TD SYNNEX (US:SNX)2022-03-24 15:14Financial Data and Key Metrics Changes - Total worldwide revenue for Q1 2022 was $15.5 billion, an increase of 1.5% from the prior year when normalizing for the merger, and approximately 6% when adjusted for constant currency [14][16] - Gross profit was $969 million with a gross margin of 6.3%, reflecting a favorable product mix and good execution [15] - Non-GAAP net income was $292 million, with non-GAAP diluted EPS at $3.03 [16] - Cash and cash equivalents at the end of the quarter were $510 million, with total debt of $5 billion, resulting in a gross leverage ratio of 3.1 times [17] Business Line Data and Key Metrics Changes - The Advanced Solutions segment showed strength, driven by increased demand for IT infrastructure solutions as businesses reopened [9][39] - The Endpoint segment continues to experience backlog issues, with long lead times for networking and storage products [58] Market Data and Key Metrics Changes - All three geographic regions performed at or better than expectations despite selective lockdowns due to COVID-19 [10] - The company noted ongoing supply chain disruptions but observed early signs of marginal improvement in backlog levels [10] Company Strategy and Development Direction - The company is focused on executing its integration plans and achieving merger-related synergy targets, with a capital allocation framework targeting dividends and share repurchases [11][18] - The company is committed to enhancing its global policies and aligning corporate culture, emphasizing a servant leadership model [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing geopolitical tensions and their potential impact on the macro economy and supply chain [13] - The company expects total revenue for fiscal Q2 to be in the range of $14.8 billion to $15.8 billion, reflecting a year-on-year growth of around 3% [22] Other Important Information - The company plans to repurchase approximately $100 million in shares during fiscal 2022, with $25 million already repurchased in Q1 [18] - The cash conversion cycle for Q1 was 24 days, higher than the previous quarter, primarily due to strategic inventory purchases [17][32] Q&A Session Summary Question: Margin differential between SYNNEX and Tech Data - Management explained that margin differentials are primarily driven by regional mix, with European margins generally lower due to structural complexities [26] Question: Enhancements or pruning of line cards - Management indicated a focus on enhancing line cards to capture new entrants in the market while noting that significant pruning activities have been completed [29][30] Question: Strategic inventory purchases and cash conversion cycle - Management acknowledged the temporary increase in inventory and confirmed the target of $1 billion in free cash flow for the year [32] Question: Drivers of strong top-line results - Management attributed the strong results to an acceleration in the Advanced Solutions segment and backlog resolution in the Endpoint segment [38][39] Question: Operating margin expectations for Q2 - Management noted that seasonal behaviors typically lead to a slight decrease in margins from Q1 to Q2, with no structural changes anticipated [51] Question: Pricing pressures and wage inflation - Management discussed ongoing price increases from vendors and the impact of inflation on labor and freight costs, emphasizing their strategy to manage these pressures [52][53] Question: Backlog commentary differentiation - Management clarified that improvements in backlog are primarily seen in the Endpoint segment, while the Advanced Solutions segment continues to face challenges [58] Question: Full-year outlook and revenue synergies - Management raised the full-year guidance, citing better-than-expected performance and the realization of synergies, while noting that revenue synergies will be more apparent once ERP systems are consolidated [67][71]