SYNNEX Corp. (NYSE:SNX) Q3 2016 Earnings Conference Call - Final Transcript

Sep 26, 2016 • 05:00 pm ET

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SYNNEX Corp. (NYSE:SNX) Q3 2016 Earnings Conference Call - Final Transcript

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Presentation
Executive
Marshall Witt

to the improved profit from the loss-making contract previously discussed. The Minacs acquisition contributed approximately $3.2 million of non-GAAP operating income.

Net total interest expense and finance charges for Q3 were $7.5 million, up from $6.8 million from the prior year quarter due to higher borrowings to fund the Minacs acquisition, and for growth in our Technology Solutions business. Net other expense was $0.4 million in the third quarter of 2016, compared to $0.2 million in the prior year quarter. The tax rate for the third quarter of FY16 was 34.9%, compared to 35.2% in the prior year period. For the remainder of FY16, we anticipate the annual tax rate to be in the range of 35.5% to 36.5%. Our third quarter non-GAAP net income attributable to SYNNEX Corporation was $68.9 million or $1.73 per diluted share.

Turning to the balance sheet. Our accounts receivable totaled $1.7 billion on August 31, 2016 for a DSO of 41 days, down three days from the prior year quarter. Inventories totaled $1.6 billion or 43 days at the end of the third quarter, up 3 days from the third quarter of 2015. Days payable outstanding was 42 days, up three days from the prior year third quarter. Hence our overall cash conversion cycle for Q3 2016 was 42 days, representing an improvement of three days from Q3 of 2015.

From a financing perspective, our debt to capitalization ratio this quarter was 29%. Preliminary cash flows used in operations were approximately $9 million for the third quarter. And at the end of Q3, between our cash and credit facility, SYNNEX had over $1.4 billion available to fund growth.

Other financial data and metrics of note for the third quarter are as follows. Depreciation expense was $15 million. Amortization expense was $13 million. HP Inc. at approximately 16% of sales was the only vendor accounting for more than 10% of sales. Capital expenditures for the quarter were $28 million, primarily due to continued Concentrix facility expansion.

Trailing four quarters ROIC was 9.6%. Excluding impact of one-time acquisitions and other integration expenses, restructuring charges and amortization, the trailing four quarter's ROIC was 10.6%. As described in our earnings release, the Board of Directors approved a regular quarterly cash dividend of $0.25 per common share to be paid on October 28, 2016 to stockholders of record as of the close of business on October 14, 2016.

Now moving to 2016 fourth quarter expectations. We expect revenue to be in the range of $3.83 billion to $3.93 billion. For non-GAAP net income, the forecast is expected to be in the range of $82.7 million to $84.7 million. Non-GAAP diluted EPS is anticipated to be in the range of $2.06 to $2.11. Non-GAAP net income and non-GAAP diluted EPS guidance excludes after-tax costs of approximately $10.2 million or $0.25 per share related to the amortization of intangibles, and approximately $7.7 million or $0.19 per share related to the acquisition, integration and restructuring expenses.

We anticipate the majority of acquisition,