TD SYNNEX (SNX) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents TD SYNNEX Corporation's unaudited consolidated financial statements, detailing key financial performance and position Consolidated Balance Sheets Total assets decreased to $28.0 billion, total liabilities decreased to $19.7 billion, and stockholders' equity increased to $8.3 billion Consolidated Balance Sheet Highlights (in thousands) | Account | May 31, 2023 | November 30, 2022 | | :--- | :--- | :--- | | Total current assets | $18,721,193 | $20,500,865 | | Total assets | $27,978,948 | $29,733,998 | | Total current liabilities | $14,412,986 | $16,428,721 | | Total liabilities | $19,710,178 | $21,708,492 | | Total stockholders' equity | $8,268,770 | $8,025,506 | Consolidated Statements of Operations Quarterly revenue decreased to $14.1 billion with net income falling, while six-month net income increased to $300.1 million Key Operating Results (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $14,062,124 | $15,269,791 | $29,187,495 | $30,739,768 | | Gross Profit | $963,410 | $955,789 | $1,966,977 | $1,924,450 | | Operating Income | $252,883 | $252,737 | $551,045 | $475,177 | | Net Income | $133,087 | $148,917 | $300,107 | $281,241 | | Diluted EPS | $1.41 | $1.55 | $3.17 | $2.92 | Consolidated Statements of Cash Flows Operating activities generated $604.8 million in cash, a significant improvement from the prior year's cash usage, driven by working capital changes Cash Flow Summary for Six Months Ended May 31 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $604,750 | $(284,482) | | Net cash used in investing activities | $(64,538) | $(46,651) | | Net cash used in financing activities | $(247,087) | $(129,950) | | Net increase (decrease) in cash | $329,223 | $(473,165) | Notes to Consolidated Financial Statements Notes provide details on accounting policies, segment performance, borrowings, and contingencies, including revenue concentration and a new share repurchase program - One customer accounted for 12% and 11% of total revenue for the three and six months ended May 31, 2023, respectively. Major vendors representing over 10% of revenue in certain periods include Apple, Cisco, and HP Inc[33] - Acquisition and integration costs related to the Tech Data merger totaled $34.2 million for the three months and $82.0 million for the six months ended May 31, 2023[48] - In January 2023, the Board authorized a new three-year, $1.0 billion share repurchase program. As of May 31, 2023, $841.7 million remained available for future repurchases[102][104] - A fine from the French Competition Authority was reduced on appeal from €76.1 million to €24.9 million, which has been paid in full. The company is appealing this matter further[107] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2023 revenue decline, improved gross margin, flat operating income, strong operating cash flow, and robust liquidity Results of Operations Q2 2023 consolidated revenue decreased 7.9% to $14.1 billion, gross margin improved, operating income was flat, and diluted EPS declined Revenue by Segment - Q2 2023 vs Q2 2022 (in thousands) | Segment | Q2 2023 Revenue | Q2 2022 Revenue | % Change | % Change (Constant Currency) | | :--- | :--- | :--- | :--- | :--- | | Americas | $8,699,342 | $9,776,933 | (11.0)% | (10.3)% | | Europe | $4,461,461 | $4,652,611 | (4.1)% | (3.5)% | | APJ | $901,321 | $840,247 | 7.3% | 11.7% | | Consolidated | $14,062,124 | $15,269,791 | (7.9)% | (7.0)% | - The decrease in revenue was primarily driven by a decline in the Endpoint Solutions portfolio due to a post-pandemic drop in demand for personal computer ecosystem products. This was partially offset by growth in the Advanced Solutions portfolio and high-growth technologies[137] - Gross margin increased to 6.85% in Q2 2023 from 6.26% in Q2 2022, primarily due to a favorable product and customer mix, including more revenue from Advanced Solutions and high-growth technologies[143] GAAP vs Non-GAAP Operating Income - Q2 2023 (in thousands) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Operating Income (GAAP) | $252,883 | $252,737 | 0.1% | | Non-GAAP Operating Income | $376,049 | $398,321 | (5.6)% | Liquidity and Capital Resources The company maintains strong liquidity with increased cash, significant operating cash flow, a slightly increased cash conversion cycle, and manageable borrowings Cash Conversion Cycle (in days) | Period | May 31, 2023 | Nov 30, 2022 | May 31, 2022 | | :--- | :--- | :--- | :--- | | DSO | 55 | 53 | 47 | | DIO | 54 | 54 | 54 | | DPO | 85 | 84 | 80 | | CCC | 24 | 23 | 21 | - Net cash provided by operating activities was $604.8 million for the first six months of 2023, compared to net cash used of $284.5 million in the prior year period, primarily due to a decline in sales volumes which resulted in decreases in accounts receivable and inventories[175] - Financing activities used $247.1 million in cash, largely due to $174.8 million in common stock repurchases and $66.2 million in dividend payments during the first six months of 2023[177] Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes in the company's market risks have occurred since the previous fiscal year-end, as disclosed in the Annual Report on Form 10-K - No material changes have occurred in the Company's market risks since November 30, 2022[190] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to 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 as of the end of the period covered by the report[192] - 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, internal controls[193] PART II - OTHER INFORMATION Item 1A. Risk Factors No material changes to the company's risk factors have occurred since the previous fiscal year-end, as disclosed in the Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the Company's 2022 Annual Report on Form 10-K[196] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds A new $1.0 billion share repurchase program was authorized, with 664,000 shares repurchased during the quarter at an average price of $90.33 per share - In January 2023, the Board of Directors authorized a new three-year $1.0 billion share repurchase program, replacing the prior $400.0 million program[197] Share Repurchases for Quarter Ended May 31, 2023 | Month | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | March 2023 | 0 | N/A | | April 2023 | 460,000 | $91.18 | | May 2023 | 204,000 | $88.40 | | Total | 664,000 | $90.33 | Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including amendments to agreements and required certifications - Exhibits filed include amendments to the Credit Agreement and the Receivables Funding and Administration Agreement, as well as required CEO and CFO certifications under Sarbanes-Oxley[199]