TD SYNNEX (SNX) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for the quarterly period ended May 31, 2025, providing a comprehensive view of the company's financial position and performance Consolidated Balance Sheets As of May 31, 2025, TD SYNNEX reported total assets of $30.51 billion, a slight increase from $30.27 billion at the end of the previous fiscal year, primarily driven by higher inventories and goodwill Consolidated Balance Sheet Summary (in thousands) | | May 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | Total current assets | $21,492,779 | $21,324,696 | | Total assets | $30,509,182 | $30,274,479 | | Total current liabilities | $17,122,402 | $17,221,235 | | Total liabilities | $22,166,815 | $22,239,045 | | Total stockholders' equity | $8,342,367 | $8,035,434 | Consolidated Statements of Operations For the three months ended May 31, 2025, revenue increased 7.2% year-over-year to $14.95 billion, with net income rising 28.8% to $184.9 million, resulting in a diluted EPS of $2.21 Key Performance Indicators (Three Months Ended May 31) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $14,946,315 | $13,947,908 | +7.2% | | Gross Profit | $1,046,373 | $973,547 | +7.5% | | Operating Income | $328,139 | $263,948 | +24.3% | | Net Income | $184,921 | $143,605 | +28.8% | | Diluted EPS | $2.21 | $1.66 | +33.1% | Key Performance Indicators (Six Months Ended May 31) | Metric | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $29,478,022 | $27,923,161 | +5.6% | | Gross Profit | $2,044,379 | $1,979,313 | +3.3% | | Operating Income | $632,598 | $566,520 | +11.7% | | Net Income | $352,458 | $315,733 | +11.6% | | Diluted EPS | $4.19 | $3.60 | +16.4% | Consolidated Statements of Comprehensive Income Comprehensive income for the three months ended May 31, 2025, was $469.0 million, primarily driven by a significant positive foreign currency translation adjustment Comprehensive Income Summary (in thousands) | | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :--- | :--- | :--- | | Net income | $184,921 | $143,605 | | Other comprehensive income (loss) | $284,051 | ($13,212) | | Comprehensive income | $468,972 | $130,393 | Consolidated Statements of Stockholders' Equity For the six months ended May 31, 2025, total stockholders' equity increased to $8.34 billion, driven by net income, partially offset by common stock repurchases and cash dividends - Key changes in stockholders' equity for the six months ended May 31, 2025 include: - Net Income: +$352.5 million - Repurchases of common stock: -$251.5 million - Cash dividends declared: -$74.1 million[19] - Cash dividends declared per share increased to $0.44 for the quarter and $0.88 for the six-month period, compared to $0.40 and $0.80 in the respective prior-year periods[19] Consolidated Statements of Cash Flows For the six months ended May 31, 2025, the company experienced a net cash outflow from operating activities of $174.8 million, a significant shift from a net inflow in the prior-year period Cash Flow Summary (Six Months Ended May 31, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($174,815) | $270,001 | | Net cash used in investing activities | ($71,078) | ($100,797) | | Net cash used in financing activities | ($126,598) | ($17,484) | | Net (decrease) increase in cash | ($292,279) | $139,872 | Notes to the Consolidated Financial Statements This section provides detailed disclosures supporting the consolidated financial statements, including segment information, revenue concentration, debt facilities, and derivative instruments - The company operates in three reportable segments based on geographic regions: the Americas, Europe, and Asia-Pacific and Japan (APJ)[22] Revenue Concentration from Key Vendors | Vendor | Three Months Ended May 31, 2025 | Six Months Ended May 31, 2025 | | :--- | :--- | :--- | | Apple, Inc. | 11% | 12% | | HP Inc. | 11% | 10% | - Acquisition, integration, and restructuring activities related to the Tech Data merger were completed in the first half of fiscal 2024, with no related expenses in Q2 2025[48] Segment Performance (Three Months Ended May 31, 2025) | Segment | Revenue (in thousands) | Operating Income (in thousands) | | :--- | :--- | :--- | | Americas | $9,009,195 | $252,646 | | Europe | $4,889,997 | $50,312 | | APJ | $1,047,123 | $25,181 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a 7.2% year-over-year revenue increase, improved operating margin, and details on liquidity and capital resources Overview TD SYNNEX operates as a leading global distributor and solutions aggregator for the IT ecosystem, characterized by low gross and operating margins across its Endpoint and Advanced Solutions portfolios - The company's strategic imperatives include expanding its portfolio, targeting new customers, growing its addressable market with new vendors, diversifying offerings, and accelerating its focus on services[107] - The company's two primary solutions portfolios are Endpoint Solutions (personal computing, mobile phones) and Advanced Solutions (data center, hybrid cloud, security, AI)[105] Results of Operations For the second quarter of 2025, revenue grew 7.2% year-over-year to $14.9 billion, with operating income increasing 24.3% to $328.1 million, primarily due to significantly lower merger integration costs Revenue by Segment (Three Months Ended May 31) | Segment | Revenue 2025 (in thousands) | Revenue 2024 (in thousands) | % Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Consolidated | $14,946,315 | $13,947,908 | 7.2% | 6.3% | | Americas | $9,009,195 | $8,557,573 | 5.3% | 5.7% | | Europe | $4,889,997 | $4,426,775 | 10.5% | 7.3% | | APJ | $1,047,123 | $963,560 | 8.7% | 7.6% | - Consolidated revenue growth for Q2 was partially offset by a greater percentage of sales being presented on a net basis, which had a negative impact of approximately $700 million, or 5%, compared to the prior-year quarter[118] - Q2 Gross margin was relatively consistent at 7.00% vs 6.98% YoY. The presentation of more revenue on a net basis positively impacted gross margin by approximately 31 basis points[126][127] - Acquisition, integration, and restructuring costs were minimal at $0.7 million in Q2 2025, compared to $37.9 million in Q2 2024, which was the primary driver for the increase in operating income[133][137] Liquidity and Capital Resources The company's business is working capital intensive, with a cash conversion cycle of 23 days, maintaining significant liquidity through various credit facilities and borrowing arrangements Cash Conversion Cycle (in days) | Period Ended | DSO | DIO | DPO | CCC | | :--- | :--- | :--- | :--- | :--- | | May 31, 2025 | 62 | 57 | 96 | 23 | | Nov 30, 2024 | 60 | 51 | 93 | 18 | | May 31, 2024 | 59 | 50 | 86 | 23 | - Net cash used in operating activities for the six months ended May 31, 2025 was $174.8 million, compared to net cash provided by operating activities of $270.0 million in the prior year period, primarily due to changes in working capital[164] - As of May 31, 2025, the company had total outstanding borrowings of approximately $4.1 billion, including $2.4 billion in Senior Notes and $1.3 billion in term loans[175] - During the three months ended May 31, 2025, the company repurchased 1.4 million shares for $148.8 million. As of May 31, 2025, $1.5 billion remained available for future repurchases[177] Quantitative and Qualitative Disclosures about Market Risk The company states that there have been no material changes in its market risks since the fiscal year ended November 30, 2024 - No material changes have occurred in the Company's market risks since November 30, 2024[181] Controls and Procedures The company's management concluded that its disclosure controls and procedures were effective as of May 31, 2025, with no material changes in internal control over financial reporting during the 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 covered by the report[183] - There were no changes in internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[184] PART II OTHER INFORMATION Legal Proceedings This section details ongoing legal matters, including an appealed fine from the French Competition Authority and a related civil lawsuit where the company believes the likelihood of a material loss is remote - The company is appealing a fine from the French Competition Authority, which was reduced from €76.1 million to €24.9 million. The reduced amount has been paid[94] - A related civil lawsuit by eBizcuss was dismissed by the Paris Commercial Court, but eBizcuss has appealed the ruling. The company believes the likelihood of a material loss is remote[94] Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended November 30, 2024 - There have been no material changes to the risk factors disclosed in the Company's 2024 Annual Report on Form 10-K[187] Unregistered Sales of Equity Securities and Use of Proceeds The company details its share repurchase activity, including a new $2.0 billion program authorized in March 2024, with $148.8 million spent on repurchases during the quarter Issuer Purchases of Equity Securities (Quarter Ended May 31, 2025) | Period | Total Shares Purchased (thousands) | Average Price Paid per Share | Maximum Dollar Value Remaining for Purchase (in thousands) | | :--- | :--- | :--- | :--- | | March 2025 | 110 | $122.95 | $1,669,962 | | April 2025 | 1,001 | $102.29 | $1,567,594 | | May 2025 | 273 | $120.28 | $1,534,704 | | Total | 1,384 | $107.49 | $1,534,704 | Other Information On May 12, 2025, Marshall Witt, the company's Chief Financial Officer, established a Rule 10b5-1 trading arrangement for the pre-arranged sale of company common stock through June 30, 2026 - On May 12, 2025, CFO Marshall Witt adopted a Rule 10b5-1 trading plan for the sale of company common stock, which will be in effect until June 30, 2026[190] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, an amendment to a receivables funding agreement, and certifications by the CEO and CFO - The exhibits filed with this report include: - Corporate governance documents (Certificate of Incorporation, Bylaws) - Sixth Omnibus Amendment to the Receivables Funding and Administration Agreement - Rule 13a-14(a) Certifications of the CEO and CFO - Section 906 Certifications of the CEO and CFO[193]