SYNNEX Corporation
Sep 28, 2015

SYNNEX Corporation Reports Fiscal 2015 Third Quarter Results

Announced Increase in Quarterly Cash Dividend to $0.20

FREMONT, Calif., Sept. 28, 2015 /PRNewswire/ -- SYNNEX Corporation (NYSE: SNX), a leading business process services company, today announced financial results for the fiscal third quarter ended August 31, 2015.


Q3 FY15

Q3 FY14

Net change

Revenue ($M)

$3,333

$3,535

-5.7%

Operating income ($M)

$81.3

$78.8

3.1%

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

$97.0

$106.3

-8.7%

Operating margin

2.44%

2.23%

21 bps

Non-GAAP operating margin(1)

2.91%

3.01%

(10) bps

Net income attributable to SYNNEX Corporation ($M)

$48.2

$45.0

7.1%

Non-GAAP net income attributable to SYNNEX Corporation ($M)(1)

$58.4

$62.5

-6.6%

Diluted EPS

$1.21

$1.14

6.1%

Non-GAAP Diluted EPS(1)

$1.47

$1.58

-7.0%

(1) Non-GAAP financial measures exclude the impact of acquisition and other integration expenses and the amortization of intangible assets. A reconciliation of GAAP to Non-GAAP financial information is presented in the supplementary information section at the end of this press release.

"Both businesses contributed to our solid profitability during the third quarter," stated Kevin Murai, President and Chief Executive Officer.   He added, "And our Concentrix business achieved revenue growth well above market growth rates."

Fiscal 2015 Third Quarter Highlights:

  • Technology Solutions: Revenue was $3.0 billion, down 7.1% from the prior fiscal year quarter. Adjusting for the translation effect of foreign currencies, the Technology Solutions business decreased by 4.0% compared with last year. Technology Solutions income before non-operating items, income taxes and noncontrolling interest was $71.0 million, or 2.39% of segment revenue, compared with $76.9 million, or 2.40% of segment revenue, in the fiscal third quarter of 2014. Fiscal third quarter 2015 results were negatively impacted by an expected $2.3 million Japan pension expense.
  • Concentrix: Revenue was $359.5 million, a 7.7% increase from the $333.8 million in revenue generated during the third quarter of last year. Adjusting for the translation effect of foreign currencies, Concentrix revenue grew 15.5% compared with last year. Income before non-operating items, income taxes and noncontrolling interest was $10.1 million, or 2.82% of Concentrix revenue, compared with $1.7 million in the prior fiscal year quarter. Non-GAAP income before non-operating items, income taxes and noncontrolling interest was $25.2 million, or 7.02% of segment revenue, for fiscal third quarter of 2015, compared with $28.3 million, or 8.49% of segment revenue, in the fiscal third quarter of 2014.
  • The trailing fiscal four quarters Return on Invested Capital ("ROIC") was 8.7% compared with 8.2% in the prior year fiscal third quarter. Excluding the impact of acquisition and integration expenses and amortization of intangibles, the trailing fiscal four quarters ROIC was 10.1%.
  • The debt to capitalization ratio was 30%, down from 38% in the prior fiscal year quarter.
  • Depreciation and amortization were $13.0 million and $13.7 million, respectively.
  • Cash generated from operations was approximately $220 million for the quarter and approximately $555 million year-to-date.
  • The Company repurchased 120,000 shares during the quarter at an aggregate cost of $8.7 million.
  • The Company paid a quarterly dividend of $0.125 per share or $4.9 million.

Fiscal 2015 Fourth Quarter Outlook:

The following statements are based on SYNNEX's current expectations for the fiscal 2015 fourth quarter and the non-GAAP financial measures exclude acquisition and other integration expenses and amortization of intangibles. These statements are forward-looking and actual results may differ materially.

  • Revenue is expected to be in the range of $3.48 billion to $3.58 billion.
  • Non-GAAP net income is expected to be in the range of $69.5 million to $71.5 million.
  • Non-GAAP diluted earnings per share are expected to be in the range of $1.74 to $1.79.
  • After-tax amortization of intangibles is expected to be $8.5 million, or $0.21 per share.
  • We anticipate a negative currency impact on revenue of approximately $110 million.

Dividends

SYNNEX announced today that its Board of Directors has declared a quarterly cash dividend of $0.20 per common share. The dividend will be payable on October 30, 2015 to stockholders of record as of the close of business on October 16, 2015.

Conference Call and Webcast

SYNNEX will be discussing its financial results and outlook on a conference call today at 2:00 p.m. (PT). A webcast of the call will be available at http://ir.synnex.com. The conference call will also be available via telephone by dialing (888) 469-3219 in North America or (630) 395-0205 outside North America.  The passcode code for the call is "SNX." A replay of the webcast will be available at http://ir.synnex.com approximately two hours after the conference call has concluded where it will be archived for one year.

About SYNNEX Corporation

SYNNEX Corporation (NYSE: SNX), a Fortune 500 corporation, is a leading business process services company, optimizing supply chains and providing outsourced services focused on customer relationship management. SYNNEX distributes a broad range of information technology systems and products, and also provides systems design and integration solutions.  Concentrix, a wholly-owned subsidiary of SYNNEX Corporation, offers a portfolio of strategic solutions and end-to-end business services around customer engagement strategy, process optimization, technology innovation, front and back-office automation and business transformation to clients in ten identified industry verticals. Founded in 1980, SYNNEX Corporation operates in 25 countries around the world. Additional information about SYNNEX may be found online at www.synnex.com.

Use of Non-GAAP Financial Information

To supplement the financial results presented in accordance with GAAP, SYNNEX uses 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 the amortization of intangible assets and acquisition and integration related expenses. These non-GAAP measures provide investors with an additional tool to evaluate operating results. Because these non-GAAP 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 the Company's consolidated financial statements prepared in accordance with GAAP.

SYNNEX refers to growth rates at constant currency or adjusting for the translation effect of foreign currencies so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of the Company's business performance. Financial results adjusted for currency are calculated by translating current period activity in local currency using the comparable prior year periods' currency conversion rate. This approach is used for countries where the functional currency is the local currency. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates.

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 debt and equity.  ROIC excluding the impact of acquisition and integration expenses and amortization of intangibles is calculated by excluding the tax effected impact of these items from operating income and equity.

SYNNEX management uses the non-GAAP financial measures internally to understand, manage and evaluate the business. SYNNEX management believes it is useful for the company and investors to review, as applicable, both GAAP information and the non-GAAP measures in order to assess the performance of SYNNEX' continuing businesses and for planning and forecasting in future periods. These non-GAAP measures are intended to provide investors with an understanding of SYNNEX' operational results and trends that more readily enable investors to analyze SYNNEX' base financial and operating performance and to facilitate period-to-period comparisons and analysis of operational trends. The management of SYNNEX believes the 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. A reconciliation of SYNNEX' non-GAAP financial information to GAAP is set forth in the supplemental information table at the end of this press release.

Safe Harbor Statement

Statements in this news release regarding SYNNEX Corporation, which 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 statements, including statements regarding SYNNEX' expectations and outlook for the fiscal 2015 fourth quarter as to revenue, non-GAAP net income, non-GAAP diluted earnings per share, after-tax amortization of intangibles, currency impact, investments, successful resolution related to one Concentrix contract, expense associated with the Japan multi-employer pension plan withdrawal, the frequency and occurrence of dividend declarations, and the anticipated benefits of the non-GAAP financial measures, 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: our ability to successfully integrate our recent acquisitions; diversion of management as a result of our recent and pending acquisitions; loss of vendors and suppliers as a result of our recent acquisitions; general economic conditions and any weakness in IT and consumer electronics spending; the loss or consolidation of one or more of our significant 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; risks associated with our anti-dilution share repurchase program; and other risks and uncertainties detailed in our Form 10-K for the fiscal year ended November 30, 2014 and subsequent SEC filings. Statements included in this press release are based upon information known to SYNNEX Corporation as of the date of this release, and SYNNEX Corporation assumes no obligation to update information contained in this press release.

Copyright 2015 SYNNEX Corporation. All rights reserved. SYNNEX, the SYNNEX Logo, CONCENTRIX, HYVE SOLUTIONS, NEW AGE ELECTRONICS, and all other SYNNEX company, product and services names and slogans are trademarks or registered trademarks of SYNNEX Corporation. SYNNEX, the SYNNEX Logo, CONCENTRIX, HYVE SOLUTIONS and NEW AGE ELECTRONICS Reg. U.S. Pat. & Tm. Off. Other names and marks are the property of their respective owners.

SNX-F

 

SYNNEX Corporation

Consolidated Balance Sheets

(currency in thousands)

(unaudited)



August 31,
 2015


November 30,
 2014

ASSETS




Current assets:




Cash and cash equivalents

$

308,076



$

180,143


Restricted cash

64,910



34,269


Short-term investments

5,387



7,128


Accounts receivable, net

1,579,736



2,091,511


Receivable from related parties

117



332


Inventories

1,326,751



1,398,463


Current deferred tax assets

33,470



34,310


Other current assets

95,782



153,833


Total current assets

3,414,229



3,899,989


Property and equipment, net

236,192



200,803


Goodwill

306,843



314,213


Intangible assets, net

180,609



229,684


Deferred tax assets

14,598



10,790


Other assets

62,049



57,563


Total assets

$

4,214,520



$

4,713,042






LIABILITIES AND EQUITY




Current liabilities:




Borrowings under securitization, term loans and lines of credit

$

89,917



$

716,257


Accounts payable

1,267,738



1,585,606


Payable to related parties

7,729



5,129


Accrued compensation and benefits

117,761



125,733


Other accrued liabilities

237,948



265,875


Income taxes payable

16,869



23,129


Total current liabilities

1,737,962



2,721,729


Long-term borrowings

647,594



264,246


Long-term liabilities

67,308



60,215


Deferred tax liabilities

11,871



12,867


Total liabilities

2,464,735



3,059,057


SYNNEX Corporation stockholders' equity:




Preferred stock




Common stock

40



40


Additional paid-in capital

404,755



384,625


Treasury stock

(46,644)



(32,723)


Accumulated other comprehensive loss

(48,676)



(6,628)


Retained earnings

1,439,857



1,308,244


Total SYNNEX Corporation stockholders' equity

1,749,332



1,653,558


Noncontrolling interest

453



427


Total equity

1,749,785



1,653,985


Total liabilities and equity

$

4,214,520



$

4,713,042


 

SYNNEX Corporation

Consolidated Statements of Operations

(currency and share amounts in thousands, except for per share amounts)

(unaudited)



Three Months Ended


Nine Months Ended


August 31, 2015


August 31, 2014


August 31, 2015


August 31,
2014

Revenue

$

3,332,537



$

3,535,202



$

9,788,780



$

10,015,721


Cost of revenue

(3,041,759)



(3,235,480)



(8,909,725)



(9,230,339)


Gross profit

290,778



299,722



879,055



785,382


Selling, general and administrative expenses

(209,499)



(220,920)



(629,468)



(576,547)


Income before non-operating items, income taxes and noncontrolling interest

81,279



78,802



249,587



208,835


Interest expense and finance charges, net

(6,794)



(7,602)



(19,050)



(18,260)


Other income (expense), net

(150)



(548)



(1,667)



2,223


Income before income taxes and noncontrolling interest

74,335



70,652



228,870



192,798


Provision for income taxes

(26,164)



(25,647)



(82,487)



(69,756)


Net income

48,171



45,005



146,383



123,042


Net income attributable to noncontrolling interest



(19)



(15)



(88)


Net income attributable to SYNNEX Corporation

$

48,171



$

44,986



$

146,368



$

122,954


Earnings per share attributable to SYNNEX Corporation:








Basic

$

1.22



$

1.15



$

3.71



$

3.16


Diluted

$

1.21



$

1.14



$

3.68



$

3.13


Weighted-average common shares outstanding:








Basic

39,082



38,753



39,035



38,363


Diluted

39,328



39,068



39,325



38,720


Cash dividends declared per share

$

0.13



$



$

0.38



$


 

SYNNEX Corporation

Segment Information

(currency in thousands)

(unaudited)



Three Months Ended


Nine Months Ended


August 31, 2015


August 31, 2014


August 31, 2015


August 31,
2014

Revenue:








  Technology Solutions

$

2,976,996



$

3,204,534



$

8,756,841



$

9,270,439


  Concentrix

359,464



333,796



1,043,031



754,243


  Inter-segment elimination

(3,923)



(3,128)



(11,092)



(8,961)


  Consolidated

$

3,332,537



$

3,535,202



$

9,788,780



$

10,015,721










Income (loss) before non-operating items, income taxes and noncontrolling interest:








  Technology Solutions

$

71,032



$

76,937



$

222,512



$

210,602


  Concentrix

10,129



1,746



26,719



(2,202)


  Inter-segment elimination

118



119



356



435


  Consolidated

$

81,279



$

78,802



$

249,587



$

208,835


 

Reconciliation of GAAP to Non-GAAP financial measures

(currency and share amounts in thousands, except for per share amounts)



Three Months Ended


Nine Months Ended


August 31,
2015


August 31,
2014


August 31,
2015


August 31,
2014

Operating income and Operating margin








Consolidated








Revenue

$

3,332,537



$

3,535,202



$

9,788,780



$

10,015,721










GAAP income before non-operating items, income taxes and noncontrolling interest

$

81,279



$

78,802



$

249,587



$

208,835


IBM CRM acquisition and other integration expenses

2,039



9,932



8,071



34,581


Amortization of intangibles

13,716



17,564



41,771



38,427


Non-GAAP operating income

$

97,034



$

106,298



$

299,429



$

281,843










GAAP operating margin

2.44

%


2.23

%


2.55

%


2.09

%

Non-GAAP operating margin

2.91

%


3.01

%


3.06

%


2.81

%









Technology Solutions








Revenue

$

2,976,996



$

3,204,534



$

8,756,841



$

9,270,439










GAAP income before non-operating items, income taxes and noncontrolling interest

$

71,032



$

76,937



$

222,512



$

210,602


Amortization of intangibles

651



914



1,978



2,810


Non-GAAP operating income

$

71,683



$

77,851



$

224,490



$

213,412










GAAP operating margin

2.39

%


2.40

%


2.54

%


2.27

%

Non-GAAP operating margin

2.41

%


2.43

%


2.56

%


2.30

%









Concentrix








Revenue

$

359,464



$

333,796



$

1,043,031



$

754,243










GAAP income (loss) before non-operating items, income taxes and noncontrolling interest

$

10,129



$

1,746



$

26,719



$

(2,202)


IBM CRM acquisition and other integration expenses

2,039



9,932



8,071



34,581


Amortization of intangibles

13,065



16,650



39,793



35,617


Non-GAAP operating income

$

25,233



$

28,328



$

74,583



$

67,996










GAAP operating margin

2.82

%


0.52

%


2.56

%


(0.29)%


Non-GAAP operating margin

7.02

%


8.49

%


7.15

%


9.02

%

 

Reconciliation of GAAP to Non-GAAP financial measures

(currency and share amounts in thousands, except for per share amounts)



Three Months Ended


Nine Months Ended


August 31, 2015


August 31, 2014


August 31, 2015


August 31, 2014

Net income








Net income attributable to SYNNEX Corporation

$

48,171



$

44,986



$

146,368



$

122,954


IBM CRM acquisition and other integration expenses, net of taxes(1)

$

1,328



$

6,327



$

5,162



$

22,176


Amortization of intangibles, net of taxes(1)

$

8,886



$

11,188



$

26,716



$

24,540


Non-GAAP net income attributable to SYNNEX Corporation

$

58,385



$

62,501



$

178,246



$

169,670










Diluted earnings per common share ("EPS")(2)








Net income attributable to SYNNEX Corporation

$

48,171



$

44,986



$

146,368



$

122,954


Less: net income allocated to participating securities

(525)



(587)



(1,731)



(1,652)


Net income attributable to SYNNEX Corporation common stockholders

47,646



44,399



144,637



121,302


IBM CRM acquisition and other integration expenses attributable to SYNNEX Corporation common stockholders,  net of taxes(1)

1,314



6,245



5,104



21,887


Amortization of intangibles attributable to SYNNEX Corporation common stockholders, net of taxes(1)

8,789



11,043



26,398



24,217


Non-GAAP net income attributable to SYNNEX Corporation common stockholders

$

57,749



$

61,687



$

176,139



$

167,406










Weighted-average number of common shares - diluted:

39,328



39,068



39,325



38,720










Diluted EPS(2)

$

1.21



$

1.14



$

3.68



$

3.13


IBM CRM acquisition and other integration expenses

0.03



0.16



0.13



0.57


Amortization of intangibles

0.22



0.28



0.67



0.63


Non-GAAP Diluted EPS(3)

$

1.47



$

1.58



$

4.48



$

4.32










(1) The tax effect of the non-GAAP adjustments was calculated using the applicable effective tax rate during the periods.


(2) Diluted EPS for all periods presented is calculated using the two-class method. Unvested restricted stock awards granted to employees and non-employee directors are considered participating securities.  For purposes of calculating Diluted EPS, Net income allocated to participating securities was approximately 1.1% and 1.2% of the Net income attributable to SYNNEX Corporation for the three and nine months ended August 31, 2015, respectively, and approximately 1.3% for both the three and nine months ended August 31, 2014.


(3) The sum of the components of Non-GAAP Diluted EPS may not agree to totals, as presented, due to rounding.

 

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SOURCE SYNNEX Corporation

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