TD SYNNEX (US:SNX)2021-03-23 00:01Financial Data and Key Metrics Changes - Total revenue for Q1 was $4.9 billion, up 21% year-over-year [27] - Gross profit totaled $305 million, up 19% or $49 million compared to the prior year; gross margin was 6.2%, consistent with the prior year [27] - Non-GAAP operating income was $156 million, up $40 million or 35% versus the prior year; non-GAAP diluted EPS from continuing operations was $1.89, up from $1.42 in the prior year [29] Business Line Data and Key Metrics Changes - Strong demand for client devices like notebooks and Chromebooks, as well as continued demand for security, cloud, and collaboration solutions [36] - Performance came from across all customer segments with no exceptions in the contribution to growth [36] Market Data and Key Metrics Changes - All regions performed well, with Canada and Japan exceeding expectations [37] - SYNNEX has a well-established presence in Japan, where Tech Data does not, while Tech Data is well-established in Europe, where SYNNEX has limited access [17] Company Strategy and Development Direction - The merger with Tech Data is expected to accelerate strategic growth initiatives by multiple years [9] - The combined company will deliver superior value for shareholders and offer exceptional reach, efficiency, and expertise across the technology ecosystem [13] - Focus on investing in next-generation technologies such as cloud, analytics, IoT, and security [15][69] Management's Comments on Operating Environment and Future Outlook - Management is encouraged about the IT spending environment and anticipates continued growth [38] - The work-from-home trend is expected to provide a tailwind for business as companies invest in IT capabilities [50] - The company expects revenue in Q2 to be in the range of $4.7 billion to $5 billion [32] Other Important Information - The merger transaction is valued at $7.2 billion, with pro forma revenue of $57 billion expected for the combined company [23][24] - The company expects to realize $100 million of net synergies in year one and $200 million in year two [25] Q&A Session Summary Question: Can the combined company growth rate be higher than the two separate companies? - Management expects significant opportunities to grow the company faster than market rates due to complementary services and offerings [47] Question: What structural ongoing impact could there be from hybrid work? - Management believes that companies will need to invest in additional IT capabilities for remote work, providing a tailwind for business [50] Question: Can you elaborate on the nature of the $200 million in synergies? - Synergies will come from leveraging IT systems, facility consolidations, and corporate spend savings [57] Question: Are there any dis-synergies anticipated with the merger? - Management does not foresee significant dis-synergies, as customer sets are complementary [58] Question: How will the transaction be financed? - The transaction will be financed through a combination of a term loan and unsecured bonds, with a focus on maintaining liquidity for growth [61] Question: What is the status of Tech Data's digital transformation investment? - The joint vision is to continue investing in the business, potentially aligning with SYNNEX's capabilities [66] Question: How did the transaction come about and what were the valuation thoughts? - The combination was seen as a way to deliver significant value, with the transaction multiple consistent with industry standards [85]