SYNNEX (SNX) Q1 Earnings Surpass Estimates, Revenues Match

SYNNEX Corporation (NYSE:SNX) reported non-GAAP earnings of $2.84 per share for first-quarter fiscal 2019, which increased 33.3% from the year-ago quarter and beat the Zacks Consensus Estimate of $2.75.

Revenues of $5.3 billion matched the Zacks Consensus Estimate and increased 17% year over year. Adjusted for foreign exchange, revenues increased 18% in the quarter.

Quarter Details

SYNNEX’s Technology Solutions revenues were up 2.3% year over year to $4.1 billion. Gross-to-net revenues accounting revenue headwind was $157 million. Gross revenues increased nearly 6% on a year-over-year basis at constant currency backed by solid demand across portfolio of products and services.

Management noted that majority of the company’s offerings performed well with reasonable demand across customer portfolio and end markets. Geographically, North America, Latin America and Japan performed in line with expectations. However, management stressed on the Japan business, which performed exceptionally well in the quarter.

Concentrix revenues increased 131% from the prior-year quarter to $1.2 billion driven by the Convergys acquisition completed last October. Further, broad-based industry vertical strength drove top-line growth.

The company’s top five clients contributed 28% to total revenues in the quarter.

Margins

In the reported quarter, non-GAAP operating income increased 73.3% to $242.7 million. Non-GAAP operating margin expanded 150 basis points (bps) on a year-over-year basis to 4.62%.

Non-GAAP operating income for the Technology Solutions was $113 million, up 17% from year-ago quarter driven by product mix, improved efficiencies and proactive cost control. Non-GAAP operating margin expanded 34 bps to 2.8%

For Concentrix segment, non-GAAP operating income was $130 million, up 128% year over year. Non-GAAP operating margin expanded 250 bps to 11.1% buoyed by the Convergys acquisition.

Balance Sheet and Other Details

SYNNEX ended the first quarter with cash and cash equivalents of nearly $249.3 million, down from $454.7 million as of the previous quarter.

During the quarter, cash flow from operations totaled approximately $111 million.

Guidance

For the fiscal second quarter, SYNNEX expects revenues in the range of $5.4-$5.7 billion. On a non-GAAP basis, earnings per share are expected in the band of $2.62- $2.78.

The company expects to make further progress on the integration and achieve synergy targets and ramp up new client wins in Q2.

However, management anticipates a slight sequential drop in revenues and adjusted profitability margins due to seasonality in Concentrix revenues and profitability in the second quarter.

Zacks Rank and Other Stocks to Consider

Currently, SYNNEX has a Zacks Rank #2 (Buy).

A few other top-ranked stocks in the broader Computer and Technology sector are Fortinet, Inc. (NASDAQ:FTNT) , eGain Corporation (NASDAQ:EGAN) and Symantec Corporation (NASDAQ:SYMC) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Fortinet, eGain and Symantec is projected at 16.8%, 30% and 7.9%, respectively.

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