01—Abstract
Summary
Summary of the 10-K filed January 29, 2018. Cited figures are marked; the original filing is the authoritative source.
SYNNEX Corporation (now TD SYNNEX Corporation) reported fiscal 2017 (year ended November 30, 2017) revenue of $17.05 billiona, up from $14.06 billion in fiscal 2016, and net income of $301.2 million, or $7.51 per diluted share, compared with $235.0 million, or $5.88 per diluted share, a year earlier.
The company operates two reportable segments: Technology Solutions, a distributor of IT and consumer electronics products that generated $15.07 billionb of revenue with an operating margin of 2.62%, and Concentrix, a business process services provider that generated $1.99 billion of revenue with an operating margin of 5.76%. Growth was driven largely by the September 1, 2017 acquisition of Westcon-Comstor Americas for a purchase price of $633.6 million, which contributed approximately $634.8 million of revenue in fiscal 2017, and by the Minacs and Tigerspike acquisitions. Balance sheet and cash flow data show total assets of $7.70 billion and total borrowings of $1.95 billion as of November 30, 2017, up from $5.22 billion of assets and roughly $964 million of borrowings a year earlier.
Net cash provided by operating activities was $176.8 millionc in fiscal 2017, down from $324.7 million in fiscal 2016, as increases in accounts receivable of $478.3 million and inventories of $243.3 million outpaced payables growth. The filing also discloses a 2017 share repurchase program of $300 million, under which no shares had been repurchased as of year-end, and a quarterly dividend increase to $0.35 per share announced January 9, 2018. The company stated that the Tax Cuts and Jobs Act would reduce its federal rate to 21%, that it expects an effective tax rate of 28% to 30% for fiscal 2018 excluding one-time TCJA effects, and that it was unable to estimate the one-time impact at the filing date.
The filing also reports leadership transition: CEO Kevin Murai will retire effective March 1, 2018, and COO Dennis Polk will become President and CEO. Concentration risks are notable, as HP accounted for approximately 13%d of consolidated revenue in fiscal 2017 (down from 17% in 2016 and 25% in 2015), and one customer accounted for 21% of consolidated revenue. MiTAC Holdings and its affiliates beneficially owned approximately 24% of outstanding common stock as of November 30, 2017.
02—Key points
Key Highlights
- Consolidated revenue rose to $17.05 billion in fiscal 2017 from $14.06 billion in fiscal 2016, with the Westcon-Comstor Americas acquisition contributing approximately $634.8 million.
- Net income attributable to SYNNEX was $301.2 million, or $7.51 per diluted share, versus $235.0 million, or $5.88 per diluted share, in fiscal 2016.
- Technology Solutions revenue was $15.07 billion with an operating margin of 2.62%; Concentrix revenue was $1.99 billion with an operating margin of 5.76%.
- Operating cash flow fell to $176.8 million from $324.7 million, driven by a $478.3 million increase in accounts receivable and a $243.3 million increase in inventories.
- Total borrowings were $1.95 billion at November 30, 2017, including a $1.2 billion U.S. term loan, and the company acquired Westcon-Comstor Americas for $633.6 million.
- Customer and supplier concentration remains significant: one customer accounted for 21% of consolidated revenue and HP for approximately 13% in fiscal 2017.
- The Board raised the quarterly dividend to $0.35 per share from $0.30, and CEO Kevin Murai will be succeeded by Dennis Polk effective March 1, 2018.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, TD Synnex kept $0.02.
- Revenue$16.77B100.0%
- Cost of revenue−$15.22B90.8%
- Gross profit$1.55B9.2%
- Operating costs−$1.04B6.2%
- Operating income$507.3M3.0%
- Interest, other & tax−$209.9M1.3%
- Net income$297.5M1.8%
Where FY2017 revenue went
$16.77B- Other operating costs: $13.99B, 83% of revenue
- Net income: $297.5M, 1.8% of revenue
- Cost of revenue: $1.23B, 7.3% of revenue
- SG&A: $1.04B, 6.2% of revenue
- Interest, other & tax: $209.9M, 1.3% of revenue
Kept 1.8% as net incomeNet income $297.5M · 1.8%Interest, other & tax $209.9M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed January 29, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $16.77B$14.06B | +19.3% |
| Cost of Revenue | $1.23B$963.39M | +28.0% |
| Gross Profit | $1.55B$1.28B | +20.8% |
| SG&A Expenses | $1.04B$903.37M | +15.3% |
| Operating Income | $507.34M$379.60M | +33.7% |
| Interest Expense | $47.37M$31.13M | +52.2% |
| Net Income | $297.46M$234.95M | +26.6% |
| EPS (Basic) | $7.52$5.91 | +27.2% |
| EPS (Diluted) | $7.48$5.88 | +27.2% |
| Shares Outstanding (Basic) | 39.56M39.32M | +0.6% |
| Shares Outstanding (Diluted) | 39.76M39.53M | +0.6% |
05—Questions
Frequently Asked Questions
How did SYNNEX perform financially in fiscal 2017?
Revenue increased to $17.05 billion from $14.06 billion, and net income attributable to SYNNEX rose to $301.2 million, or $7.51 per diluted share, from $235.0 million, or $5.88 per diluted share, in fiscal 2016. Growth was driven in part by the Westcon-Comstor Americas acquisition, which contributed approximately $634.8 million of revenue.
Why did operating cash flow decline in fiscal 2017?
Net cash provided by operating activities was $176.8 million, compared with $324.7 million in fiscal 2016. The filing attributes this mainly to a $478.3 million increase in accounts receivable and a $243.3 million increase in inventories, partly offset by a $342.0 million increase in accounts payable, with the receivable and inventory increases tied to growth in Technology Solutions and the Westcon-Comstor Americas acquisition.
What are the main risks highlighted in the filing?
The filing highlights low gross margins in the Technology Solutions segment, dependence on a small number of OEM suppliers (HP was approximately 13% of fiscal 2017 revenue), customer concentration (one customer was 21% of revenue), intense competition, reliance on floor plan and securitization financing, and exposure to foreign currency and operations in India, the Philippines and China. It also notes risks from the Tax Cuts and Jobs Act and from integrating the Westcon-Comstor Americas business.
What changes in capital returns and leadership were disclosed?
The Board authorized a three-year $300 million share repurchase program effective July 1, 2017, under which no shares had been repurchased as of November 30, 2017. The quarterly dividend was increased to $0.35 per share from $0.30, payable January 31, 2018. Kevin Murai is retiring as President and CEO effective March 1, 2018, and Dennis Polk will succeed him.
What did the filing say about the Tax Cuts and Jobs Act?
The company stated that the federal corporate tax rate would fall from 35% to 21%, requiring a one-time remeasurement of deferred taxes, and that mandatory repatriation of foreign earnings would be taxed. It anticipated a fiscal 2018 effective tax rate of 28% to 30%, excluding the one-time TCJA impact, and said it was unable at that time to estimate a reasonable range for the one-time impact.
06—Continue