SYNNEX Corporation
Sep 26, 2016

SYNNEX Corporation Reports Fiscal 2016 Third Quarter Results

Increased Quarterly Cash Dividend by 25% to $0.25 per Share

FREMONT, Calif., Sept. 26, 2016 /PRNewswire/ -- SYNNEX Corporation (NYSE: SNX), a leading business process services company, today announced financial results for the fiscal third quarter ended August 31, 2016.


Q3 FY16

Q3 FY15

Net change

Revenue ($M)

$3,670

$3,333

10.1%

Operating income ($M)

$98.0

$81.3

20.6%

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

$113.6

$97.0

17.1%

Operating margin

2.67%

2.44%

23 bps

Non-GAAP operating margin(1)

3.10%

2.91%

19 bps

Net income attributable to SYNNEX Corporation ($M)

$58.7

$48.2

21.9%

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

$68.9

$58.4

18.0%

Diluted EPS

$1.47

$1.21

21.5%

Non-GAAP Diluted EPS(1)

$1.73

$1.47

17.7%





(1)

Non-GAAP financial measures exclude the impact of acquisition and integration expenses, restructuring costs, the amortization of intangible assets and the related tax effects thereon. A reconciliation of GAAP to Non-GAAP financial information is presented in the supplementary information section at the end of this press release.

 

"Execution in our core business and the investments we've made in new business models helped drive strong performance in Technology Solutions. Also, we are seeing the benefits of strong sales and productivity improvements in our Concentrix business," stated Kevin Murai, President and Chief Executive Officer.  "During the quarter we closed the acquisition of Minacs and I am pleased to welcome our new associates to the company."

Fiscal 2016 Third Quarter Highlights:

  • Technology Solutions: Revenue was $3.3 billion, up 9.8% from the prior fiscal year third quarter. Adjusting for the translation effect of foreign currencies, the Technology Solutions business increased by 9.0% compared with last year. Technology Solutions generated operating income of $79.4 million, or 2.43% of segment revenue, compared with $71.0 million, or 2.39% of segment revenue, in the fiscal third quarter of 2015.
  • Concentrix: Revenue was $406.7 million, an increase of 13.1% from the $359.5 million in revenue generated during the third quarter of last year. Adjusting for the Minacs acquisition and translation effect of foreign currencies, Concentrix revenue increased 5.0% compared with last year. Operating income was $18.6 million, compared with $10.1 million in the prior fiscal year third quarter. Non-GAAP operating income was $33.5 million, or 8.24% of segment revenue, for fiscal third quarter of 2016, compared with $25.2 million, or 7.02% of segment revenue, in the fiscal third quarter of 2015.
  • The trailing fiscal four quarters Return on Invested Capital ("ROIC") was 9.6% compared with 8.9% in the prior year fiscal third quarter. Excluding the impact of acquisition and integration expenses, restructuring costs and amortization of intangibles, the trailing fiscal four quarters ROIC was 10.6%.
  • The debt to capitalization ratio was 29.5%, down from 29.7% in the prior fiscal year third quarter.
  • Depreciation and amortization were $15.4 million and $13.0 million, respectively.
  • Cash used in operations was approximately $9 million for the quarter.

Fiscal 2016 Fourth Quarter Outlook:

The following statements are based on SYNNEX's current expectations for the fiscal 2016 fourth quarter. Non-GAAP financial measures exclude the impact of acquisition and integration expenses, restructuring costs, the amortization of intangibles and the related tax impact thereon. These statements are forward-looking and actual results may differ materially.

  • Revenue is expected to be in the range of $3.83 billion to $3.93 billion.
  • Net income is expected to be in the range of $64.8 million to $66.8 million and on a Non-GAAP basis net income is expected to be in the range of $82.7 million to $84.7 million.
  • Diluted earnings per share is expected to be in the range of $1.62 to $1.66 and on a Non-GAAP basis diluted earnings per share is expected to be in the range of $2.06 to $2.11.
  • After-tax amortization of intangibles is expected to be $10.2 million, or $0.25 per share. After tax acquisition, integration and restructuring expenses are 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 $0.25 per common share. The dividend will be payable on October 28, 2016 to stockholders of record as of the close of business on October 14, 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, 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 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 fourth 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 integration expenses and restructuring expenses and the timing of completion of such costs, currency impact, 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: 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, MINACS and all other SYNNEX company, product and services names and slogans are trademarks or registered trademarks of SYNNEX Corporation. SYNNEX, the SYNNEX Logo, CONCENTRIX and MINACS 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,
 2016


November 30,
 2015

ASSETS




Current assets:




Cash and cash equivalents

$

223,282



$

336,072


Restricted cash

4,845



88,558


Short-term investments

6,959



5,546


Accounts receivable, net

1,651,074



1,759,491


Receivable from related parties

99



114


Inventories

1,568,697



1,328,967


Current deferred tax assets

42,814



40,510


Other current assets

117,952



90,523


Total current assets

3,615,722



3,649,781


Property and equipment, net

315,239



248,627


Goodwill

519,704



298,785


Intangible assets, net

274,861



166,567


Deferred tax assets

28,970



19,849


Other assets

67,440



60,538


Total assets

$

4,821,936



$

4,444,147






LIABILITIES AND EQUITY




Current liabilities:




Borrowings, current

$

187,878



$

92,093


Accounts payable

1,515,939



1,445,194


Payable to related parties

15,725



7,661


Accrued compensation and benefits

149,734



135,453


Other accrued liabilities

226,368



218,687


Income taxes payable

20,339



19,069


Total current liabilities

2,115,983



1,918,157


Long-term borrowings

620,544



638,798


Other long-term liabilities

101,369



76,582


Deferred tax liabilities

57,257



10,713


Total liabilities

2,895,153



2,644,250


SYNNEX Corporation stockholders' equity:




Preferred stock




Common stock

41



40


Additional paid-in capital

432,949



411,687


Treasury stock

(61,631)



(51,287)


Accumulated other comprehensive income (loss)

(64,611)



(55,237)


Retained earnings

1,619,997



1,494,178


Total SYNNEX Corporation stockholders' equity

1,926,745



1,799,381


Noncontrolling interest

38



516


Total equity

1,926,783



1,799,897


Total liabilities and equity

$

4,821,936



$

4,444,147


 

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, 2016


August 31, 2015


August 31, 2016


August 31, 2015

Revenue:








Products

$

3,267,287



$

2,976,901



$

9,099,762



$

8,756,532


Services

402,527



355,636



1,075,173



1,032,248


Total revenue

3,669,814



3,332,537



10,174,935



9,788,780


Cost of revenue:








Products

(3,096,529)



(2,816,516)



(8,608,518)



(8,264,527)


Services

(247,328)



(225,243)



(662,238)



(645,198)


Gross profit

325,957



290,778



904,179



879,055


Selling, general and administrative expenses

(227,935)



(209,499)



(655,225)



(629,468)


Operating income

98,022



81,279



248,954



249,587


Interest expense and finance charges, net

(7,517)



(6,794)



(20,245)



(19,050)


Other income (expense), net

(378)



(150)



4,605



(1,667)


Income before income taxes

90,127



74,335



233,314



228,870


Provision for income taxes

(31,426)



(26,164)



(83,619)



(82,487)


Net income

58,701



48,171



149,695



146,383


Net (income) loss attributable to noncontrolling interest

3





(67)



(15)


Net income attributable to SYNNEX Corporation

$

58,704



$

48,171



$

149,628



$

146,368


Earnings per share attributable to SYNNEX Corporation:








Basic

$

1.48



$

1.22



$

3.77



$

3.71


Diluted

$

1.47



$

1.21



$

3.75



$

3.68


Weighted-average common shares outstanding:








Basic

39,346



39,082



39,285



39,035


Diluted

39,534



39,328



39,492



39,325


Cash dividends declared per share

$

0.20



$

0.13



$

0.60



$

0.38


 

SYNNEX Corporation
Segment Information
(currency in thousands)
(unaudited)






Three Months Ended


Nine Months Ended


August 31, 2016


August 31, 2015


August 31, 2016


August 31, 2015

Revenue:








  Technology Solutions

$

3,267,354



$

2,976,996



$

9,099,969



$

8,756,841


  Concentrix

406,715



359,464



1,087,332



1,043,031


  Inter-segment elimination

(4,255)



(3,923)



(12,366)



(11,092)


  Consolidated

$

3,669,814



$

3,332,537



$

10,174,935



$

9,788,780










Operating income:








  Technology Solutions

$

79,410



$

71,032



$

222,896



$

222,512


  Concentrix

18,564



10,129



25,855



26,719


  Inter-segment elimination

48



118



203



356


  Consolidated

$

98,022



$

81,279



$

248,954



$

249,587


 

SYNNEX Corporation
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, 2016


August 31, 2015


August 31, 2016


August 31, 2015

Operating income and Operating margin








Consolidated








Revenue

$

3,669,814



$

3,332,537



$

10,174,935



$

9,788,780










GAAP operating income

$

98,022



$

81,279



$

248,954



$

249,587


Acquisition and integration expenses

2,358



2,039



3,928



8,071


Restructuring costs

258





4,255




Amortization of intangibles

13,011



13,716



36,509



41,771


Non-GAAP operating income

$

113,649



$

97,034



$

293,646



$

299,429


Depreciation

15,375



13,025



46,549



35,305


Adjusted EBITDA

$

129,024



$

110,059



$

340,195



$

334,734










GAAP operating margin

2.67

%


2.44

%


2.45

%


2.55

%

Non-GAAP operating margin

3.10

%


2.91

%


2.89

%


3.06

%









Technology Solutions








Revenue

$

3,267,354



$

2,976,996



$

9,099,969



$

8,756,841










GAAP operating income

$

79,410



$

71,032



$

222,896



$

222,512


Amortization of intangibles

674



651



1,987



1,978


Non-GAAP operating income

$

80,084



$

71,683



$

224,883



$

224,490


Depreciation

3,558



3,144



10,446



9,168


Adjusted EBITDA

$

83,642



$

74,827



$

235,329



$

233,658










GAAP operating margin

2.43

%


2.39

%


2.45

%


2.54

%

Non-GAAP operating margin

2.45

%


2.41

%


2.47

%


2.56

%









Concentrix








Revenue

$

406,715



$

359,464



$

1,087,332



$

1,043,031










GAAP operating income

$

18,564



$

10,129



$

25,855



$

26,719


Acquisition and integration expenses

2,358



2,039



3,928



8,071


Restructuring costs

258





4,255




Amortization of intangibles

12,337



13,065



34,522



39,793


Non-GAAP operating income

$

33,517



$

25,233



$

68,560



$

74,583


Depreciation

11,866



10,001



36,306



26,494


Adjusted EBITDA

$

45,383



$

35,234



$

104,866



$

101,077










GAAP operating margin

4.56

%


2.82

%


2.38

%


2.56

%

Non-GAAP operating margin

8.24

%


7.02

%


6.31

%


7.15

%

 

SYNNEX Corporation
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, 2016


August 31, 2015


August 31, 2016


August 31, 2015

Net income








Net income attributable to SYNNEX Corporation

$

58,704



$

48,171



$

149,628



$

146,368


Acquisition and integration expenses

2,358



2,039



3,928



8,071


Restructuring costs

258





4,255




Amortization of intangibles

13,011



13,716



36,509



41,771


Income taxes related to the above(1)

(5,423)



(5,541)



(16,017)



(17,964)


Non-GAAP net income attributable to SYNNEX Corporation

$

68,908



$

58,385



$

178,303



$

178,246










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








Net income attributable to SYNNEX Corporation

$

58,704



$

48,171



$

149,628



$

146,368


Less: net income allocated to participating securities

(589)



(525)



(1,559)



(1,731)


Net income attributable to SYNNEX Corporation common stockholders

58,115



47,646



148,069



144,637


Acquisition and integration expenses attributable to SYNNEX Corporation common stockholders

2,337



2,018



3,893



7,979


Restructuring costs attributable to SYNNEX Corporation common stockholders

258





4,217




Amortization of intangibles attributable to SYNNEX Corporation common stockholders

12,871



13,567



36,108



41,278


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

(5,366)



(5,482)



(15,843)



(17,755)


Non-GAAP net income attributable to SYNNEX Corporation common stockholders

$

68,215



$

57,749



$

176,444



$

176,139










Weighted-average number of common shares - diluted:

39,534



39,328



39,492



39,325










Diluted EPS(2)

$

1.47



$

1.21



$

3.75



$

3.68


Acquisition and integration expenses

0.06



0.05



0.10



0.20


Restructuring costs

0.01





0.11




Amortization of intangibles

0.33



0.34



0.91



1.05


Income taxes related to the above(1)

(0.14)



(0.14)



(0.40)



(0.46)


Non-GAAP Diluted EPS(3)

$

1.73



$

1.47



$

4.47



$

4.48


 

SYNNEX Corporation
Reconciliation of GAAP to Non-GAAP financial measures
(amounts in millions, except for per share amounts)




Forecast


Three Months Ending November 30, 2016


Low


High

Net income




Net income attributable to SYNNEX Corporation

$

64.8



$

66.8


Acquisition, integration and restructuring expenses

12.0



12.0


Amortization of intangibles

15.9



15.9


Income taxes related to the above(1)

(10.0)



(10.0)


Non-GAAP net income attributable to SYNNEX Corporation

$

82.7



$

84.7






Diluted EPS(2)

$

1.62



$

1.66


Acquisition, integration and restructuring expenses

0.30



0.30


Amortization of intangibles

0.40



0.40


Income taxes related to the above(1)

(0.25)



(0.25)


Non-GAAP Diluted EPS(3)

$

2.06



$

2.11










(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% of the Net income attributable to SYNNEX Corporation for both the three and nine months ended August 31, 2016, and approximately 1.1% and 1.2% for the three and nine months ended August 31, 2015, respectively. Net income allocated to participating securities is approximately 1.0% of the Net income attributable to SYNNEX Corporation for the three months ending November 30, 2016.



(3)

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

 

SYNNEX Corporation
Calculation of Financial Metrics
(currency in thousands)


Return on Invested Capital






August 31, 2016


August 31, 2015

ROIC




Operating income (Trailing fiscal four quarters)

$

353,918



$

349,261


Income taxes on operating income(1)

(127,744)



(127,403)


Operating income after taxes

226,174



221,858






Total borrowings, excluding book overdraft (five quarters average)

$

736,354



$

858,888


Total equity (five quarters average)

1,834,574



1,688,416


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

(223,772)



(44,114)


Total invested capital

2,347,156



2,503,190






ROIC

9.6

%


8.9

%





Adjusted ROIC




Non-GAAP operating income (Trailing fiscal four quarters)

$

413,634



$

424,292


Income taxes on Non-GAAP operating income(1)

(149,334)



(154,959)


Non-GAAP operating income after taxes

264,300



269,333






Total invested capital

$

2,347,156



$

2,503,190


Tax effected impact of acquisition and integration expenses, restructuring costs and amortization of intangibles (five quarters average)

147,387



106,851


Total Non-GAAP invested capital

2,494,543



2,610,041






Adjusted ROIC

10.6

%


10.3

%







(1)

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

 

Debt to Capitalization








August 31, 2016


August 31, 2015

Total borrowings, excluding book overdraft

(a)

$

806,025



$

737,511


Total equity

(b)

1,926,783



1,749,785


Debt to capitalization

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

29.5

%


29.7

%

 

SYNNEX Corporation
Cash Conversion Cycle
(currency in thousands)






Three Months Ended



August 31, 2016


August 31, 2015

Days sales outstanding





Revenue (products and services)

(a)

$

3,669,814



$

3,332,537


Accounts receivable, including receivable from related parties

(b)

1,651,173



1,579,853


Days sales outstanding

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

41



44







Days inventory outstanding





Cost of revenue (products and services)

(c)

$

3,343,857



$

3,041,759


Inventories

(d)

1,568,697



1,326,751


Days inventory outstanding

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

43



40







Days payable outstanding





Cost of revenue (products and services)

(e)

$

3,343,857



$

3,041,759


Accounts payable, including payable to related parties

(f)

1,531,664



1,275,467


Days payable outstanding

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

42



39







Cash conversion cycle


42



45


 

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SOURCE SYNNEX Corporation

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