01—Abstract
Summary
Summary of the 10-K filed January 26, 2017. Cited figures are marked; the original filing is the authoritative source.
SYNNEX Corporation, a Fortune 500 business process services company headquartered in Fremont, California, reported fiscal 2016 (year ended November 30, 2016) revenue of $14.06 billiona, up from $13.34 billion in fiscal 2015, with operating income of $379.6 million and net income attributable to SYNNEX of $234.9 million, or $5.88 per diluted share.
The company operates two segments: Technology Solutions, which distributes IT and consumer electronics products and generated $12.49 billionb of revenue at a 5.41% gross margin, and Concentrix, its customer engagement services business, which generated $1.59 billion of revenue with a 38.76% gross margin. The Concentrix growth was aided by the August 2016 acquisition of Minacs for a preliminary purchase price of $435.6 million, which contributed approximately $157.0 million of revenue in fiscal 2016. Cash flow from operations was $327.0 million in fiscal 2016, down from $643.6 million in fiscal 2015, as accounts payable and inventory increased.
Inventories rose to $1.74 billionc from $1.33 billion, and total borrowings were $966.9 million at year-end. Dividends declared rose to $0.85 per share in fiscal 2016 from $0.58 in fiscal 2015, and the company announced a $0.25 quarterly dividend on January 5, 2017. Investors should note concentration risks: HP accounted for approximately 17% of consolidated revenue, one customer accounted for 12%, and MiTAC Holdings and its affiliates owned approximately 24% of common stock.
02—Key points
Key Highlights
- Consolidated revenue of $14,061.8 million in fiscal 2016, up from $13,338.4 million in fiscal 2015; gross profit of $1,283.0 million, with gross margin of 9.12%
- Net income attributable to SYNNEX of $234.9 million, or $5.88 diluted EPS, compared with $5.24 in fiscal 2015
- Concentrix segment revenue of $1,587.7 million and operating income of $63.9 million, compared with $51.1 million in fiscal 2015; Technology Solutions operating income was $315.5 million
- Minacs acquisition completed August 1, 2016 for a preliminary purchase price of $435.6 million in cash, contributing about $157.0 million of revenue
- Operating cash flow of $327.0 million in fiscal 2016 versus $643.6 million in fiscal 2015, reflecting a $410.2 million increase in inventory
- Concentration risk: HP accounted for about 17% of consolidated revenue in fiscal 2016, and one customer accounted for 12%
- Dividends declared of $0.85 per share in fiscal 2016 versus $0.58 in fiscal 2015; a $0.25 per share dividend was announced January 5, 2017
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, TD Synnex kept $0.02.
- Revenue$14.06B100.0%
- Cost of revenue−$12.78B90.9%
- Gross profit$1.28B9.1%
- Operating costs−$903.4M6.4%
- Operating income$379.6M2.7%
- Interest, other & tax−$144.7M1.0%
- Net income$234.9M1.7%
Where FY2016 revenue went
$14.06B- Other operating costs: $11.82B, 84% of revenue
- Net income: $234.9M, 1.7% of revenue
- Cost of revenue: $963.4M, 6.9% of revenue
- SG&A: $903.4M, 6.4% of revenue
- Interest, other & tax: $144.7M, 1.0% of revenue
Kept 1.7% as net incomeNet income $234.9M · 1.7%Interest, other & tax $144.7M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed January 26, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $14.06B$13.34B | +5.4% |
| Cost of Revenue | $963.39M$11.28B | −91.5% |
| Gross Profit | $1.28B$1.19B | +7.7% |
| SG&A Expenses | $903.37M$837.24M | +7.9% |
| Operating Income | $379.60M$354.55M | +7.1% |
| Interest Expense | $31.13M$27.93M | +11.4% |
| Net Income | $234.95M$208.53M | +12.7% |
| EPS (Basic) | $5.91$5.28 | +11.9% |
| EPS (Diluted) | $5.88$5.24 | +12.2% |
| Shares Outstanding (Basic) | 39.32M39.06M | +0.7% |
| Shares Outstanding (Diluted) | 39.53M39.35M | +0.5% |
05—Questions
Frequently Asked Questions
What drove the increase in revenue and the change in profitability?
Revenue rose 5.4% to $14.06 billion. Technology Solutions revenue increased 4.6%, mainly on strong demand for system design and integration solutions, partly offset by lower sales in Japan. Concentrix revenue increased 12.1%, primarily due to the Minacs acquisition, higher volume and expanded services to existing customers. Operating margin improved to 2.70% from 2.66%, helped by Concentrix, where operating income rose to $63.9 million from $51.1 million.
How much does the company depend on its largest suppliers and customers?
HP represented approximately 17% of consolidated revenue in fiscal 2016, down from 25% in fiscal 2015. Its supplier agreements are short-term and terminable without cause on short notice. One customer accounted for 12% of consolidated revenue in fiscal 2016. The company states that the loss of any single customer would not have a material adverse effect on the company as a whole.
What is the company's debt and liquidity position?
Total borrowings were $966.9 million as of November 30, 2016, including $363.7 million classified as current. The U.S. Credit Agreement term loan had $585.9 million outstanding, and $262.9 million was outstanding under the accounts receivable securitization arrangement. Cash and cash equivalents were $380.7 million, of which $200.0 million was held by foreign subsidiaries. Management believes current cash and credit availability are sufficient for at least the next twelve months.
What are the main ownership and related-party considerations?
MiTAC Holdings and its affiliates owned approximately 24% of outstanding common stock as of November 30, 2016, and executive officers, directors and principal stockholders together owned about 27%. The company purchased $170.1 million of inventory from MiTAC Holdings and its affiliates in fiscal 2016. Synnex Technology International, an affiliated company, is also a potential competitor, and neither MiTAC Holdings nor Synnex Technology International is restricted from competing with the company.
06—Continue