TD SYNNEX (US:SNX)2020-06-26 01:08Financial Data and Key Metrics Changes - Total revenue for Q2 2020 was $5.5 billion, down 3% from $5.7 billion in the same quarter last year, and down 2% on a constant currency basis [10] - Consolidated gross profit was $618 million, a decrease of 12% or $81 million year-over-year, with a gross margin of 11.2% compared to 12.2% a year ago [10] - Non-GAAP operating income was $162 million, down 34% year-over-year, with a non-GAAP operating margin of 2.9%, lower by 134 basis points compared to the prior year [10][15] - Total non-GAAP net income was $94 million, down 36% from the prior year, with non-GAAP diluted EPS at $1.83, also down 36% [15] Business Segment Performance - Technology Solutions revenue was $4.5 billion, down 2% or $96 million year-over-year, with a gross margin of 6.1%, an increase of 23 basis points due to favorable product mix [11] - Concentrix revenue was $1.1 billion, an 8% decrease year-over-year, with a gross margin of 32.4%, down from 37.1% a year ago [13] - Non-GAAP operating income for Concentrix was $63 million, down 47% year-over-year, with a non-GAAP operating margin of 5.9% compared to 10.3% a year ago [13] Market Data and Key Metrics Changes - The cash conversion cycle improved to 46 days, down 7 days from the previous year, leading to a preliminary cash flow from operations of $1.2 billion [17] - Total liquidity available to fund operations was approximately $2.5 billion at the end of Q2 [18] Company Strategy and Industry Competition - The company is committed to finalizing the spin-off of Concentrix, targeting completion in the fourth quarter of 2020 [21] - A new three-year $400 million share repurchase program was approved, effective July 1, 2020, as part of a return to pre-pandemic capital allocation strategies [19] - The company anticipates a shift towards more work-from-home capabilities, which may lead to a permanent change in operational models [62] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about recovery as economies begin to reopen, but acknowledged ongoing challenges due to COVID-19 [52] - The company expects continued solid sales in mobile, cloud, and security products, with a gradual recovery in office and enterprise product transactions [53] - There is an expectation of ongoing COVID-related expenses, but these are anticipated to decrease over time [54] Other Important Information - The company noted that supply chain challenges are improving but not fully back to normal, with significant backlogs still present [59][60] - The company is seeing strong demand for outsourcing services as clients adapt to new economic realities [42] Q&A Session Summary Question: Update on supply chain impact of the pandemic - Management indicated that supply chain conditions are better than at the beginning of the quarter, but not fully normalized, with significant backlogs still present [59][60] Question: Percentage of call center workers able to work remotely - Approximately 60% of call center workers were able to work remotely at peak, with some regions returning to on-site work [67] Question: Long-term growth rate for Concentrix - Management sees opportunities for growth despite current declines, with expectations to return to pre-COVID growth rates over time [109] Question: Concerns about work-from-home demand peaking - Management acknowledged the surge in demand for work-from-home solutions but believes that ongoing investments in technology will support future growth [78][80] Question: COVID-related costs and their impact on future expenses - Management noted that some COVID-related expenses will become part of the fixed expense run rate, but efforts will be made to offset these costs [86][87]