carry itself through the first half and in some of the activities that we've done will increase this and carry us through the second half. That's pretty much how we've been running the place for a long time but we try to consider that and think of it in that point of view. It's always the newer stuff coming later, more efficiency on the stuff that's coming today and hopefully that answers that question for you.

Thank you so much for the details and clarifications, it's greatly appreciated.

You bet. Yeah.

Thank you. Your next question comes from the line of Mark Delaney, Goldman Sachs. Please go ahead. You're live in the call. Mark Delaney - Goldman Sachs & Co. LLC: Yes. Good afternoon. Thanks for taking the questions, I have two. First on component margins, so EBIT margins in that segment, above 5% for a couple quarters now. I'm hoping you can deconstruct some of the regional dynamics behind that because I know Arrow had invested for quite a while in engineering resources specifically for Asia, and I'm hoping to better understand to what extent some of the margin gains are coming in from Asia to a greater than average extent or is it more broad based across geographies?

Yeah, actually it's – Mark, every region has increased design wins and every region has increased profitability. So, you can call it even. You could call it one's a little better than another but Asia's had a big profitability increase, North America's had a profitability increase and so is Europe. And it's primarily been the design engineering strategy and suppliers continue to like that, and suppliers and customers continue to pay for that. We expect that to continue. Mark Delaney - Goldman Sachs & Co. LLC: Got it. My follow-up question is related to the cyclical outlook. I believe Arrow has said in the past that its business can lag semi suppliers on both the way up and the way down by one to two quarters. So I want to better understand if you think there's a timing dynamic at play and if lower guidance from semi companies like the TIs of the world, if that's maybe a lead indicator for what Arrow may see next year or is it the investments in engineering, the business mix, do you think those are sufficient so that Arrow is not going to see it or if you do, it's just going to be to a much lesser extent?

Yes. So as I said before, our wireless percentage of our business and our automotive while growing are the two areas that we have been less impacted by or the channel has been less impacted by. So, I think the wireless is the biggest slowdown that the market is seeing right now and so for whatever reason or another, we're not seeing that because it's not a big piece of our mix. I think the question that everybody has to ask – are you expecting a general market downturn next year? Are you expecting an economic downturn in which case we'll feel it? I believe right now if you were to say, it's the three to six months that you've seen, we could pretty much see out and things look pretty good going into next year. I think the design activities we have is certainly going to help the second half of that year because that's usually the timeframe you have on those. So we're actually feeling pretty good that if there is a downturn, it could be minimized by the business that we have in-house and that's what we've been striving for. So if there is one, we're going to be in about the best shape that we've ever been in. Mark Delaney - Goldman Sachs & Co. LLC: That's helpful. Thank you very much.

Thank you. Your final question comes from the line of William Stein at SunTrust. Please go ahead. You're live in the call.

Great. Thanks for taking my question and squeezing me in. I want to add my congratulations to the good op margin, especially in the components business and look forward to getting even better there. But I did want to ask another question about this GPU commentary you had, Mike, very interesting because we know that that's a great growth area in semis right now. But I have maybe three sort of little questions about it. First, are these longstanding relationships or new ones? Also, are you dealing with sort of the big vendor that we all know in this space or are there potentially multiple vendors that you're helping? And we know that you used to have a great relationship with one of the big FPGA companies that are similarly linked to this dynamic, but they're under new ownership. Maybe you can update us as to whether they're a part of this effort? Thank you.

I mean, it would be hard not to just say, yes, to virtually every one of your questions. It is interesting. If you take a look at our line card, we are well-poised here. Obviously, the growth that is projected for this market is high. We're already in it with a lot of design activity. And, yes, we have some new relationships that only augment that. That's the interesting thing about this business, you're constantly adding new suppliers. You're adding new capabilities. What's also interesting is the software that goes around all of this which has been something that we've done very well on the ECS side of the house. So, we do see ECS as part of these conversations and most of it is related to the edge and what's happened out there. So, whether it's fully autonomous, whether it's artificial intelligence, most of these programs – I'm going to say programs are new, you know the words and the verbiage and all of that is getting a couple of quarters old but, no, we're poised very well that where we focused our engineers going into the second half of next year. And you saw the Smart City lab, you take a look at that and some of the – through the press releases, you can see which suppliers have joined in on that and which ones are going to be a big part of those solutions. And all those questions get answered pretty quick, when you see Arrow as the person that's bringing them all together through the lab work. And we think that's going to pay off in heavy dividends.

Okay. Thank you.

Thank you. We have no final questions and I would like to hand the call back to Steve O'Brien.

Thanks, Mark. In closing, I will review Arrow's Safe Harbor statement. Some of the comments made on today's call may include forward-looking statements, including statements addressing future financial results. These statements are subject to a number of risks and uncertainties that could cause actual results or facts to differ materially from such statements for a variety of reasons, and the company undertakes no obligation to update publicly or revise any of the forward-looking statements. Detailed information about these risks is included in Arrow's SEC filings. If you have any questions about the information presented today, please feel free to contact me. Thank you for your interest in Arrow Electronics and have a nice day.

Thank you all, presenters. Ladies and gentlemen, that concludes your conference call for today. You may now disconnect. Thank you for joining and enjoy the rest of the day.