SNX - Earnings call transcript Q1 2019

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Operator

Good afternoon. My name is Jesse, and I’ll be your conference operator today. I would like to welcome everyone to the SYNNEX First Quarter Fiscal 2019 Earnings Call. Today’s call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there’ll be a question-and-answer session. opening to would Ms. for the to time, over call this remarks, like I pass At Mary Head Lai, of Investor Relations. Miss, begin. you may

Mary Lai

Good the to the XXXX. afternoon. earnings you. for fiscal first SYNNEX call quarter Thank Corporation Welcome

Securities margin, you session. me our of will President income CEO, Laws. hear President Actual may within open and to costs, Polk, differ will synergies, of the integration, Joining are tax without After expenses, expense the intangibles, their to, Chris question-and-answer net CFO; and to shares, demand, call financial could Marshall materially the review EPS, of from integration results limitation, of Please rates, today charges, performance. consist amortization seasonality, market, prepared Such some Dennis forward-looking overall statements interest inventory and and diluted acquisition-related meaning Concentrix. the Witt, results net information Federal non-GAAP operating note Caldwell, that our remarks, growth, and trends today adjusted revenue, or expectations. and relate your we statements margin, of

now, for and over turn information. be will release will more fiscal call update. the The or to For financial discussion respective is no may Reconciliation and and conference to Also, please X-K Form reporting financial forward-looking discussed their dates. risk press the X-K. Corporation release to today. Marshall? permission. the reference filed our we without obligation and of of any our recorded during earnings non-GAAP in certain Form and our XXXX non-GAAP statements our not SYNNEX the which update CFO of XX-K And rebroadcasted speak Form with information, in our assumes property the statements, included factors related SEC the refer I GAAP for the is of SYNNEX the call, in forward-looking call

Marshall Witt

today. joining Mary, Thank all you and for thank us you,

would comments discuss retrospective we net the the we our XXXX that assist net financial a our of revenue specified, recognition revenue under X, as on we and QX have adopted effective to discuss revenue quarter revenue like new XXXX. full we trends. the you the revenues XXX also in approach will to for fiscal XXX Before regards My today performance, first the adoption trends or December results and gross understanding inform ASC ASC reflect to of call in these reflect treatment. Unless today standard referenced

to is tables the previously release. our XX-K, Please material. stated refer revenue expected not this As in the included Form reconciliation adoption and impact in the from press earnings

increase So before a first billion, level, This $XXX gross currency, compared in to of increased of to growth. roughly billion, headwind. year last revenue X%. million $X revenues solid revenue prior the FX, billion, the quarter for segment in October Solutions $X.X strength year in approximately gross basis, completed constant revenue a products billion $X.X The Convergys was up let’s review to supported quarter. the The the compared million net of revenue contributed our the X%, quarter. across same in and and quarter Concentrix year-over-year set quarter broad-based an in revenue up $X.X $XXX On quarter XXX%, portfolio followed the prior net first includes income guidance or to Dennis. year-over-year was by services. industry demand of revenue in go revenue, turning second basis, was a highs. On total the XXXX record vertical acquisition EPS consolidated year. our ahead by XX%. At XX% record QX first increased non-GAAP was results, quarter billion and increase to revenue diluted call over all and Technology $X.X Adjusting

and due revenue, year of dollars The synergies. versus several was an set profit $XXX mainly the quarter, lines a margin of margin margins in points Technology gross The Gross year the points acquisition, product combined the was profit most margins from revenue ago. million improvement positive dollars Total to the million, to quarter. Convergys revenue increase, of $XXX was revenue Our our the or record down growth compared Several an attributable to year adjusted absolute Solutions basis first strong Solutions of to and prior million X.X% as up expense mostly Concentrix’ Convergys a dollars from notably gross SG&A XXX up factors mix. X.X% increase highs. dollars XX largely to all-time margin basis of partially increased contribution year-ago prior up expansion gross Technology gross totaled Solutions prior from cost percentage SG&A from in basis in the and quarter. year was and XX%, overall acquisition, million, gross due and ongoing XX% $XXX the profit quarter, quarter services. XX.X%, with was contributed or offset Technology performance company. the by gross in which an margin XXX slightly $XXX points

a increase XXX Solutions prior First $XXX and XX%. the compared the quarter. product X.X% the non-GAAP XX%, was expansion primarily operating operating or segment to Non-GAAP basis of margin was quarter over up year At was basis due income period. level, cost The margin controls. of efficiencies Technology up the ago. year improved income increase $XX Adjusted $XXX a X.X%, year was mix, proactive points point $XXX prior million was from consolidated to million, growth, non-GAAP XXth XX million, consecutive operating of an operating quarter of year-over-year million or

well in million, industry increase basis as acquisition, margin was margin balanced quarter the profit prior income as or year $XXX up points from period. XXX% dollars in XXX a verticals. was the year-over-year. contribution operating both $XX of The non-GAAP [ph] absolute from Concentrix, from was the million, dollars For up in operating XX.X%, primarily Convergys Adjusted and number

expense to the a fund from were million, quarter. charges net Convergys $XX up XX% debt. liquidity year acquisition. finance approximately standpoint, quarter We million to total variable increase and $XX fixing well-positioned while the remain from borrowings in First our was approximately of prior year-over-year The interest due

second appropriate to finance the a million fiscal of believe XX% for The range effective our quarterly million rate charges. level ago. and the the XXXX, compared is we total $XX expense XX%, $XX a quarter for was of For year net to tax first quarter interest

prior XXXX, in from up XX% rate to $XX business fiscal contributions $XXX period, both balanced reflecting For was million, anticipate the the net range the or XX% Non-GAAP segments. of second to of the income million, quarter effective we tax be XX%. year from

quarter growth quarter EPS Our same year-over-year. year $X.XX, up the first the was of period non-GAAP a marks diluted $X.XX, over or This XXth consecutive ago. XX%

to Turning balance sheet. the

Our inventories totaled totaled billion on receivable $X.X $X.X February billion accounts XX, and XXXX.

up to the Our prior basis cash business ASC the primarily was which to the prior days benefit to last year up days, due year increase and conversion of and XXX compared payable over payments period. timing cycle XX to expected quarter, on XX inventory the was positioning XX first the The in was months. quarter for an coming accounts compared days of

XXXX. expenditure the for amortization X.X%; and quarter approximately end in of million; approximately approximately had credit $X.XXX healthy while common remains QX, from are first will Concentrix capital April a the preliminary first note share QX. of $XXX XX, follows: Technology of of At $XX to expectations and to $XXX dividend cash user. million; quarter. close are generated Solutions expense to of of SYNNEX available facilities, was depreciation record business was cash that $X Board liquidity was as as Other the Our regular billion million net XX.X% adjusted in a down operations four million, per million; operations XXXX the of on our fund financial be ROIC between trailing and and over growth. for data $XX was in quarter ROIC. quarterly Preliminary come was April for for The on levels cash quarters cash used of stockholders portfolio $XX Directors expense inventory approved flows paid was XX, metrics

moving XXXX second quarter outlook. fiscal Now our to

integration and expenses. these now income forward-looking the Please diluted fiscal non-GAAP after-tax and over materially. that million, of intangibles related XXXX We to Non-GAAP share of differ may approximately $XX.X range of net the EPS are the in cost per note guidance expected weighted second or to income billion $X.XX average expect net $X.XX in million. million. be in expected of is diluted revenue the shares EPS be is approximately turn actual million acquisition-related expectations range range be call and $X.X and per results I’ll based amortization Non-GAAP quarter diluted the billion. of Non-GAAP to of to statements to of Dennis. excludes on to $X.XX $XXX.X $XXX.X $X.X XX.X to to share

Dennis Polk

our well call to Thank today. you Thank you, joining Marshall. as everyone

execution, our quarter margins. line significant you our performance XXXX may made have growth record $X.X billion was top profit a Technology With revenue great solid to fiscal XX% investments our off fiscal our earned a we XXXX. investments and As recall, pay as in segments. a year-over-year continued as we for our of These business was both Concentrix gross delivered Solutions dollars first to year and SYNNEX, start highest and ever

time. We EPS of income as non-GAAP quarter represented earnings all diluted our business net strong highest also first generated and the leverage in both levels

contribution from results, consecutive proud are a and Technology Concentrix XXX Solutions. quarters We profitable now to have with profit of balanced more completed

Moving the quarter. to highlights business from

is team Concentrix to an call success. The quarter, nearly Chris? margin over results. for team would QX in the highlight execute areas continues fourth its Our ongoing integration. right to major to go-forward Chris the has of to revenue Concentrix acquisition mix delivered to so. turn $X.X adjusted managing I to we operating well billion like now business while a from many have at XX.X%. Similar ensuring the And also very do Concentrix

Christopher Caldwell

expectations, been value executed Convergys cash plan. well and made at our Concentrix of combined proposition progress about pleased our very we with set results the Thanks, to the of with adjusted is These team flow possible in quarter Dennis. cost in slightly generation. revenue have solid integration hadn’t our if points our delivered margin up The We capability XXX achieving significant results the XXXX. strong while above basis profit strong couldn’t on start synergy the delivering in business,

basis. reported a XXX% a billion, revenues measure. with headwind First an this quarter were approximately basis, revenues $X.XX for approximately on about constant-currency totaled up a like-for-like causing currency On fluctuations of increase X% on X.X% Concentrix

where we from with constant-currency in While the as our Concentrix a in our top margin is profile in the year-ago client of to period. the to we’re operating see comments XX.X%, verticals entity, quarter, sales pipeline one the million, for Adjusted integration of integration from was one the particular, I’m this The Revenue million integrated in XX% we not income growth the and on business operating as other Adjusted pleased QX. the that client side existing efforts prior acquired up profit portfolio. selling transaction saw the X.X% efforts across up in of situations five profit transaction transaction. strong the the the revenue that from our efforts in line very caused and progress of side in capability both particularly are Consistent was transaction, efforts rationale newly a cost the buying year. our continuing containment and result portfolio we with of totaled for from operating decisions. clients of and or a strong synergies, majority came $XX portfolio. a for delay in have general footprint or margin our $XXX the improve quarter client improved

for front, target synergies quarter exited $XX million. synergy $XX the confident we transaction run million, meet are of we that rate on year an one the will and On approximately our we of annualized

XXX,XXX seen one have in bulk facility are of strong and systems is to left we integrate. integration of as organization, Convergys. strong with operating progress what Today, consolidation, back-office the We the combined

of quarter our the in closure severance duplicate to and integration for integration-related related incurred for approximately site $XX related primarily combined results projects the footprint. GAAP reflect costs expenses, costs to positions, Our rationalization million of

expect the complete will year the be that We the our previously end by activities budget. this continue within discussed majority to integration of of

we savings. on a As continue alignment with networks, for additional our we [ph] cost we our visibility time three our announced of activities, The we we have that year synergy back-office customer that the confidence million experience further with efforts of now us $XXX that opportunities and provides these integration will annually can target achieve will into constant generate tools see transaction. at that

to Moving cash flows.

the This Cash activities. operations on a totaled with flows the approximately view cash have Concentrix quarter cash-generation million. with We $XXX capabilities. that operating our integration strong business has even is long-term quarter the in from flow consistent spending strong,

Additionally, quarterly expenditures should quarters. quarter. revenue. spend. relatively we the long-term this That spending This of be capital $XX in Capital this we to a said, million was between that expenditures X% approximately believe X% can in capital spent vary in business light to continue business

Now turning QX. to

We expect and achieving to and our make further integration synergy progress new in client the on ramping wins. targets

that and profitability Concentrix We revenue expect typical the pattern continue. of seasonal will

and both QX. and we Specifically, through portfolio thinking do of in included have that a approaching we slight a mix go. constant-currency Concentrix to by in QX this our improve in to anticipate recognized industry of while increasing at being million grow the growth the ramp approximately come and operating adjusted able in portfolio. year of growth we These as will sequential quarter, our we business, of expect the in pro changes rest impact a new non-GAAP from downs These would in profitability an changes our first ramp of the margin long-term see XXXX, that Through means end are $XX margins solution legacy for with dip down revenue on the QX. of starting rates in forma our and rate profitably will basis revenue

confidence to team’s dedication I while the Dennis. capability for Back with working Concentrix completing to members positioning our me and the like give you, clients’ XXXX in As market of integration. for The success I meet sets and all in would work thank the conclude, beyond. the also conjunction hard to our needs team

Dennis Polk

Chris. Thanks,

our Solutions the to start business, quarter a Regarding solid Technology first well. as year was our

new we in grew collect year-over-year of While customers, noted, our of the that constant adoption I’m X% our and billion Marshall $X.X amount standard invoice reported the affected revenue our was our gross accounting pleased by approximately from currency. revenue,

margin continual growth, business of mix in all TS ensure of operating to our for generate to reflects appropriate ability X.XX% non-GAAP the Our and investments. continue our returns to we securing are from our leverage our drive

our America, discussion. Transitioning well outlook. expectations. ability sizable We region Japan markets. into of to and majority our end the standpoint, portfolio with customer From LatAm Solutions, offerings quarter the our our Technology Overall, demand and markets a For performed delivered across reasonable thoughts their about North second The our in and execute opportunities and the QX in remain operate operate in to similar continue we are we optimistic comments about our offer January growth year. markets our during are for many to results our in coming us.

with we noted, line the perform overall Chris as Concentrix, expect for For business to QX. seasonal trends historical in

are We are and expect efforts Convergys progress encouraged as integrating by to continue planned. these the fully we making towards

seasonal revenue mix. incremental we line gross expect and exit we generate be is which a channel but In be to growth driven balance market revenue norms Solutions, and Growth expected we for underlying we to the we we revenue technology leverage. Within will and on stable Technology basis, sector net products ultimately we translate QX business on remain us approximate to the focus continue our on through to remains and same expect fiscal a XXXX. with confident for growth by to see growth efforts, Technology As basis, offer. opportunities. demand solutions grow in constant pipeline to should as be and that certainly Concentrix as revenue we cross-selling The the an Solutions, market will integrated new positive a

provided EPS goal upper-end same. as achieve XXXX ahead, slightly target Looking the or the second-half of the the XXXX, fiscal approach we above our remains we fiscal to

I’m up of amount partners future. our thank opportunity want confident day. in SYNNEX participate integration in calls support Convergys; second, help also a customer Michael for business of investments like by in. committing the take I sometime the these deep-dive I Distribution. grow through and bring of I from engagement and new in Urban, this Worldwide shareholders I officially made Michael to the value our and welcome we’ve is to commitment. this shape and for faster take join of continuing way Technology the their that areas: SYNNEX. tremendous moment making onboarding, to X. work am than XXXX the to company, every recent will vendor he February on proud our to trust Michael of we also to return and open focusing process, goal and ongoing thank he the and President associates underpinned is key his XXX,XXX-plus want their them us markets Solutions this all to for specific first, to that, call With third, of will success joined to I hard major all in want years; Our three on questions. would learning

Operator

[Operator Sheerin Instructions] The with Stifel. Matthew from first question comes

is open. line Your

Matthew Sheerin

and good you, Thank Yes. afternoon.

me. couple a of Just questions from

starting Solutions year-over-year profile as the business, some with you more, some going and margin you relates we pruning Hyve where Tech about and stand and on on know particularly Dennis talked shuffling? give and margins and color execution. obviously just has core off there? it Hyve elaborate that mix more or which the Just you and the then Marshall, Could could to business, the significantly also I through been So some on up

Dennis Polk

margin will aspect part off and XXXX our commentary over was a QX to are the that Dennis. I’ll of your in then we is continuing portion us things, The as think, business. Hyve increase of I of start and that. really XXXX Marshall, on in This all on add Matt. Hi, question. was had some margin the around many well work

recall returns As that talked working about we in prior really quarters, business. you in the on

would we closer In to expect Hyve. level at be a line expectations add the like margins well at also I’ll we not were they for year, be for revenue to what this in year, Hyve, for the last our them much them was right QX QX as with to at. were back to Looking quarter.

one that’s year-over-year. in little from improved margin got a that We quarter. reasons a reason of from It sold our the our that tailwind tariffs through. eventually also why So from of in tailwinds improved were – the occurred bit a little bit inventory we a mark-up

So the business in margins the positive then our was that a mix a just quarter And our drove that benefit. in overall year-over-year benefit. the to was

Marshall Witt

solutions, add cloud-based last the benefit. an Yes. big that’s that of Matt, that to a to grow Dennis piece out as net to we thing called only I’d but security year-over-year another quarter. It’s not that And piece, continue is, gross versus the element those it’s

Matthew Sheerin

Okay, fair it enough. I in expectations. it with But In think last year-over-year? was down the year-over-year you still down was said quarter, Hyve down. Is that business, a basis? Because on was line that

Dennis Polk

is Matt, Dennis, Hi, again. this

last is As as Technology year-over-year components concerned, in I’ve out what of the Hyve of and I Solutions reiterate about changes. quarters. said break going But say far couple to we’re and will talk not

We’re base change business mentioned in say on to will going right operating perspective QX business. make with to diversifying XXXX, margins, working in like are progress our very customer and our and goals prospects encouraged I to forward asset I the continued from on that we Q-over-Q this our growing and XXXX. by XXXX the regards commenting the from to Hyve I’m ensure those on getting an we returns

Matthew Sheerin

cycle a that and on PCs, this What’s have will or refresh, as Okay, your the seen concern seeing. expirations year, a the some thank hardware three now, Microsoft just cycle? take the whole of both end it your the strength that to on refresh two Tech Solutions what’s the that servers there? out. cycle follow-up at and we’ve upgrade sense for you. given Particularly of lot years And played on you’re strong business regarding the There’s relates and

Dennis Polk

of I asking a things couple you’re think, Well, about. there,

channel the noted this the we’re still in, the as now as year a spend to channel. far overall we that that’s definitely going As amount business of the earlier on and technology of just we’re couple environment, positive spend later, months and

for positive us. a definitely that’s So

very over past about confident customers the that all, with their the in with they’re of conversation months, last reiterated meeting speaking Second we’ve our feeling since with business that XXXX. two you, been and

grow our to with So customers. we expect

part to of that but XXXX. at sure, refresh, As it aspect to going of mean related it’s the end end doesn’t

As in technology think we always, companies we will occur beyond. will XXXX and that benefit XXXX from that expect and to continue and on investment in

Matthew Sheerin

very much. Okay, fair Thanks enough.

Dennis Polk

Thanks, Mike.

Operator

question from next James. Your is Raymond with Tindle Adam

is line Your open.

Adam Tindle

to X.X to a and post XX Convergys cash think – I Marshall, leverage thanks within goal months. a about I talked times first flow first. Okay, the good leverage about and acquisition, afternoon. turn full just you the XX down to wanted get to

Given and from seems issue like right the think on far, seen still working you’ve but delevering? in were to first That And in obviously, would so thought be you secondly, cash timing the temporary for concentrated flow TS way about is what magnitude this is it asset the returns this Hyve. question. standpoint, I a

just a to there. can XX so? or billion over the $X need close achieve you confused next this So I’m change what Maybe I you given, little months generation to think, cash in

Marshall Witt

Adam. Yes,

So exactly right. you’re

still change is at get goal there. XXXX, X.X as Our to to times down no

way to isolated right capital, one around we’ve also my investments side. last the remarks in confidence the TS that that million prepared in debt so inventory total. as saying think we the made saw months, we about of focused we comment in temporary. Mostly, XXXX of is other in roughly some and being over we’ll We made drivers quarter it’s get the our benefits over working bringing You’re a down that AP coming the long $XXX of

Adam Tindle

growth ratio? EBITDA that maybe in helping of also a Okay, combination

Marshall Witt

Very both good point. Yes, helps.

Adam Tindle

got Okay, it.

second just guidance. wanted on I So question, the touch EPS to

nothing another sequential decline Is Could Maybe that. or like like something is touch in steeper just it May a guidance the just bit Hyve you pretty for on the like than falloff on things conservatism? reasoning sounds first. the seen touch are that? the First, in May It we’ve to past. stable, from just little February

Marshall Witt

we as you segment. the conservative Dennis’ think, stay TS Concentrix position. is, I feel good overall first the about pretty Adam, our We the thing well comment, Yes, segment, to in our as know Back outlook.

as in is QX look we too of our terms typically mentioned continue seasonality EPS investments piece of in QX, other Dennis? we make to that, consideration and that’s QX. to thing nothing business to The but he a unusual that from

Dennis Polk

Yes, the last the Adam, thing, I changed we’ve a know, this other would XX only is, months. quite bit as business in offer that you

five what So and aspects. it was if seasonality is you when the Concentrix of I back in guidance years, reflective and and that, our isn’t think look quite four you three, the Convergys factor especially

Adam Tindle

Okay, that’s full-year on just helpful. being Maybe initial the the that in high-end confidence $XX.XX guidance, guidance. of at

about As QX the the comment that can QX the to you being and relative high-end, Is on kind at your initial think of you cadence guidance that expectation? just how this touch on expecting? out played you of year were has

Dennis Polk

it, Adam, we’re that’s with again. say what better that’s way Yes, months I guidance. expected. you looking QX we fair three in our a line Dennis, and think, that talked than little since we provided quarter a and And updated was expected a again, less to the to than we time at we’re Hi, this just, last is and bit

be So is achieved the in we see overall. in with line how out to being year goal XXXX projecting the

Marshall Witt

over Adam, And, what you if to the to acquired HX. tilting, months, last a XX just you months think there is as will, XX we’ve about

the weighting thought, what initial of and we strong be probably question, we’ll forward. your forward, see we more continues but the of towards second-half so – back HX, to we year, that seasonally expect that move And heavier to year going as first-half

Adam Tindle

you. Thank That’s Great. helpful.

Dennis Polk

you. Thank

Operator

Atkins Frank with from comes question SunTrust. next Your

open. is line Your

Frank Atkins

quarter. Concentrix. in areas a questions, non-voice? quickly talk going you the Thank my little taking on you What forward? versus voice ask you Can job to and on some look nice mix at Wanted bit of the division terms that as growth are for about

Marshall Witt

larger acquisition with Convergys, terms of what voice clearly Concentrix of of historical voice, non-voice, had the in a Frank, had. So than our the we business concentration

what bigger us goal margins we of voice. seen our and non-voice business versus grow that’s the areas more growth and is we’ve see Our into the that the some going traditional helping

focus driving revenue being that to go. back mix the greater our on as we percentage continue up, of a non-voice with we��ll So

Frank Atkins

you talk are on Concentrix, how could some and And going you Any trends driving wages, margins helpful. of about attrition, bit then utilization, on Okay, the a that’s give operating those headcount, color in still metrics? of terms forward? little could

Marshall Witt

in metrics, the we operational monitor various clearly, sort of of So different business, all data-intensive terms metrics. the our

In haven’t would of the North of I constraints high-level wage marketplace. and pressure broken resource before, sort comments some that generally, American out we say we terms see within

as wages seeing hire the economy minimum when staff. or well that’s look of it going been going nature, have flow and we has been has doing I think a at there out we’re cost up. been of pretty up good from consistent primarily, But global

services. but seeing – not was mix We’re actually and business, the was our attrition consistent mix down sort of across all-time drive year, wages. And the last an of relatively to of that that continue sort by at the of low getting we types also only enterprise right and the right

well-positioned frankly, that standpoint. we So from ourselves see

Frank Atkins

the Can me. bit currency And guidance you the one a about on from forward? anticipated little revenue impact talk last going Okay.

Marshall Witt

is this Frank, Marshall. Yes.

saw the you tables, of in little headwind As a bit we in QX. felt

So forward. going it’s that difficult project to

line, sure manage. on always we overall is because U.S., both and the In have risk terms we bottom impact the of that significant that to monitor that make Chris’ has organization nothing and top outside material, but presence a effectively line

Frank Atkins

very much. you Thank understood. Okay,

Marshall Witt

Thank you.

Operator

next Your comes with from question Tim Yang Citi.

open. is line Your

Zhen Yang

taking Thanks Hi. for the question.

to Just about from change number and right excluding the the for – comp number for clarify, of growth of you that TS TS the for segment, you have second-half XXXX? mentioned your X% to us easy Is forward that going in the FX. given X% accounting think

Dennis Polk

Dennis. this is Zhen, Hi,

quarter revenue, our gross was constant-currency rate. that growth So first

what X% do is market strives the our to generally best not faster We’re plans the to by are will going growth we’ll projecting and around grow than that segment area SYNNEX that. rate the our individual market, always forward, offer but continue I X% and to

Zhen Yang

segment. Got that is Is for it. This right? TS

Dennis Polk

generally to segment This flows Concentrix well. Yes. the as

Zhen Yang

That’s all questions. so much. Thanks. Got my it. you Thank

Dennis Polk

Thanks, Zhen.

Operator

with Your Research. comes Shannon next Cross Cross from question

is line open. Your

Shannon Cross

you. had questions. couple Thank I of a

off So during of talk quarter in a was historical other first, you any some a geographical of can bit in And Japan sort you’re trends? regions? there in of the from seeing terms and standpoint change the linearity normal of what

Dennis Polk

Hi, Shannon, is this Dennis.

I geographical, you’re business TS as the far asking about As specifically? assume

Shannon Cross

Yes, yes.

Dennis Polk

you. Thank

every in will my with remarks, quarter. line team. performed I I As the right with really across a that geo from said in in board good performance the so say prepared expectations, the Japan business excelled our

them said we effort why the with as quarters it’s team us of I an expected because to the But work for and improving lot leadership you trajectory, line on the that result hard few been in business and really it’s past. of bit recall, We and a that’s our they’re in past to, were get a business recent right-size probably right a struggling by there expectation.

So and by well of from encouraged prospects perspective really regions its TS Japan forward. QX, going overall, expect executed same our well each going forward. But the we we and in are performed a

Shannon Cross

Okay, when not thanks. I think, sure. I’m And you – I’m curious,

– you’ve or confidence maybe it in and of think the your Obviously, – have underlying business the cost moving How high-end in your the to that confidence really the Concentrix was what improvement the was core versus reductions or up of your business range EPS in guided I of place reaching on for is year. your through, in versus stated driven Marshall you one next. is expectation upside the pre-acquisitions? the or there it side, quarter you much the

Dennis Polk

Dennis. is Hi, this Shannon,

the companies, it’s winning Concentrix the business. from that business. of think prepared we from about result remarks, out to, growing a aspect But talked the getting benefit leverage and getting to Chris’ business obviously, I new one, also, a the combined more and back within balanced getting as of benefits acquisition Convergys

on the that’s side. So true is Technology really on Concentrix Solutions. same the thing the And

business, profit of line. the that and grow bottom the additional gain leverage to that bring expect We to from

of as the expect into as about Westcon-Comstor can acquisition the really second a is expect, our you acquisition. the of people hold. most take when are benefits and integration second-half you start us complete, well. the to As would to solid And familiar year each with probably are well, year-and-a-half is cross-selling now in in And as the from we we other get any benefit year really that real

Shannon Cross

I’m to it benefits? to a with willingness sort of Have operating of my of a the curious, of point them, Thank final are talk netted a all more every and customers is an of kind curious their mean, you. down about expense? realize what a I seen or then pull the a billing that. than just straight-out of and question. or and more we are terms I’m starting with to as-a-service to any as from customers guess And ratable conversations purchase from more a push question like. the more I macro of trend you Is movement capital shift kind inflection quarter, they in revenue Okay. to still of

Dennis Polk

ramp conversations This we’re having would And in sudden, it’s this is Shannon. speaking Sure. going say an that say, on Thanks, are often, to the it’s that I Dennis, say, I’m is what not point, inflection all now I It’s conversations. and these up happening again. now. more though is would "Okay, more people more of Obviously, significantly." becoming to consistent. primarily right a as-a-service

Shannon Cross

Yes.

Dennis Polk

tell of of And the my keep would I a talking it’s feeling a part going back conversation reflected to our to ago, daily of here. daily later, there, much of whereas So more A year building wasn’t least at conversations. much to from out business. I from customers, and really you it’s year a perspective our it if

Shannon Cross

great. you. Thank Okay,

Dennis Polk

Thank you.

Operator

from with next Your comes Ananda Loop Baruah question Capital.

open. is line Your

Ananda Baruah

sounds what the is the Dennis, year. it in the I expect up about – anything Hey, just components foundation showed that? the in we on thanks, and could a way you solid guys, the that quarter – bit structural that to there margins up highlighted for like for it Congrats show Could is little a a that the Is the taking to talk you mix into question. dynamic, quarter? to anything continue go what this And should quarter? a way of sort that? And that guess, there solid are

Dennis Polk

Ananda. this Dennis. Hi, Yes, is

and investments, our our to our we The more on we really we’ve to making effort towards mix So most is been of our make value that with there. dynamics out should offer the most services, And some business, work play the the that services these time and margin in we where from investments now, our improve customers for the in – from we more the been add. the higher continued the to value mix quite around products perspective more QX. all see improve has

Ananda Baruah

them is there regards right it than time market, – – as are kind it? product, right kind those I Dennis, those way, to around kind sophisticated something products read in the as right product you place as of right And time? service price, you right offerings do wrap you more a more mean, they of more mix of of there well, training is So product VARs it sophisticated than don’t to is really the customers is right anything being at to least around able it? as getting taking is. say, products, I offerings about at – portfolio, sophisticated right up to the sort with right it in just the anything or the more – to more into we there or having of there kind wrap just in want the to solutions to talking

Dennis Polk

service level services transaction transaction, And that it’s get of in and can Dennis, is you we on improve. deals. cases, the paid way higher for in it’s lot end that’s a at basis, what which and this And aren’t it’s a our relationship. a so cases, about much of wrapped the what they Thank service possible most has through of yes, Ananda, margins and customers, that’s around you. the can their by aspects high-end, and customers needed are more where a in the be of most again. what – daily to services positive think we our to close land some that so is went some

focus that ours a been those as participating of that’s in to as So ensure possible. many we’re deals of

there’s we next operating we where in comes approach investments said, a services additional All to and when it additional make deals, have service those transaction. we improving realize it’s capabilities that’s add of for to and being that, As top balanced the are that we can then on margins.

We’re paid for working we run on what very that, we deliver to the to but also a machine. customer getting have efficient and

up a our adds as I very to of the side think, and well, margins overall. job improved we’ve good on that cost working the business done

Ananda Baruah

it. Got

So game the out? plan under this playing all of sort falls

Dennis Polk

that’s statement, think, yes. fair a I

Ananda Baruah

follow-up. okay, Okay, And cool. just quick a

I mean, that how You a – cost revenue about – it Is it’s mentioned margin we lapped both of providing I you and expectations, on Westcon-Comstor. quickly know the I side, year how know the I – benefit mean, now. your that on think to side? is in relative tracking? the But should context how

Dennis Polk

Sure.

we we the year-and-a-half a now it’s us back out it a transaction, because individual into for business. a later that I being Westcon-Comstor, entity transaction an Regarding done have relating job, good are the date, to break think, integrating harder little as the very to

mode we’re benefits that the cross-sell the that. transaction, of quarters comments into business So grain think I we’re really acquired. in of somewhat well. America And don’t was cross-sell perfect indicated from because again, performing in that for a as were perspective. a you have a couple I to my getting, is All our have and salt, key see we business visibility the take being to full with we said, we the revenue we’re looking that transaction to growing from of before, starting What into and North former

Ananda Baruah

Okay, appreciate great. lot. I Thanks it. a

Dennis Polk

Thank you.

Mary Lai

Thank you.

Operator

from Sheerin with comes next Matthew question Stifel. Your

is line Your open.

Matthew Sheerin

Yes, thanks.

Just follow-up. a quick

and Regarding been widespread enough elaborate future obviously, inventory CPU building to been in some that, that, for about getting the build parts. inventory? areas you your And related shortages reporting of selective could and not commentary warning Taiwan inventory you on have Intel’s been ODMs quarters, about what on have there’s

getting or call could that about seemed other you other of out builds whether have and But and didn’t into You resellers your inventory not some talk large and the playing to that have issues product. distributors that’s things?

Dennis Polk

clear. to you the latter Dennis. I be is of Sure, very said. what Matt. not It’s want This

Matthew Sheerin

Okay.

Dennis Polk

that This can comments, we’re not be unusual just of to conversion doing. pure timing. cash Marshall’s Back lot something cycles a is

and In regular our have, things bit for addition around of tend inventory timing going ends the inventory to buy-sell on in inventory, versus with more primarily six because out we were the certain take that we did a of that where quarter transactions outs quarter, little customers, weeks extra to few this we planning typical issues have how what’s integration much day. that. four than eight to roll next nothing all to That’s a go

Matthew Sheerin

benefit had at Okay, And still benefit fair at there? you least played from do – along out passing point, that some or you to related inventory. where modest just this tariff some talked about Has margin the much enough. you pretty see

Dennis Polk

played expectation it’s out. our is, Matthew, Yes,

Matthew Sheerin

right. Thanks Okay. lot. All a

Dennis Polk

you. Thank

Operator

today. that, for back That’s Ms. all With the Mary the to I’ll turn remarks. questions have closing for that we call Lai

Mary Lai

I today. speaking us with your forward time joining we to and time. next for everyone, you, Thank you look appreciate

Dennis Polk

you. Thank

Mary Lai

Thank you.

Operator

today’s concludes This conference call.

You may now disconnect.

TD SYNNEX (SNX) 27 Mar 192019 Q1 Earnings call transcript