TD SYNNEX (US:SNX)2023-03-28 17:57Financial Data and Key Metrics Changes - Worldwide gross billings for Q1 came in at $20.2 billion, up 1% year-over-year and up 4% in constant currency, while net revenue was $15.1 billion, down 2% year-over-year and up 1% in constant currency [23] - Non-GAAP operating income increased 5% year-over-year, with non-GAAP net income at $279 million and non-GAAP diluted EPS at $2.93, which was at the high end of the previously communicated guidance range for the quarter [25][42] - Total adjusted SG&A expense was $568 million, representing 3.8% of revenue, while non-GAAP operating margin was 2.93%, up 14 basis points year-over-year [32] Business Line Data and Key Metrics Changes - The basket of high-growth technologies, including Hyve, grew in the mid-teens for the quarter, highlighting the strategic importance of these projects [18] - Overall strength in advanced solutions and high-growth technologies helped offset declines in endpoint solutions, resulting in 4% constant currency growth in gross billings [19] - Endpoint solution products saw significant deceleration in demand in the Americas, partially offset by strength in advanced solutions and high-growth technologies [24] Market Data and Key Metrics Changes - In the Americas, revenue declined 4% year-over-year, while Europe increased 5% and APJ increased 26%, all in constant currency [23] - Demand declines in both Europe and Asia-Pacific, Japan were less pronounced compared to North America [7] - The company reported growth in market share in North America and Europe, with IDC and context reports indicating overall market share growth in those regions [19][47] Company Strategy and Development Direction - The company is focused on diversifying its portfolio, investing in data center and networking infrastructure, hybrid cloud, cybersecurity, data analytics, and hyperscale infrastructure [12] - The company expects to navigate rapidly changing market dynamics by leveraging its variable cost structure and diversified portfolio [20] - The company is committed to returning cash to shareholders through share repurchases and dividends, with approximately $900 million remaining on its share repurchase authorization [34][40] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment impacted demand for PCs and related products, with expectations for a more stable endpoint solutions portfolio in the second half of the year [2][27] - The company anticipates continued pressure on endpoint solutions but sees opportunities for growth in advanced solutions and high-growth technologies [27] - Management expressed confidence in delivering over $1 billion in free cash flow for the year, with a significant portion expected to be returned to shareholders [40] Other Important Information - The company published its first Corporate Citizenship Report, demonstrating its commitment to environmental and social goals [26] - The cash conversion cycle for Q1 was 26 days, with expectations for improvement in Q2 [33][71] - Non-GAAP interest expense for Q1 was $78 million, which was $5 million above the outlook [25] Q&A Session Summary Question: Can you talk about the strength in Europe and Asia-Pacific? - Management indicated that they feel they have grown market participation in North America and Europe, with European performance showing less decline in endpoint solutions and more growth in advanced solutions [47][48] Question: What are the views on GDP given current market conditions? - Management noted that recent events may not yet be reflected in GDP reports, but they expect a flattish GDP outlook [56][58] Question: How significant are new technologies like generative AI in your portfolio? - Management stated that while AI has not yet become a material part of their revenue stream, they expect it to manifest in first-of-a-kind offerings before being packaged for broader customer engagement [59][61] Question: What is the current state of channel inventory? - Management acknowledged anecdotal evidence of inventory work down within the channel but noted that they have not yet seen tangible signs of recovery [65] Question: Can you discuss the impact of pricing changes in the device business? - Management confirmed that they have seen price activity in PCs and expect price reductions as supply stabilizes, but it is too early to determine the impact on average selling prices [70] Question: What is the outlook for cash flow and capital allocation? - Management expects positive cash flow in Q2, Q3, and Q4, with a continued focus on a 50/50 allocation between reinvestment and returns to shareholders [87]