TD SYNNEX Reports Fiscal 2022 First Quarter Results

FREMONT, Calif. & CLEARWATER, Fla.–(BUSINESS WIRE)–TD SYNNEX (NYSE: SNX) today announced financial results for the fiscal first quarter ended February 28, 2022.

 

 

Q1 FY22

 

 

Q4 FY21(2)

 

 

Q1 FY21

 

 

Net

Change

from Q4 FY21

 

Net

Change

from Q1 FY21

Revenue ($M)

 

$

15,470

 

 

$

15,611

 

 

$

4,939

 

 

(0.9

)%

 

213.2

%

Operating income ($M)

 

$

222.4

 

 

$

185.4

 

 

$

141.7

 

 

20.0

%

 

57.0

%

Non-GAAP operating income ($M)(1)

 

$

431.9

 

 

$

407.9

 

 

$

156.0

 

 

5.9

%

 

176.9

%

Operating margin

 

 

1.44

%

 

 

1.19

%

 

 

2.87

%

 

25

bps

 

-143

bps

Non-GAAP operating margin(1)

 

 

2.79

%

 

 

2.61

%

 

 

3.16

%

 

18

bps

 

-37

bps

Net income ($M)

 

$

132.3

 

 

$

119.4

 

 

$

87.8

 

 

10.8

%

 

50.7

%

Non-GAAP net income ($M)(1)

 

$

292.4

 

 

$

275.8

 

 

$

98.6

 

 

6.0

%

 

196.6

%

Diluted EPS

 

$

1.37

 

 

$

1.24

 

 

$

1.69

 

 

10.5

%

 

-18.9

%

Non-GAAP Diluted EPS(1)

 

$

3.03

 

 

$

2.86

 

 

$

1.89

 

 

5.9

%

 

60.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“We announce our strong fiscal first quarter results, with broad-based positive momentum, amidst a volatile and uncertain time in the world,” said Rich Hume, CEO of TD SYNNEX. “We are thankful for the tremendous efforts and collaboration of our global team and remain committed to supporting humanitarian efforts in Ukraine and Eastern Europe.”

Fiscal 2022 First Quarter Highlights

  • Revenue was $15.5 billion in the fiscal first quarter of 2022, up 213.2% from the prior fiscal first quarter primarily due to the impact of the completion of the merger with Tech Data on September 1, 2021. On a sequential basis, revenue decreased 0.9% compared to the prior quarter.
  • Operating income was $222 million, compared to $185 million in the prior quarter, and $142 million in the prior fiscal first quarter. Non-GAAP operating income was $432 million, compared to $408 million in the prior quarter, and $156 million in the prior fiscal first quarter. Operating margin was 1.4%, compared to 1.2% in the prior quarter, and 2.9% in the prior fiscal first quarter. Non-GAAP operating margin was 2.8%, compared to 2.6% in the prior quarter, and 3.2% in the prior fiscal first quarter.
  • Cash used in operations was approximately $1.3 billion for the quarter, primarily due to a temporary increase in net working capital to support revenue growth and strategic inventory purchases that are expected to sell through in the next 3 to 4 months.
  • The trailing fiscal four quarters Return on Invested Capital (“ROIC”) was 9.7% compared to 13.1% in the prior quarter, and 16.8% in the prior fiscal first quarter. The adjusted trailing fiscal four quarters ROIC was 13.9%, compared to 16.0% in the prior quarter and 17.8% in the prior fiscal first quarter. ROIC was also negatively impacted by the temporary increase in net working capital to support revenue growth and higher inventory due to strategic purchases.

The following statements are based on TD SYNNEX’ current expectations for the fiscal 2022 second quarter. Non-GAAP financial measures exclude the impact of acquisition, integration and restructuring costs, amortization of intangible assets, share-based compensation, purchase accounting adjustments, and the related tax effects thereon. These statements are forward-looking and actual results may differ materially.

Second Quarter Fiscal 2022 Outlook

  • Revenue is expected to be in the range of $14.8 billion to $15.8 billion.
  • Net income is expected to be in the range of $84 million to $184 million and on a non-GAAP basis, net income is expected to be in the range of $231 million to $270 million.
  • Diluted earnings per share is expected to be in the range of $0.87 to $1.91 and on a non-GAAP basis, diluted earnings per share is expected to be in the range of $2.40 to $2.80, based on estimated outstanding diluted weighted average shares of 95.7 million.

Full Year Fiscal 2022 Outlook

  • Diluted earnings per share is expected to be in the range of $5.18 to $6.32 and on a non-GAAP basis, diluted earnings per share is expected to be in the range of $11.15 to $11.65, based on estimated outstanding diluted weighted average shares of 95.7 million.

Dividend

TD SYNNEX announced today that its Board of Directors declared a quarterly cash dividend of $0.30 per common share. The dividend is payable on April 22, 2022 to stockholders of record as of the close of business on April 8, 2022.

Conference Call and Webcast

TD SYNNEX will host a conference call today to discuss the fiscal 2022 first quarter results at 6:00 AM (PT)/9:00 AM (ET).

A live audio webcast of the earnings call will be accessible at ir.synnex.com and a replay of the webcast will be available following the call.

About TD SYNNEX

TD SYNNEX (NYSE: SNX) is a leading global distributor and solutions aggregator for the IT ecosystem. We’re an innovative partner helping more than 150,000 customers in 100+ countries to maximize the value of technology investments, demonstrate business outcomes and unlock growth opportunities. Headquartered in Clearwater, Florida, and Fremont, California, TD SYNNEX’ 22,000 co-workers are dedicated to uniting compelling IT products, services and solutions from 1,500+ best-in-class technology vendors. Our edge-to-cloud portfolio is anchored in some of the highest-growth technology segments including cloud, cybersecurity, big data/analytics, IoT, mobility and everything as a service. TD SYNNEX is committed to serving customers and communities, and we believe we can have a positive impact on our people and our planet, intentionally acting as a respected corporate citizen. We aspire to be a diverse and inclusive employer of choice for talent across the IT ecosystem. For more information, visit TDSYNNEX.com.

(1)Use of Non-GAAP Financial Information

In addition to the financial results presented in accordance with GAAP, TD SYNNEX also uses adjusted selling, general and administrative expenses, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP diluted earnings per share, which are non-GAAP financial measures that exclude acquisition, integration and restructuring costs, the amortization of intangible assets, share-based compensation expense, purchase accounting adjustments and the related tax effects thereon. The Company also uses adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) which excludes other income (expense), net, acquisition, integration and restructuring costs, share-based compensation expense and purchase accounting adjustments. In prior periods, TD SYNNEX has excluded other items relevant to those periods for purposes of its non-GAAP financial measures.

Acquisition, integration and restructuring costs typically consist of acquisition, integration, restructuring and divestiture related costs and are expensed as incurred. These expenses primarily represent professional services costs for legal, banking, consulting and advisory services, severance and other personnel related costs, share-based compensation expense and debt extinguishment fees. From time to time, this category may also include transaction-related gains/losses on divestitures/spin-off of businesses, costs related to long-lived assets including impairment charges and accelerated depreciation and amortization expense due to changes in asset useful lives, as well as various other costs associated with the acquisition or divestiture.

TD SYNNEX’ acquisition activities have resulted in the recognition of finite-lived intangible assets which consist primarily of customer relationships and lists and vendor lists. Finite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company’s Statements of Operations. Although intangible assets contribute to the Company’s revenue generation, the amortization of intangible assets does not directly relate to the sale of the Company’s products. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company’s acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets, along with the other non-GAAP adjustments, which neither relate to the ordinary course of the Company’s business nor reflect the Company’s underlying business performance, enhances the Company’s and investors’ ability to compare the Company’s past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company’s GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

Share-based compensation expense is a non-cash expense arising from the grant of equity awards to employees based on the estimated fair value of those awards. Although share-based compensation is an important aspect of the compensation of our employees, the fair value of the share-based awards may bear little resemblance to the actual value realized upon the vesting or future exercise of the related share-based awards and the expense can vary significantly between periods as a result of the timing of grants of new stock-based awards, including grants in connection with acquisitions. Given the variety and timing of awards and the subjective assumptions that are necessary when calculating share-based compensation expense, TD SYNNEX believes this additional information allows investors to make additional comparisons between our operating results from period to period.

Purchase accounting adjustments are primarily related to the impact of recognizing the acquired vendor and customer liabilities related to the merger with Tech Data at fair value. The Company expects the duration of these adjustments to benefit our non-GAAP operating income through fiscal 2022 and through a portion of fiscal 2023 based on historical settlement patterns with our vendors and in accordance with the timing defined in our policy for releasing vendor and customer liabilities we deem remote to be paid.

Trailing fiscal four quarters ROIC is defined as the last four quarters’ tax effected operating income divided by the average of the last five quarterly balances of borrowings and equity, net of cash. Adjusted ROIC is calculated by excluding the tax effected impact of non-GAAP adjustments from operating income and by excluding the cumulative tax effected impact of current and prior period non-GAAP adjustments on equity.

TD SYNNEX also uses free cash flow, which is cash flow from operating activities, reduced by purchases of property and equipment. TD SYNNEX uses free cash flow to conduct and evaluate its business because, although it is similar to cash flow from operations, TD SYNNEX believes it is an additional useful measure of cash flows since purchases of property and equipment are a necessary component of ongoing operations. Free cash flow reflects an additional way of viewing TD SYNNEX’ liquidity that, when viewed with its GAAP results, provides a more complete understanding of factors and trends affecting its cash flows. Free cash flow has limitations as it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments for business acquisitions. Therefore, TD SYNNEX believes it is important to view free cash flow as a complement to its entire Consolidated Statements of Cash Flows.

TD SYNNEX management uses non-GAAP financial measures internally to understand, manage and evaluate the business, to establish operational goals, and in some cases for measuring performance for compensation purposes. These non-GAAP measures are intended to provide investors with an understanding of TD SYNNEX’ operational results and trends that more readily enable investors to analyze TD SYNNEX’ base financial and operating performance and to facilitate period-to-period comparisons and analysis of operational trends, as well as for planning and forecasting in future periods. Management believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. As these non-GAAP financial measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures, and should be read only in conjunction with TD SYNNEX’ Consolidated Financial Statements prepared in accordance with GAAP. A reconciliation of TD SYNNEX’ GAAP to non-GAAP financial information is set forth in the supplemental tables at the end of this press release.

(2) Because the merger with Tech Data did not occur until September 1, 2021 and therefore the results for Tech Data are not included in the Q1 FY2021 numbers, we have provided the results for Q4 FY2021 to enable investors to more readily analyze TD SYNNEX’ financial and operating performance and to facilitate period-to-period comparisons and analysis of operational trends.

Safe Harbor Statement

Statements in this news release regarding TD SYNNEX that are not historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may be identified by terms such as believe, foresee, expect, may, will, provide, could and should and the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements regarding strategies and objectives of TD SYNNEX for future operations; our expectations and outlook for the fiscal 2022 second quarter as to revenue, net income, non-GAAP net income, diluted earnings per share, non-GAAP diluted earnings per share, and outstanding diluted weighted average shares; inventory purchases and related sales; our dividend program; the anticipated benefits of the non-GAAP financial measures; and the expected duration of our purchase accounting adjustments.

The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. These risks and uncertainties include, but are not limited to: the risk that the legacy SYNNEX and legacy Tech Data businesses will not be integrated successfully or realize the anticipated benefits of the combined company; new or ongoing effects of the COVID-19 pandemic; the unfavorable outcome of any legal proceedings that have been or may be instituted against us; the ability to retain key personnel; general economic conditions and any weakness in information technology and consumer electronics spending; seasonality; the loss or consolidation of one or more of our significant original equipment manufacturer, or OEM, suppliers or customers; market acceptance and product life of the products we assemble and distribute; competitive conditions in our industry and their impact on our margins; pricing, margin and other terms with our OEM suppliers; our ability to gain market share; variations in supplier-sponsored programs; changes in our costs and operating expenses; changes in foreign currency exchange rates; changes in tax laws; risks associated with our international operations; uncertainties and variability in demand by our reseller and integration customers; supply shortages or delays; any termination or reduction in our floor plan financing arrangements; credit exposure to our reseller customers and negative trends in their businesses; any future incidents of theft; the declaration, timing and payment of dividends, and the Board’s reassessment thereof; and other risks and uncertainties detailed in our Form 10-K for the fiscal year ended November 30, 2021 and subsequent SEC filings. Statements included in this press release are based upon information known to TD SYNNEX as of the date of this release, and TD SYNNEX assumes no obligation to update information contained in this press release unless otherwise required by law.

Copyright 2022 TD SYNNEX CORPORATION. All rights reserved. TD SYNNEX, the TD SYNNEX Logo, and all other TD SYNNEX company, product and services names and slogans are trademarks or registered trademarks of TD SYNNEX Corporation. Other names and marks are the property of their respective owners.

TD SYNNEX Corporation

Consolidated Balance Sheets

(Currency and share amounts in thousands, except par value)

(Amounts may not add due to rounding)

(Unaudited)

 

 

February 28, 2022

 

November 30, 2021

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

510,207

 

 

$

993,973

 

Accounts receivable, net

 

8,732,024

 

 

 

8,310,032

 

Receivables from vendors, net

 

1,102,988

 

 

 

1,118,963

 

Inventories

 

7,747,799

 

 

 

6,642,915

 

Other current assets

 

720,383

 

 

 

668,261

 

Total current assets

 

18,813,401

 

 

 

17,734,144

 

Property and equipment, net

 

429,765

 

 

 

483,443

 

Goodwill

 

3,911,973

 

 

 

3,917,276

 

Intangible assets, net

 

4,832,795

 

 

 

4,913,124

 

Other assets, net

 

599,264

 

 

 

618,393

 

Total assets

$

28,587,198

 

 

$

27,666,380

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Current liabilities:

 

 

 

Borrowings, current

$

1,111,400

 

 

$

181,256

 

Accounts payable

 

12,057,797

 

 

 

12,034,946

 

Other accrued liabilities

 

1,902,311

 

 

 

2,017,253

 

Total current liabilities

 

15,071,508

 

 

 

14,233,455

 

Long-term borrowings

 

3,935,220

 

 

 

3,955,176

 

Other long-term liabilities

 

514,936

 

 

 

556,134

 

Deferred tax liabilities

 

1,043,677

 

 

 

1,015,640

 

Total liabilities

 

20,565,341

 

 

 

19,760,405

 

Stockholders’ equity:

 

 

 

Preferred stock, $0.001 par value, 5,000 shares authorized, no shares issued or outstanding

 

 

 

 

 

Common stock, $0.001 par value, 200,000 shares authorized, 98,386 and 98,204 shares issued as of February 28, 2022 and November 30, 2021, respectively

 

98

 

 

 

98

 

Additional paid-in capital

 

7,293,780

 

 

 

7,271,337

 

Treasury stock, 2,915 and 2,633 shares as of February 28, 2022 and November 30, 2021, respectively

 

(230,374

)

 

 

(201,139

)

Accumulated other comprehensive loss

 

(317,015

)

 

 

(336,194

)

Retained earnings

 

1,275,368

 

 

 

1,171,873

 

Total stockholders’ equity

 

8,021,857

 

 

 

7,905,975

 

Total liabilities and equity

$

28,587,198

 

 

$

27,666,380

 

TD SYNNEX Corporation

Consolidated Statements of Operations

(Currency and share amounts in thousands, except per share amounts)

(Amounts may not add due to rounding)

(Unaudited)

 

 

Three Months Ended

 

February 28, 2022

 

 

 

February 28, 2021

Revenue

$

15,469,977

 

 

 

 

$

4,939,014

 

Cost of revenue

 

(14,501,316

)

 

 

 

 

(4,634,447

)

Gross profit

 

968,661

 

 

 

 

 

304,567

 

Acquisition, integration and restructuring costs

 

(93,370

)

 

 

 

 

 

Selling, general and administrative expenses

 

(652,851

)

 

 

 

 

(162,820

)

Operating income

 

222,440

 

 

 

 

 

141,747

 

Interest expense and finance charges, net

 

(42,343

)

 

 

 

 

(22,838

)

Other expense, net

 

(4,268

)

 

 

 

 

(1,333

)

Income before income taxes

 

175,829

 

 

 

 

 

117,575

 

Provision for income taxes

 

(43,505

)

 

 

 

 

(29,754

)

Net income

$

132,324

 

 

 

 

$

87,822

 

Earnings per common share:

 

 

 

 

 

Basic

$

1.38

 

 

 

 

$

1.70

 

Diluted

$

1.37

 

 

 

 

$

1.69

 

Weighted-average common shares outstanding:

 

 

 

 

 

Basic

 

95,584

 

 

 

 

 

51,145

 

Diluted

 

95,892

 

 

 

 

 

51,563

 

TD SYNNEX Corporation

Reconciliation of GAAP to Non-GAAP financial measures

(Currency in thousands)

(Amounts may not add due to rounding)

 

 

Three months ended

 

February 28,

2022

 

November 30,

2021

 

February 28,

2021

Selling, general and administrative expenses

 

 

 

 

 

GAAP selling, general and administrative expenses

$

746,221

 

$

757,805

 

$

162,820

Acquisition, integration and restructuring costs

 

93,370

 

 

102,082

 

 

Amortization of intangibles

 

76,136

 

 

77,204

 

 

9,369

Share-based compensation

 

6,750

 

 

14,932

 

 

4,887

Purchase accounting adjustments

 

8,082

 

 

4,876

 

 

Adjusted selling, general and administrative expenses

$

561,883

 

$

558,711

 

$

148,564

 

Three months ended

 

February 28,

2022

 

November 30,

2021

 

February 28,

2021

Operating income and operating margin

 

 

 

 

 

Revenue

$

15,469,977

 

 

$

15,611,266

 

 

$

4,939,014

 

 

 

 

 

 

 

GAAP operating income

$

222,440

 

 

$

185,365

 

 

$

141,747

 

Acquisition, integration and restructuring costs

 

93,370

 

 

 

102,082

 

 

 

 

Amortization of intangibles

 

76,136

 

 

 

77,204

 

 

 

9,369

 

Share-based compensation

 

6,750

 

 

 

14,932

 

 

 

4,887

 

Purchase accounting adjustments

 

33,161

 

 

 

28,353

 

 

 

 

Non-GAAP operating income

$

431,857

 

 

$

407,936

 

 

$

156,003

 

 

 

 

 

 

 

GAAP operating margin

 

1.44

%

 

 

1.19

%

 

 

2.87

%

Non-GAAP operating margin

 

2.79

%

 

 

2.61

%

 

 

3.16

%

 

Three months ended

 

February 28,

2022

 

November 30,

2021

 

February 28,

2021

Adjusted EBITDA

 

 

 

 

 

Net income

$

132,324

 

$

119,440

 

 

$

87,822

Interest expense and finance charges, net

 

42,343

 

 

86,066

 

 

 

22,838

Provision (benefit) for income taxes

 

43,505

 

 

(21,749

)

 

 

29,754

Depreciation(1)

 

79,365

 

 

27,432

 

 

 

5,499

Amortization of intangibles

 

76,136

 

 

77,204

 

 

 

9,369

EBITDA

$

373,673

 

$

288,393

 

 

$

155,282

Other expense, net

 

4,268

 

 

1,608

 

 

 

1,333

Acquisition, integration and restructuring costs

 

40,499

 

 

102,082

 

 

 

Share-based compensation

 

6,750

 

 

14,932

 

 

 

4,887

Purchase accounting adjustments

 

33,161

 

 

28,353

 

 

 

Adjusted EBITDA

$

458,351

 

$

435,368

 

 

$

161,502

 

(1) Includes depreciation recorded in acquisition, integration, and restructuring costs.

TD SYNNEX Corporation

Reconciliation of GAAP to Non-GAAP financial measures

(Currency and share amounts in thousands, except per share amounts)

(Amounts may not add due to rounding)

(continued)

 

 

Three months ended

 

February 28,

2022

 

November 30,

2021

 

February 28,

2021

Net income

 

 

 

 

 

Net income

$

132,324

 

 

$

119,440

 

 

$

87,822

 

Acquisition, integration and restructuring costs

 

95,202

 

 

 

146,001

 

 

 

 

Amortization of intangibles

 

76,136

 

 

 

77,204

 

 

 

9,369

 

Share-based compensation

 

6,750

 

 

 

14,932

 

 

 

4,887

 

Purchase accounting adjustments

 

33,161

 

 

 

28,353

 

 

 

 

Income taxes related to the above

 

(47,883

)

 

 

(65,184

)

 

 

(3,525

)

Income tax capital loss carryback benefit

 

(3,246

)

 

 

(44,968

)

 

 

 

Non-GAAP net income

$

292,444

 

 

$

275,778

 

 

$

98,553

 

 

 

 

 

 

 

Diluted earnings per common share (“EPS”)(1)

 

 

 

 

 

Net income

$

132,324

 

 

$

119,440

 

 

$

87,822

 

Less: net income allocated to participating securities

 

878

 

 

 

(825

)

 

 

882

 

Net income attributable to common stockholders

 

131,446

 

 

 

118,615

 

 

 

86,940

 

Acquisition, integration and restructuring costs attributable to common stockholders

 

94,570

 

 

 

144,947

 

 

 

 

Amortization of intangibles attributable to common stockholders

 

75,631

 

 

 

76,646

 

 

 

9,273

 

Share-based compensation attributable to common stockholders

 

6,705

 

 

 

14,824

 

 

 

4,837

 

Purchase accounting adjustments attributable to common stockholders

 

32,941

 

 

 

28,148

 

 

 

 

Income taxes related to the above attributable to common stockholders

 

(47,566

)

 

 

(64,713

)

 

 

(3,489

)

Income tax capital loss carryback benefit attributable to common stockholders

 

(3,224

)

 

 

(44,643

)

 

 

 

Non-GAAP net income attributable to common stockholders

$

290,503

 

 

$

273,824

 

 

$

97,561

 

 

 

 

 

 

 

Weighted-average number of common shares – diluted:

 

95,892

 

 

 

95,873

 

 

 

51,563

 

 

 

 

 

 

 

Diluted EPS(1)

$

1.37

 

 

$

1.24

 

 

$

1.69

 

Acquisition, integration and restructuring costs

 

0.99

 

 

 

1.51

 

 

 

 

Amortization of intangibles

 

0.79

 

 

 

0.80

 

 

 

0.18

 

Share-based compensation

 

0.07

 

 

 

0.15

 

 

 

0.09

 

Purchase accounting adjustments

 

0.34

 

 

 

0.29

 

 

 

 

Income taxes related to the above

 

(0.50

)

 

 

(0.67

)

 

 

(0.07

)

Income tax capital loss carryback

 

(0.03

)

 

 

(0.47

)

 

 

 

Non-GAAP Diluted EPS(1)

$

3.03

 

 

$

2.86

 

 

$

1.89

 

Contacts

Liz Morali

Investor Relations

510-668-8436

[email protected]

Bobby Eagle

Global Corporate Communications

727-538-5864

[email protected]

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