TD SYNNEX (SNX) - 2024 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements This section presents TD SYNNEX Corporation's unaudited consolidated financial statements, including Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows, with detailed accounting policy notes Consolidated Balance Sheets Total assets slightly decreased to $29.21 billion as of August 31, 2024, while total liabilities also decreased to $21.04 billion | Balance Sheet Items (in thousands) | August 31, 2024 | November 30, 2023 | | :--- | :--- | :--- | | Total current assets | $20,057,783 | $20,084,436 | | Cash and cash equivalents | $853,923 | $1,033,776 | | Inventories | $7,674,438 | $7,146,274 | | Total assets | $29,207,547 | $29,412,814 | | Total current liabilities | $15,990,394 | $16,738,762 | | Borrowings, current | $314,198 | $983,585 | | Long-term borrowings | $3,736,004 | $3,099,193 | | Total liabilities | $21,043,464 | $21,229,632 | | Total stockholders' equity | $8,164,083 | $8,183,182 | Consolidated Statements of Operations Q3 2024 revenue increased 5.2% to $14.68 billion with net income rising to $178.6 million, while nine-month revenue slightly decreased to $42.61 billion | Metric (in thousands, except EPS) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $14,684,712 | $13,960,615 | $42,607,873 | $43,148,110 | | Gross Profit | $961,048 | $971,273 | $2,940,361 | $2,938,250 | | Operating Income | $302,879 | $240,233 | $869,399 | $791,278 | | Net Income | $178,556 | $139,262 | $494,289 | $439,369 | | Diluted EPS | $2.08 | $1.49 | $5.67 | $4.66 | Consolidated Statements of Comprehensive Income Comprehensive income for Q3 2024 increased to $278.6 million, while the nine-month period saw a decrease to $549.3 million, influenced by currency adjustments | Metric (in thousands) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $178,556 | $139,262 | $494,289 | $439,369 | | Other Comprehensive Income | $100,043 | $74,468 | $55,007 | $219,172 | | Comprehensive Income | $278,599 | $213,730 | $549,296 | $658,541 | Consolidated Statements of Stockholders' Equity Total stockholders' equity slightly decreased to $8.16 billion for the nine months ended August 31, 2024, due to stock repurchases and dividends offsetting net income | Activity (Nine Months Ended Aug 31, 2024, in thousands) | Amount | | :--- | :--- | | Beginning Stockholders' Equity | $8,183,182 | | Net Income | $494,289 | | Repurchases of common stock | ($514,748) | | Cash dividends declared | ($104,055) | | Ending Stockholders' Equity | $8,164,083 | - The cash dividend declared per share increased to $0.40 for the third quarter of 2024, up from $0.35 in the prior-year quarter. For the nine-month period, the dividend per share was $1.20, compared to $1.05 in 2023[11] Consolidated Statements of Cash Flows Net cash from operating activities decreased to $655.8 million for the nine months ended August 31, 2024, with increased cash usage in investing and financing activities | Cash Flow Activity (Nine Months Ended, in thousands) | August 31, 2024 | August 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $655,783 | $1,196,705 | | Net cash used in investing activities | ($181,573) | ($113,157) | | Net cash used in financing activities | ($655,436) | ($405,621) | | Net (decrease) increase in cash | ($179,853) | $728,016 | Notes to Consolidated Financial Statements These notes detail accounting policies, business segments, acquisition costs, share-based compensation, and debt structure, highlighting revenue concentration and share repurchase activities - The company operates in three reportable segments based on geographic regions: the Americas, Europe, and Asia-Pacific and Japan (APJ)[15] - Revenue from products purchased from Apple, Inc. accounted for 11% of consolidated revenue in Q3 2024 and 12% in the first nine months of 2024[25] - Acquisition, integration, and restructuring costs related to the Tech Data merger were substantially complete, with no material expenses in Q3 2024. However, costs for the nine-month period totaled $64.4 million, including termination fees for IT systems and costs from a Voluntary Severance Program[40][43] - The company has a $2.0 billion share repurchase program authorized in March 2024. As of August 31, 2024, $1.9 billion was available for future repurchases[50][52] | Segment Performance (in thousands) | Q3 2024 Revenue | Q3 2024 Operating Income | YTD 2024 Revenue | YTD 2024 Operating Income | | :--- | :--- | :--- | :--- | :--- | | Americas | $9,090,011 | $220,900 | $25,550,680 | $589,866 | | Europe | $4,591,161 | $57,415 | $14,135,188 | $200,100 | | APJ | $1,003,540 | $24,564 | $2,922,005 | $79,433 | | Consolidated | $14,684,712 | $302,879 | $42,607,873 | $869,399 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2024 financial performance, noting a 5.2% revenue increase, margin analysis, and liquidity, including an improved cash conversion cycle and increased share repurchases Overview TD SYNNEX, a global IT distributor, focuses on high-growth areas like hybrid cloud and AI, operating through Endpoint and Advanced Solutions portfolios with a business model influenced by market demand - The company's global strategy is to deliver higher value by focusing on strategic priorities, including investments in hybrid cloud, security, data analytics, AI, and hyperscale infrastructure[108] - Offerings are grouped into two primary solutions portfolios: Endpoint Solutions (PCs, mobile phones, accessories) and Advanced Solutions (data center technologies like hybrid cloud, security, storage, networking)[111] Results of Operations Q3 2024 consolidated revenue grew 5.2% (5.6% constant currency), impacted by net basis revenue recognition, while gross margin declined and GAAP operating margin improved due to lower restructuring costs | Revenue Growth (Q3 2024 vs Q3 2023) | Reported | Constant Currency | | :--- | :--- | :--- | | Consolidated | 5.2% | 5.6% | | Americas | 2.4% | 2.7% | | Europe | 8.6% | 8.9% | | APJ | 17.6% | 19.7% | - The presentation of additional revenue on a net basis negatively impacted consolidated revenue by approximately $550 million, or 4%, in Q3 2024 compared to the prior year[126] | Margin Analysis (Q3 2024 vs Q3 2023) | Q3 2024 | Q3 2023 | | :--- | :--- | :--- | | Gross Margin | 6.54% | 6.96% | | Non-GAAP Gross Margin | 6.54% | 6.97% | | GAAP Operating Margin | 2.06% | 1.72% | | Non-GAAP Operating Margin | 2.68% | 2.84% | - The decrease in Q3 gross margin was primarily due to higher strategic technologies margins in the prior year period and a less profitable mix of products sold in the current period[137] Liquidity and Capital Resources The company's working capital intensive business saw its cash conversion cycle improve to 21 days, despite a decrease in net cash from operations and increased cash usage for share repurchases | Cash Conversion Cycle (in days) | Aug 31, 2024 | Nov 30, 2023 | Aug 31, 2023 | | :--- | :--- | :--- | :--- | | CCC | 21 | 23 | 23 | - Net cash provided by operating activities decreased to $655.8 million for the nine months ended Aug 31, 2024, from $1.2 billion in the prior-year period[174] - The company repurchased 4.7 million shares for $509.9 million in the nine months ended August 31, 2024. As of this date, $1.9 billion remained available for future repurchases under its program[185] - Total outstanding borrowings were approximately $4.1 billion as of August 31, 2024, including $2.4 billion in Senior Notes and $1.3 billion in term loans[183] Critical Accounting Policies and Estimates No material changes occurred in the company's critical accounting policies and estimates during the nine months ended August 31, 2024 - There were no material changes to critical accounting policies and estimates during the nine months ended August 31, 2024[188] Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes in the company's market risks have occurred since November 30, 2023 - No material changes have occurred in the Company's market risks since November 30, 2023[190] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of August 31, 2024, with no material changes to internal control over financial reporting during the last quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period[192] - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[192] PART II OTHER INFORMATION Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2023 Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the Company's 2023 Annual Report on Form 10-K[194] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 490,000 common shares for $56.5 million in Q3 2024, with $1.89 billion remaining available under its share repurchase program | Period (2024) | Total Shares Purchased (thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | June 1 - 30 | — | $— | | July 1 - 31 | 388 | $115.85 | | August 1 - 31 | 102 | $113.28 | | Total | 490 | $115.32 | - In March 2024, the Board of Directors authorized a new $2.0 billion share repurchase program, which does not have an expiration date[195] Item 5. Other Information Richard T. Hume, a board member and former CEO, adopted a Rule 10b5-1 trading plan on June 28, 2024, for the sale of up to 120,000 common shares - On June 28, 2024, Richard T. Hume, former CEO and current board member, adopted a Rule 10b5-1 trading plan for the sale of up to 120,000 shares of common stock until March 28, 2025[197] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, compensatory and financing agreements, and CEO/CFO certifications - Exhibits filed with the report include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1), a severance agreement, an offer letter, and an amendment to a receivables funding agreement[199]