SYNNEX Corporation
Jun 23, 2016

SYNNEX Corporation Reports Fiscal 2016 Second Quarter Results

FREMONT, Calif., June 23, 2016 /PRNewswire/ -- SYNNEX Corporation (NYSE: SNX), a leading business process services company, today announced financial results for the fiscal second quarter ended May 31, 2016.


Q2 FY16

Q2 FY15

Net change

Revenue ($M)

$3,379

$3,254

3.9%

Operating income ($M)

$75.3

$89.4

-15.7%

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

$91.7

$104.9

-12.6%

Operating margin

2.23%

2.75%

(52) bps

Non-GAAP operating margin(1)

2.71%

3.22%

(51) bps

Net income attributable to SYNNEX Corporation ($M)

$44.4

$51.9

-14.5%

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

$54.8

$61.7

-11.2%

Diluted EPS

$1.11

$1.30

-14.6%

Non-GAAP Diluted EPS(1)

$1.37

$1.55

-11.6%


(1) Non-GAAP financial measures exclude the impact of acquisition and other integration expenses, restructuring and site closure costs 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.

 

"During our second quarter, we achieved sales and profit results above our expectations." stated Kevin Murai, President and Chief Executive Officer. "Our efficient operating model delivered another strong quarter of positive operating cash flow, double digit adjusted ROIC and, we believe, positions us well for growth in the second half of 2016."

Fiscal 2016 Second Quarter Highlights:

  • Technology Solutions: Revenue was $3.0 billion, up 4.5% from the prior fiscal year second quarter. Adjusting for the translation effect of foreign currencies, the Technology Solutions business increased by 4.6% compared with last year. Technology Solutions generated operating income of $75.8 million, or 2.49% of segment revenue, compared with $80.2 million, or 2.75% of segment revenue, in the fiscal second quarter of 2015.
  • Concentrix: Revenue was $335.9 million, a decrease of 1.7% from the $341.8 million in revenue generated during the second quarter of last year. Adjusting for the translation effect of foreign currencies, Concentrix revenue decreased 0.5% compared with last year. Operating loss was $0.6 million, compared with $9.0 million in the prior fiscal year second quarter. Non-GAAP operating income was $15.1 million, or 4.50% of segment revenue, for fiscal second quarter of 2016, compared with $23.9 million, or 6.98% of segment revenue, in the fiscal second quarter of 2015.
  • The trailing fiscal four quarters Return on Invested Capital ("ROIC") was 9.4% compared with 8.6% in the prior year fiscal second quarter. Excluding the impact of acquisition and integration expenses, restructuring costs and amortization of intangibles, the trailing fiscal four quarters ROIC was 10.4%.
  • The debt to capitalization ratio was 27.3%, down from 29.9% in the prior fiscal year second quarter.
  • Depreciation and amortization were $16.7 million and $11.8 million, respectively.
  • Cash generated from operations was approximately $142 million for the quarter.

Fiscal 2016 Third Quarter Outlook:

The following statements are based on SYNNEX's current expectations for the fiscal 2016 third quarter. Non-GAAP financial measures exclude the impact of 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 $3.40 billion to $3.53 billion.
  • Net income is expected to be in the range of $52.5 million to $54.5 million and on a Non-GAAP basis net income is expected to be in the range of $60.6 million to $62.6 million.
  • Diluted earnings per share is expected to be in the range of $1.32 to $1.37 and on a Non-GAAP basis diluted earnings per share is expected to be in the range of $1.52 to $1.57.
  • After-tax amortization of intangibles is expected to be $7.7 million, or $0.19 per share.

Dividend Announcement

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 July 29, 2016 to stockholders of record as of the close of business on July 15, 2016.

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 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 26 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, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA"), non-GAAP net income attributable to SYNNEX Corporation, non-GAAP diluted earnings per share and adjusted ROIC, which are non-GAAP financial measures that exclude acquisition and integration expenses related to the acquisition of the Customer Relationship Management, or CRM, business of International Business Machines Corporation, or IBM, restructuring costs, the amortization of intangible assets and the related tax effects thereon. These non-GAAP financial measures provide investors with an additional tool to evaluate operating results. Because 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 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, net of cash and cash equivalents in the United States. Adjusted ROIC, or ROIC excluding the impact of IBM CRM acquisition and integration expenses, restructuring costs and the amortization of intangibles is calculated by excluding the tax effected impact of these items from operating income and equity.

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. SYNNEX management believes it is useful for the company and investors to review, as applicable, both GAAP information and non-GAAP financial 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 2016 third quarter as to revenue, net income, non-GAAP net income, diluted earnings per share, non-GAAP diluted earnings per share, after-tax amortization of intangibles, impact of acquisition and other integration expenses, currency impact, the frequency and occurrence of dividend declarations, our expectations regarding growth in 2016and 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: general economic conditions and any weakness in information technology and consumer electronics spending; 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;; and other risks and uncertainties detailed in our Form 10-K for the fiscal year ended November 30, 2015 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 2016 SYNNEX Corporation. All rights reserved. SYNNEX, the SYNNEX Logo, CONCENTRIX, and all other SYNNEX company, product and services names and slogans are trademarks or registered trademarks of SYNNEX Corporation. SYNNEX, the SYNNEX Logo, and CONCENTRIX 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)



May 31,
 2016


November 30,
 2015

ASSETS




Current assets:




Cash and cash equivalents

$

589,006



$

336,072


Restricted cash

2,007



88,558


Short-term investments

7,370



5,546


Accounts receivable, net

1,512,671



1,759,491


Receivable from related parties

89



114


Inventories

1,378,055



1,328,967


Current deferred tax assets

38,358



40,510


Other current assets

109,583



90,523


Total current assets

3,637,139



3,649,781


Property and equipment, net

277,739



248,627


Goodwill

298,854



298,785


Intangible assets, net

142,368



166,567


Deferred tax assets

27,366



19,849


Other assets

59,355



60,538


Total assets

$

4,442,821



$

4,444,147






LIABILITIES AND EQUITY




Current liabilities:




Borrowings, current

$

91,433



$

92,093


Accounts payable

1,378,358



1,445,194


Payable to related parties

11,242



7,661


Accrued compensation and benefits

119,582



135,453


Other accrued liabilities

225,534



218,687


Income taxes payable

15,973



19,069


Total current liabilities

1,842,122



1,918,157


Long-term borrowings

624,538



638,798


Other long-term liabilities

91,990



76,582


Deferred tax liabilities

9,170



10,713


Total liabilities

2,567,820



2,644,250


SYNNEX Corporation stockholders' equity:




Preferred stock




Common stock

41



40


Additional paid-in capital

427,222



411,687


Treasury stock

(61,047)



(51,287)


Accumulated other comprehensive income (loss)

(61,037)



(55,237)


Retained earnings

1,569,215



1,494,178


Total SYNNEX Corporation stockholders' equity

1,874,394



1,799,381


Noncontrolling interest

607



516


Total equity

1,875,001



1,799,897


Total liabilities and equity

$

4,442,821



$

4,444,147


 

SYNNEX Corporation

Consolidated Statements of Operations

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

(unaudited)



Three Months Ended


Six Months Ended


May 31, 2016


May 31, 2015


May 31, 2016


May 31, 2015

Revenue:








Products

$

3,047,638



$

2,915,500



$

5,832,475



$

5,779,631


Services

331,861



338,285



672,646



676,612


Total revenue

3,379,499



3,253,785



6,505,121



6,456,243


Cost of revenue:








Products

(2,880,859)



(2,743,872)



(5,511,989)



(5,448,011)


Services

(204,610)



(209,854)



(414,910)



(419,955)


Gross profit

294,030



300,059



578,222



588,277


Selling, general and administrative expenses

(218,724)



(210,698)



(427,290)



(419,969)


Operating income

75,306



89,361



150,932



168,308


Interest expense and finance charges, net

(6,512)



(5,815)



(12,728)



(12,256)


Other income (expense), net

949



(1,584)



4,983



(1,517)


Income before income taxes

69,743



81,962



143,187



154,535


Provision for income taxes

(25,386)



(30,052)



(52,193)



(56,323)


Net income

44,357



51,910



90,994



98,212


Net (income) loss attributable to noncontrolling interest

5



(36)



(70)



(15)


Net income attributable to SYNNEX Corporation

$

44,362



$

51,874



$

90,924



$

98,197


Earnings per share attributable to SYNNEX Corporation:








Basic

$

1.12



$

1.31



$

2.29



$

2.49


Diluted

$

1.11



$

1.30



$

2.28



$

2.47


Weighted-average common shares outstanding:








Basic

39,283



39,054



39,254



39,011


Diluted

39,477



39,343



39,470



39,323


Cash dividends declared per share

$

0.20



$

0.13



$

0.40



$

0.25


 

SYNNEX Corporation

Segment Information

(currency in thousands)

(unaudited)



Three Months Ended


Six Months Ended


May 31, 2016


May 31, 2015


May 31, 2016


May 31, 2015

Revenue:








  Technology Solutions

$

3,047,708



$

2,915,557



$

5,832,615



$

5,779,845


  Concentrix

335,925



341,805



680,617



683,567


  Inter-segment elimination

(4,134)



(3,577)



(8,111)



(7,169)


  Consolidated

$

3,379,499



$

3,253,785



$

6,505,121



$

6,456,243










Operating income:








  Technology Solutions

$

75,815



$

80,230



$

143,486



$

151,480


  Concentrix

(570)



9,012



7,291



16,590


  Inter-segment elimination

61



119



155



238


  Consolidated

$

75,306



$

89,361



$

150,932



$

168,308


 

SYNNEX Corporation

Reconciliation of GAAP to Non-GAAP financial measures

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



Three Months Ended


Six Months Ended


May 31, 2016


May 31, 2015


May 31, 2016


May 31, 2015

Operating income and Operating margin








Consolidated








Revenue

$

3,379,499



$

3,253,785



$

6,505,121



$

6,456,243










GAAP operating income

$

75,306



$

89,361



$

150,932



$

168,308


IBM CRM acquisition and other integration expenses

568



2,039



1,570



6,032


Restructuring charges

3,997





3,997




Amortization of intangibles

11,794



13,462



23,498



28,055


Non-GAAP operating income

$

91,665



$

104,862



$

179,997



$

202,395


Depreciation

16,700



11,109



31,174



22,280


Adjusted EBITDA

$

108,365



$

115,971



$

211,171



$

224,675










GAAP operating margin

2.23

%


2.75

%


2.32

%


2.61

%

Non-GAAP operating margin

2.71

%


3.22

%


2.77

%


3.13

%









Technology Solutions








Revenue

$

3,047,708



$

2,915,557



$

5,832,615



$

5,779,845










GAAP operating income

$

75,815



$

80,230



$

143,486



$

151,480


Amortization of intangibles

662



658



1,313



1,327


Non-GAAP operating income

$

76,477



$

80,888



$

144,799



$

152,807


Depreciation

3,575



3,141



6,888



6,024


Adjusted EBITDA

$

80,052



$

84,029



$

151,687



$

158,831










GAAP operating margin

2.49

%


2.75

%


2.46

%


2.62

%

Non-GAAP operating margin

2.51

%


2.77

%


2.48

%


2.64

%









Concentrix








Revenue

$

335,925



$

341,805



$

680,617



$

683,567










GAAP operating income

$

(570)



$

9,012



$

7,291



$

16,590


IBM CRM acquisition and other integration expenses

568



2,039



1,570



6,032


Amortization of intangibles

11,132



12,804



22,185



26,728


Restructuring charges

3,997





3,997




Non-GAAP operating income

$

15,127



$

23,855



$

35,043



$

49,350


Depreciation

13,185



8,087



24,440



16,493


Adjusted EBITDA

$

28,312



$

31,942



$

59,483



$

65,843










GAAP operating margin

(0.17)%



2.64

%


1.07

%


2.43

%

Non-GAAP operating margin

4.50

%


6.98

%


5.15

%


7.22

%

 

SYNNEX Corporation

Reconciliation of GAAP to Non-GAAP financial measures

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



Three Months Ended


Six Months Ended


May 31, 2016


May 31, 2015


May 31, 2016


May 31, 2015

Net income








Net income attributable to SYNNEX Corporation

$

44,362



$

51,874



$

90,924



$

98,197


IBM CRM acquisition and other integration expenses

568



2,039



1,570



6,032


Restructuring charges

3,997





3,997




Amortization of intangibles

11,794



13,462



23,498



28,055


Income taxes related to the above(1)

(5,956)



(5,695)



(10,594)



(12,423)


Non-GAAP net income attributable to SYNNEX Corporation

$

54,765



$

61,680



$

109,395



$

119,861










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








Net income attributable to SYNNEX Corporation

$

44,362



$

51,874



$

90,924



$

98,197


Less: net income allocated to participating securities

(466)



(630)



(965)



(1,220)


Net income attributable to SYNNEX Corporation common stockholders

43,896



51,244



89,959



96,977


IBM CRM acquisition and other integration expenses attributable to SYNNEX Corporation common stockholders

564



2,015



1,557



5,960


Restructuring charges attributable to SYNNEX Corporation common stockholders

3,957





3,959




Amortization of intangibles attributable to SYNNEX Corporation common stockholders

11,665



13,301



23,236



27,712


Income taxes related to the above attributable to SYNNEX Corporation common stockholders(1)

(5,892)



(5,626)



(10,477)



(12,269)


Non-GAAP net income attributable to SYNNEX Corporation common stockholders

$

54,190



$

60,934



$

108,234



$

118,380










Weighted-average number of common shares - diluted:

39,477



39,343



39,470



39,323










Diluted EPS(2)

$

1.11



$

1.30



$

2.28



$

2.47


IBM CRM acquisition and other integration expenses

0.01



0.05



0.04



0.15


Restructuring charges

0.10





0.10




Amortization of intangibles

0.30



0.34



0.59



0.70


Income taxes related to the above(1)

(0.15)



(0.14)



(0.27)



(0.31)


Non-GAAP Diluted EPS

$

1.37



$

1.55



$

2.74



$

3.01


 

SYNNEX Corporation

Reconciliation of GAAP to Non-GAAP financial measures

(amounts in millions, except for per share amounts)



Forecast


Three Months Ending August 31, 2016


Low


High

Net income




Net income attributable to SYNNEX Corporation

$

52.5



$

54.5


IBM CRM acquisition and other integration expenses

0.6



0.6


Amortization of intangibles

12.1



12.1


Income taxes related to the above(1)

(4.6)



(4.6)


Non-GAAP net income attributable to SYNNEX Corporation

$

60.6



$

62.6






Diluted EPS(2)

$

1.32



$

1.37


IBM CRM acquisition and other integration expenses

0.01



0.01


Amortization of intangibles

0.30



0.30


Income taxes related to the above(1)

(0.11)



(0.11)


Non-GAAP Diluted EPS

$

1.52



$

1.57




(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 1.0% and 1.1% of the Net income attributable to SYNNEX Corporation for the three and six months ended May 31, 2016, respectively, and approximately 1.2% for both the three and six months ended May 31, 2015. Net income allocated to participating securities is approximately 1.0% of the Net income attributable to SYNNEX Corporation for the three months ending August 31, 2016.

 

SYNNEX Corporation

Calculation of Financial Metrics

(currency in thousands)


Return on Invested Capital



Trailing Fiscal Four Quarters Ended


May 31, 2016


May 31, 2015

ROIC




Operating income

$

337,176



$

346,783


Income taxes on operating income(1)

(122,175)



(127,392)


Operating income after taxes

215,001



219,391






Total borrowings, excluding book overdraft (five quarters average)

$

722,294



$

906,656


Total equity (five quarters average)

1,794,895



1,654,744


Less: U.S. cash and cash equivalents (five quarters average)

(224,869)



(19,599)


Total invested capital

2,292,320



2,541,801






ROIC

9.4

%


8.6

%





Adjusted ROIC




Non-GAAP operating income

$

397,019



$

433,555


Income taxes on Non-GAAP operating income(1)

(143,856)



(159,388)


Non-GAAP operating income after taxes

253,163



274,167






Total invested capital

$

2,292,320



$

2,541,801


Tax effected impact of IBM CRM acquisition and other integration expenses, restructuring charges and amortization of intangibles (five quarters average)

137,720



93,853


Total Non-GAAP invested capital

2,430,040



2,635,654






Adjusted ROIC

10.4

%


10.4

%


(1) Income taxes on operating income was calculated using the applicable effective tax rates during the periods presented.


Debt to Capitalization




May 31, 2016


May 31, 2015

Total borrowings, excluding book overdraft

(a)

$

704,219



$

735,728


Total equity

(b)

1,875,001



1,728,388


Debt to capitalization

(a)/((a)+(b))

27.3

%


29.9

%

 

SYNNEX Corporation

Cash Conversion Cycle

(currency in thousands)




Three Months Ended



May 31, 2016


May 31, 2015

Days sales outstanding





Revenue (products and services)

(a)

$

3,379,499



$

3,253,785


Accounts receivable, including receivable from related parties

(b)

1,512,760



1,692,195


Days sales outstanding

(b)/((a)/the number of days during the period)

41



48







Days inventory outstanding





Cost of revenue (products and services)

(c)

3,085,469



2,953,726


Inventories

(d)

1,378,055



1,246,498


Days inventory outstanding

(d)/((c)/the number of days during the period)

41



39







Days payable outstanding





Cost of revenue (products and services)

(e)

$

3,085,469



$

2,953,726


Accounts payable, including payable to related parties

(f)

1,389,600



1,235,230


Days payable outstanding

(f)/((e)/the number of days during the period)

41



38







Cash conversion cycle


41



49


 

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SOURCE SYNNEX Corporation

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