SYNNEX Corp. (NYSE:SNX) Q4 2019 Earnings Conference Call - Final Transcript

Jan 09, 2020 • 05:00 pm ET


SYNNEX Corp. (NYSE:SNX) Q4 2019 Earnings Conference Call - Final Transcript


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Dennis Polk

the acquisition.

Well, as a result of the true entrepreneurial spirit and capability of SYNNEX and Concentrix and under the excellent leadership of the management team, we substantially completed the integration and stabilized revenue growth in just one year, far ahead of expectations. This aspect, along with the dynamics of operating a nearly $5 billion a year, 225,000 plus associate CRM services entity under the umbrella of a technology distribution company moved us to the belief that the two segments operating independently would be more beneficial for all stakeholders.

Equally important in this decision is the fact that the markets that both business operate in have been and will continue to go through rapid change. Considering this aspect, we believe that having each business be independent to address the individual market dynamics in the nimblest way will enable the best opportunity for each entity to grow and drive returns especially so in the significant markets that each segment has to address. I will talk about a few more aspects related to the separation later in my prepared remarks, but let me now turn over the call to Marshall to discuss our Q4 results, Marshall?

Marshall W. Witt

Thanks, Dennis and regarding the proposed separation, we expect the transaction to be a tax-free share distribution to SYNNEX shareholders, resulting in two publicly traded companies. We anticipate filing the associated Form 10 in February with the effective date of separation expected in the second half of 2020. The capital structure of each segment will be detailed in the Form 10, however, given early indications from financial partners, we expect both segments to exit separation with strong capital positions resulting from continued operating performance and cash flow generation. Please refer to the investor presentation published on our website.

Now let's discuss Q4 results. We are pleased to report that we've exceeded expectations for all the Q4 financial metrics we previously guided to in September. On a consolidated basis, total revenue was an all-time record of $6.6 billion, up 19% compared to $5.5 billion in the same quarter of last year. FX did not have a significant impact on our top line or bottom line.

Our consolidated gross profit dollars totaled a record $795 million, up 21% or $140 million versus a year ago and gross margin was 12%, an improvement of 27 basis points from the prior year quarter. Total adjusted SG&A expense was $456 million or 7% of revenue, up $70 million in absolute dollars, but down 4 basis points as a percentage of revenue compared to a year ago quarter. We posted record consolidated non-GAAP operating income dollars and operating margin in the fourth quarter. Non-GAAP operating income was $338 million, up $71 million or 26% year-over-year. Non-GAAP operating margin of 5.1% [Phonetic] was a 31 basis point expansion from the prior year period.

Shifting gears to Q4 operating performance by business segment. First on Technology Solutions. Technology Solutions delivered its highest ever revenue of $5.4 billion, an increase of 17% compared to $4.6