01—Abstract
Summary
Summary of the 10-K filed January 28, 2021. Cited figures are marked; the original filing is the authoritative source.
SYNNEX Corporation reported fiscal 2020 (ended November 30, 2020) revenue of $24.68 billiona, up from $23.76 billion in fiscal 2019, with net income of $529.2 million ($10.21 diluted EPS) versus $500.7 million a year earlier.
The year was shaped by COVID-19, which drove higher demand for technology equipment in the Technology Solutions segment, while the company also incurred net incremental COVID-19 costs of approximately $131 millionb. Gross margin was 11.54% and operating margin 3.36%, and cash flow from operations was $1.834 billion, up from $549.9 million in fiscal 2019. The defining event of the period was the December 1, 2020 separation of the Concentrix customer experience services business through a distribution of 100% of Concentrix common stock to SYNNEX stockholders, after which SYNNEX no longer consolidates Concentrix.
The filing states that, going forward, the company's discussion of risks and human capital focuses on the Technology Solutions segment, and that its services revenue and the higher margins of Concentrix will be discontinued. The company expects a decrease in products revenue of approximately $1.2 billionc in the second half of 2021 due to a customer moving to a consignment model. Balance sheet and capital allocation changed meaningfully.
Cash and cash equivalents rose to $1.56 billiond at year-end, and borrowings were reduced by a partial term loan repayment funded by Concentrix borrowings, leaving the company with borrowings of about $1.6 billion after the Separation. The board reinstated a quarterly dividend of $0.20 per share on January 11, 2021, after suspending dividends in March 2020. MiTAC Holdings and affiliates held approximately 18% of common stock, a concentration the filing flags as a governance and conflict-of-interest risk.
02—Key points
Key Highlights
- Total revenue of $24,675,563 thousand in fiscal 2020, compared with $23,757,293 thousand in fiscal 2019; Technology Solutions revenue was $19,977,150 thousand and Concentrix revenue was $4,719,534 thousand.
- Net income of $529,160 thousand, or $10.21 diluted EPS, versus $500,712 thousand ($9.74 diluted EPS) in fiscal 2019; operating income was $830,103 thousand.
- Net cash provided by operating activities was $1,834,366 thousand in fiscal 2020, versus $549,919 thousand in fiscal 2019, aided by a $685.0 million increase in accounts payable.
- Separation of Concentrix completed December 1, 2020 via distribution of about 51.6 million shares to stockholders; SYNNEX no longer consolidates Concentrix results from that date.
- Cash and cash equivalents of $1,564,672 thousand at November 30, 2020; the company says its borrowings post-Separation totaled $1.6 billion.
- Expected decrease in products revenue of approximately $1.2 billion in the second half of 2021 due to a customer moving to a consignment model.
- Quarterly dividend of $0.20 per share reinstated on January 11, 2021, after suspension in March 2020; a new $400 million three-year share repurchase program was authorized in June 2020 with no shares repurchased as of November 30, 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, TD Synnex kept $0.03.
- Revenue$19.98B100.0%
- Cost of revenue−$18.78B94.0%
- Gross profit$1.19B6.0%
- Operating costs−$672.5M3.4%
- Operating income$521.3M2.6%
- Interest, other & tax$7.8M0.0%
- Net income$529.2M2.6%
Where FY2020 revenue went
$19.98B- Cost of revenue: $18.78B, 94% of revenue
- Operating income: $521.3M, 2.6% of revenue
- SG&A: $665.1M, 3.3% of revenue
Kept 2.6% as operating incomeOperating income $521.3M · 2.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed January 28, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $19.98B$19.07B | +4.8% |
| Cost of Revenue | $18.78B$17.91B | +4.9% |
| Gross Profit | $1.19B$1.16B | +3.2% |
| SG&A Expenses | $665.10M$636.85M | +4.4% |
| Operating Income | $521.34M$519.43M | +0.4% |
| Interest Expense | $132.95M$172.78M | −23.0% |
| Net Income | $529.16M$500.71M | +5.7% |
| EPS (Basic) | $10.28$9.79 | +5.0% |
| EPS (Diluted) | $10.21$9.74 | +4.8% |
| Shares Outstanding (Basic) | 50.90M50.67M | +0.5% |
| Shares Outstanding (Diluted) | 51.24M50.94M | +0.6% |
05—Questions
Frequently Asked Questions
How did the Concentrix separation change SYNNEX's financial profile?
After December 1, 2020, SYNNEX no longer consolidates Concentrix, so its services revenue and the higher-margin Concentrix segment are discontinued. The filing notes that gross and operating margins will decline as a result, and that the Technology Solutions segment, a low-margin distribution business, will be the focus of future operations and risk disclosures.
How concentrated are SYNNEX's customers and suppliers?
One customer accounted for 19% of consolidated revenue in fiscal 2020 and 2019 and 17% in fiscal 2018. HP Inc., the largest OEM supplier, represented approximately 12% of consolidated revenue in fiscal 2020 and 2019 and 13% in fiscal 2018. The company states that the loss of any single customer would not have a material adverse effect on it.
What is MiTAC Holdings' role and why does it matter to investors?
MiTAC Holdings and its affiliates beneficially owned approximately 18% of outstanding common stock as of November 30, 2020. The filing says this concentration could allow them to influence matters requiring stockholder approval and could delay or prevent a change in control. SYNNEX also purchased $211.9 million of inventories and services from MiTAC Holdings and affiliates in fiscal 2020, and Synnex Technology International, an affiliate and potential competitor, is not restricted from competing with SYNNEX.
How much debt does SYNNEX carry and what are the key terms?
As of November 30, 2020, total principal debt under SYNNEX and Concentrix borrowing arrangements was $2,775,049 thousand. Much of the variable-rate debt was economically converted to fixed rate through interest rate swaps, with $1.6 billion of outstanding borrowings post-Separation converted. The filing says the company was in compliance with all material covenants as of November 30, 2020.
What did COVID-19 do to SYNNEX's results in fiscal 2020?
The filing says COVID-19 drove stronger demand for technology equipment in Technology Solutions as remote work and learning increased, lifting its revenue by 4.8% to $19.98 billion. The company also reported net incremental COVID-19 costs of approximately $131 million, of which about $86 million were in Concentrix and about $45 million in Technology Solutions, and Concentrix revenue was hurt by shelter-in-place restrictions, particularly in the second quarter.
06—Continue