SYNNEX Corporation Reports Fiscal 2015 Fourth Quarter and Full Year Results

Record Operating Cash Generation for the Year

Jan 07, 2016, 16:03 ET from SYNNEX CORP

FREMONT, Calif., Jan. 7, 2016 /PRNewswire/ -- SYNNEX Corporation (NYSE: SNX), a leading business process services company, today announced financial results for the fiscal fourth quarter and fiscal year ended November 30, 2015.

Q4 FY15

Q4 FY14

Net change

Revenue ($M)

$3,550

$3,824

-7.2%

Operating income ($M)

$105.0

$99.7

5.3%

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

$120.0

$124.9

-3.9%

Operating margin

2.96%

2.61%

35 bps

Non-GAAP operating margin(1)

3.38%

3.27%

11 bps

Net income attributable to SYNNEX Corporation ($M)

$62.2

$57.1

8.9%

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

$71.6

$72.7

-1.4%

Diluted EPS

$1.56

$1.44

8.3%

Non-GAAP Diluted EPS(1)

$1.80

$1.83

-1.6%

(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.

"We delivered another solid quarter with Technology Solutions showing sequential growth in line with expectations," stated Kevin Murai, President and Chief Executive Officer. He added, "Concentrix delivered another outstanding quarter as we benefitted from a healthy pipeline and strong execution."

Fiscal 2015 Fourth Quarter Highlights:

  • Technology Solutions: Revenue was $3.2 billion, down 8.8% from the prior fiscal year quarter. Adjusting for the translation effect of foreign currencies, the Technology Solutions business decreased by 6.2% compared with last year. Technology Solutions generated operating income of $80.4 million, or 2.53% of segment revenue, compared with $94.9 million, or 2.72% of segment revenue, in the fiscal fourth quarter of 2014.
  • Concentrix: Revenue was $373.6 million, a 9.3% increase from the $342.0 million in revenue generated during the fourth quarter of last year. Adjusting for the translation effect of foreign currencies, Concentrix revenue grew 15.3% compared with last year. Operating income was $24.4 million, or 6.53% of Concentrix revenue, compared with $4.7 million in the prior fiscal year quarter. Non-GAAP operating income was $38.8 million, or 10.38% of segment revenue, for fiscal fourth quarter of 2015, compared with $29.1 million, or 8.52% of segment revenue, in the fiscal fourth quarter of 2014.
  • The trailing fiscal four quarters Return on Invested Capital ("ROIC") was 9.2% compared with 8.3% in the prior year fiscal fourth quarter. Excluding the impact of acquisition and integration expenses and amortization of intangibles, the trailing fiscal four quarters ROIC was 10.4%.
  • The debt to capitalization ratio was 28.9%, down from 37.2% in the prior fiscal year fourth quarter.
  • Depreciation and amortization were $13.4 million and $13.0 million, respectively.
  • Cash generated from operations was approximately $102 million for the quarter.

 

FY15

FY14

Net change

Revenue ($M)

$13,338

$13,840

-3.6%

Operating income ($M)

$354.6

$308.5

14.9%

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

$419.4

$406.7

3.1%

Operating margin

2.66%

2.23%

43 bps

Non-GAAP operating margin(1)

3.14%

2.94%

20 bps

Net income attributable to SYNNEX Corporation ($M)

$208.5

$180.0

15.8%

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

$249.9

$242.3

3.1%

Diluted EPS

$5.24

$4.57

14.7%

Non-GAAP Diluted EPS(1)

$6.28

$6.16

1.9%

(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.

Fiscal 2015 Highlights:

  • Technology Solutions: Revenue was $11.9 billion, down 6.4% from the prior fiscal year. Adjusting for the translation effect of foreign currencies, the Technology Solutions business decreased by 3.7% compared with last year. Technology Solutions operating income was $303.0 million, or 2.54% of segment revenue compared with $305.5 million, or 2.40% of segment revenue, in fiscal 2014.
  • Concentrix: Revenue was $1.4 billion, a 29.2% increase from the $1.1 billion in revenue generated during last year. Adjusting for the IBM CRM acquisition and translation effect of foreign currencies, Concentrix revenue grew 12.2% compared with last year. Operating income was $51.1 million, or 3.61% of Concentrix revenue, compared with $2.5 million in the prior fiscal year. Non-GAAP operating income was $113.4 million, or 8.00% of segment revenue, for fiscal 2015, compared with $97.1 million, or 8.86% of segment revenue, in fiscal 2014.
  • Depreciation and amortization were $48.8 million and $54.8 million, respectively.
  • Cash generated from operations was approximately $659 million for the year.

Fiscal 2016 First Quarter Outlook:

The following statements are based on SYNNEX's current expectations for the fiscal 2016 first quarter. 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 $3.23 billion to $3.33 billion.
  • Non-GAAP net income is expected to be in the range of $53.6 million to $55.6 million.
  • Non-GAAP diluted earnings per share is expected to be in the range of $1.34 to $1.39.
  • After-tax amortization of intangibles is expected to be $7.7 million, or $0.19 per share.
  • We anticipate a negative currency impact on revenue of approximately $55 million.

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 January 29, 2016 to stockholders of record as of the close of business on January 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 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 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 and non-GAAP diluted earnings per share, which are non-GAAP financial measures that exclude the amortization of intangible assets and acquisition and integration expenses related to the IBM CRM acquisition and the related tax effects thereon. 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, net of cash and cash equivalents in the United States.  ROIC excluding the impact of IBM CRM 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 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 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 first quarter as to revenue, non-GAAP net income, non-GAAP diluted earnings per share, after-tax amortization of intangibles, currency impact, investments, 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 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; 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 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)

November 30,  2015

November 30,  2014

ASSETS

Current assets:

Cash and cash equivalents

$

336,072

$

180,143

Restricted cash

88,558

34,269

Short-term investments

5,546

7,128

Accounts receivable, net

1,759,491

2,091,511

Receivable from related parties

114

332

Inventories

1,328,967

1,398,463

Current deferred tax assets

40,510

34,310

Other current assets

90,523

153,833

Total current assets

3,649,781

3,899,989

Property and equipment, net

248,627

200,803

Goodwill

298,785

314,213

Intangible assets, net

166,567

229,684

Deferred tax assets

19,849

10,790

Other assets

60,538

57,563

Total assets

$

4,444,147

$

4,713,042

LIABILITIES AND EQUITY

Current liabilities:

Borrowings, current

$

92,093

$

716,257

Accounts payable

1,445,194

1,585,606

Payable to related parties

7,661

5,129

Accrued compensation and benefits

135,453

125,733

Other accrued liabilities

218,687

265,875

Income taxes payable

19,069

23,129

Total current liabilities

1,918,157

2,721,729

Long-term borrowings

638,798

264,246

Other long-term liabilities

76,582

60,215

Deferred tax liabilities

10,713

12,867

Total liabilities

2,644,250

3,059,057

SYNNEX Corporation stockholders' equity:

Preferred stock

Common stock

40

40

Additional paid-in capital

411,687

384,625

Treasury stock

(51,287)

(32,723)

Accumulated other comprehensive income (loss)

(55,237)

(6,628)

Retained earnings

1,494,178

1,308,244

Total SYNNEX Corporation stockholders' equity

1,799,381

1,653,558

Noncontrolling interest

516

427

Total equity

1,799,897

1,653,985

Total liabilities and equity

$

4,444,147

$

4,713,042

 

SYNNEX Corporation

Consolidated Statements of Operations

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

(unaudited)

Three Months Ended

Fiscal Year Ended

November 30, 2015

November 30, 2014

November 30, 2015

November 30, 2014

Revenue:

Products

$

3,179,751

$

3,485,032

$

11,936,282

$

12,755,264

Services

369,866

338,837

1,402,115

1,084,326

Total revenue

3,549,617

3,823,869

13,338,397

13,839,590

Cost of revenue:

Products

(3,012,292)

(3,295,645)

(11,276,819)

(12,075,828)

Services

(224,589)

(214,602)

(869,787)

(664,758)

Gross profit

312,736

313,622

1,191,791

1,099,004

Selling, general and administrative expenses

(207,771)

(213,950)

(837,239)

(790,497)

Operating income

104,965

99,672

354,552

308,507

Interest expense and finance charges, net

(7,246)

(6,927)

(26,296)

(25,187)

Other income (expense), net

606

(1,261)

(1,061)

962

Income before income taxes

98,325

91,484

327,195

284,282

Provision for income taxes

(36,101)

(34,376)

(118,588)

(104,132)

Net income

62,224

57,108

208,607

180,150

Net income attributable to noncontrolling interest

(67)

(28)

(82)

(116)

Net income attributable to SYNNEX Corporation

$

62,157

$

57,080

$

208,525

$

180,034

Earnings per share attributable to SYNNEX Corporation:

Basic

$

1.57

$

1.45

$

5.28

$

4.61

Diluted

$

1.56

$

1.44

$

5.24

$

4.57

Weighted-average common shares outstanding:

Basic

39,134

38,874

39,061

38,490

Diluted

39,431

39,223

39,352

38,845

Cash dividends declared per share

$

0.20

$

0.13

$

0.58

$

0.13

 

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

Three Months Ended

Fiscal Year Ended

November 30, 2015

November 30, 2014

November 30, 2015

November 30, 2014

Revenue:

  Technology Solutions

$

3,179,819

$

3,485,075

$

11,936,660

$

12,755,514

  Concentrix

373,639

341,971

1,416,670

1,096,214

  Inter-segment elimination

(3,841)

(3,177)

(14,933)

(12,138)

  Consolidated

$

3,549,617

$

3,823,869

$

13,338,397

$

13,839,590

Operating income:

  Technology Solutions

$

80,438

$

94,897

$

302,950

$

305,499

  Concentrix

24,408

4,657

51,127

2,455

  Inter-segment elimination

119

118

475

553

  Consolidated

$

104,965

$

99,672

$

354,552

$

308,507

 

 

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

Three Months Ended

Fiscal Year Ended

November 30, 2015

November 30, 2014

November 30, 2015

November 30, 2014

Operating income and Operating margin

Consolidated

Revenue

$

3,549,617

$

3,823,869

$

13,338,397

$

13,839,590

GAAP operating income

$

104,965

$

99,672

$

354,552

$

308,507

IBM CRM acquisition and other integration expenses

2,038

8,455

10,109

43,036

Amortization of intangibles

12,985

16,734

54,756

55,161

Non-GAAP operating income

$

119,988

$

124,861

$

419,417

$

406,704

Depreciation

13,449

11,368

48,754

36,538

Adjusted EBITDA

$

133,437

$

136,229

$

468,171

$

443,242

GAAP operating margin

2.96

%

2.61

%

2.66

%

2.23

%

Non-GAAP operating margin

3.38

%

3.27

%

3.14

%

2.94

%

Technology Solutions

Revenue

$

3,179,819

$

3,485,075

$

11,936,660

$

12,755,514

GAAP operating income

$

80,438

$

94,897

$

302,950

$

305,499

Amortization of intangibles

652

727

2,630

3,538

Non-GAAP operating income

$

81,090

$

95,624

$

305,580

$

309,037

Depreciation

3,307

2,810

12,475

10,817

Adjusted EBITDA

$

84,397

$

98,434

$

318,055

$

319,854

GAAP operating margin

2.53

%

2.72

%

2.54

%

2.40

%

Non-GAAP operating margin

2.55

%

2.74

%

2.56

%

2.42

%

Concentrix

Revenue

$

373,639

$

341,971

$

1,416,670

$

1,096,214

GAAP operating income

$

24,408

$

4,657

$

51,127

$

2,455

IBM CRM acquisition and other integration expenses

2,038

8,455

10,109

43,036

Amortization of intangibles

12,333

16,007

52,126

51,623

Non-GAAP operating income

$

38,779

$

29,119

$

113,362

$

97,114

Depreciation

10,261

8,790

36,755

25,953

Adjusted EBITDA

$

49,040

$

37,909

$

150,117

$

123,067

GAAP operating margin

6.53

%

1.36

%

3.61

%

0.22

%

Non-GAAP operating margin

10.38

%

8.52

%

8.00

%

8.86

%

 

 

SYNNEX Corporation

Reconciliation of GAAP to Non-GAAP financial measures

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

Three Months Ended

Fiscal Year Ended

November 30, 2015

November 30, 2014

November 30, 2015

November 30, 2014

Net income

Net income attributable to SYNNEX Corporation

$

62,157

$

57,080

$

208,525

$

180,034

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

1,283

5,181

6,445

27,357

Amortization of intangibles, net of taxes(1)

8,194

10,416

34,910

34,956

Non-GAAP net income attributable to SYNNEX Corporation

$

71,634

$

72,677

$

249,880

$

242,347

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

Net income attributable to SYNNEX Corporation

$

62,157

$

57,080

$

208,525

$

180,034

Less: net income allocated to participating securities

(673)

(715)

(2,413)

(2,386)

Net income attributable to SYNNEX Corporation common stockholders

61,484

56,365

206,112

177,648

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

1,270

5,118

6,380

27,001

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

8,103

10,288

34,494

34,501

Non-GAAP net income attributable to SYNNEX Corporation common stockholders

$

70,857

$

71,771

$

246,986

$

239,150

Weighted-average number of common shares - diluted:

39,431

39,223

39,352

38,845

Diluted EPS(2)

$

1.56

$

1.44

$

5.24

$

4.57

IBM CRM acquisition and other integration expenses

0.03

0.13

0.16

0.70

Amortization of intangibles

0.21

0.26

0.88

0.89

Non-GAAP Diluted EPS

$

1.80

$

1.83

$

6.28

$

6.16

(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 months and year ended November 30, 2015, respectively, and approximately 1.3% for both the three months and year ended November 30, 2014.

 

SYNNEX Corporation

Calculation of Financial Metrics

(currency in thousands)

 

Return on Invested Capital

Trailing Fiscal Four Quarters Ended

November 30, 2015

November 30, 2014

ROIC

Operating income

$

354,552

$

308,507

Income taxes on operating income(1)

128,503

113,005

Operating income after taxes

226,049

195,502

Total borrowings (five quarters average)

$

804,906

$

807,658

Total equity (five quarters average)

1,723,374

1,559,621

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

(80,476)

(11,954)

Total invested capital

2,447,804

2,355,325

ROIC

9.2

%

8.3

%

Adjusted ROIC

Non-GAAP operating income

$

419,417

$

406,704

Income taxes on Non-GAAP operating income(1)

152,013

148,975

Non-GAAP operating income after taxes

267,404

257,729

Total invested capital

$

2,447,804

$

2,355,325

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

118,241

64,083

Total Non-GAAP invested capital

2,566,045

2,419,408

Adjusted ROIC

10.4

%

10.7

%

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

 

 

Debt to Capitalization

November 30, 2015

November 30, 2014

Total borrowings

(a)

$

730,891

$

980,503

Total equity

(b)

1,799,897

1,653,985

Debt to capitalization

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

28.9

%

37.2

%

 

SYNNEX Corporation

Cash Conversion Cycle

(currency in thousands)

Three Months Ended

November 30, 2015

November 30, 2014

Days sales outstanding

Revenue (products and services)

(a)

$

3,549,617

$

3,823,869

Accounts receivable, including receivable from related parties

(b)

1,759,605

2,091,843

Days sales outstanding

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

45

50

Days inventory outstanding

Cost of revenue (products and services)

(c)

3,236,881

3,510,247

Inventories

(d)

1,328,967

1,398,463

Days inventory outstanding

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

37

36

Days payable outstanding

Cost of revenue (products and services)

(e)

$

3,236,881

$

3,510,247

Accounts payable, including payable to related parties

(f)

1,452,855

1,590,735

Days payable outstanding

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

41

41

Cash conversion cycle

41

45

 

SOURCE SYNNEX CORP