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Edited Transcript of SNX earnings conference call or presentation 27-Mar-17 9:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 SYNNEX Corp Earnings Call

Fremont Apr 21, 2017 (Thomson StreetEvents) -- Edited Transcript of SYNNEX Corp earnings conference call or presentation Monday, March 27, 2017 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher Caldwell

SYNNEX Corporation - Executive Vice-President and President of Concentrix Corporation

* Dennis Polk

SYNNEX Corporation - COO and Director

* Kevin M. Murai

SYNNEX Corporation - CEO, President and Director

* Marshall W. Witt

SYNNEX Corporation - CFO

* Mike Vaishnav

SYNNEX Corporation - SVP of Corporate Finance and Treasurer

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Conference Call Participants

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* Adam Tyler Tindle

Raymond James & Associates, Inc., Research Division - Research Analyst

* Jim Suva

Citigroup Inc., Research Division - Director

* Matthew Sheerin

Stifel, Nicolaus & Company, Incorporated, Research Division - MD

* Richard Kugele

Needham & Company, LLC, Research Division - Senior Analyst

* Shannon Siemsen Cross

Cross Research LLC - Co-Founder, Principal and Analyst

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Presentation

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Operator [1]

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Good afternoon. My name is Iris, and I will be your conference operator today for the SYNNEX 2017 First Quarter Earnings Call. (Operator Instructions) Today's conference is being recorded. If you have any objections, you may disconnect. Thank you. At this time, I would like to pass the call over to Mike Vaishnav, Senior Vice President, Corporate Finance and Treasurer at SYNNEX Corporation.

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Mike Vaishnav, SYNNEX Corporation - SVP of Corporate Finance and Treasurer [2]

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Thank you, Iris. Good afternoon, and welcome to the SYNNEX Corporation earnings conference call for the fiscal 2017 first quarter ended February 28, 2017. Joining us on today's call are Kevin Murai, President and CEO; Dennis Polk, COO; Marshall Witt, CFO; and Chris Caldwell, EVP and President of Concentrix Corporation.

Please note that some of the information you will hear today consists of forward-looking statements within the meaning of the federal securities laws. Such statements may relate to, without limitation, market, demand, sales, growth, non-GAAP net income and EPS, margin, profit, revenue, costs, expenses, shares, tax rate, seasonality, strategy, overperformance and cash conversion cycle. Actual results or trends could differ materially from our expectation. For more information, please refer to the risk factors discussed in our Form 10-K for the fiscal 2016 and discussion of forward-looking statements in our earnings release and Form 8-K filed with the SEC today. SYNNEX assumes no obligation to update any forward-looking statements, which speak as of their respective dates.

Also, during this call, we will reference certain non-GAAP financial information. Reconciliation of non-GAAP and GAAP reporting is included in today's earnings release and related Form 8-K available on our website at www.synnex.com.

This conference call is the property of SYNNEX Corporation and may not be recorded or rebroadcast without our specific written permission.

Now I would like to turn our call to Marshall for an update of our financial performance. Marshall?

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Marshall W. Witt, SYNNEX Corporation - CFO [3]

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Thanks, Mike. First, I will review our results of operations and key financial metrics and then conclude with guidance for the second quarter fiscal 2017 before turning the call over to Kevin.

Our Q1 net income and EPS, both GAAP and non-GAAP, exceeded our expectations, while revenue was in line with our expectations. On a consolidated basis, total revenue was $3.5 billion, up 12.6% compared to $3.1 billion in the same quarter of the prior year. Adjusting for FX of $19 million, revenue in constant currency was 12% higher compared to the prior quarter.

Technology Solutions segment revenues were $3 billion, representing an increase of 9.4% compared to the prior year quarter. The TS revenue increase was mainly due to strong demand for our cloud-based solutions. On a constant currency basis, Technology Solutions segment revenues increased approximately 8.6% year-over-year.

Concentrix revenues were $478.2 million, up 38.7% from $344.7 million in the prior year quarter. The Minacs acquisition contributed to the majority of the increase in revenue. Adjusting for the acquisition and the negative impact of FX, revenue in constant currency was comparable to the prior year quarter.

Now turning to gross profit. Our gross profit on Q1 revenues was $341.8 million or 9.7% of revenues compared to $284.2 million or 9.1% of revenues in Q1 of 2016. The increase in gross profit dollars was due to higher sales in our Concentrix segment and higher value-added services.

Q1 total adjusted selling, general and administrative expenses were $223.3 million or 6.34% of our revenue compared to 6.28% of revenue or $196.2 million in the first quarter of fiscal 2016. The increase was due to the Minacs acquisition. Both segments effectively managed support costs while growing revenue. Consolidated non-GAAP operating income was $118.9 million or 3.38% of revenue compared to $88.3 million or 2.83% of revenue in the prior year first quarter. At the segment level, Q1 Technology Solutions non-GAAP operating income was $81.1 million or 2.66% of revenue, up 18.67% from the prior year quarter result of $68.3 million or 2.45% of revenue due to higher value-added services, scale efficiencies and solid execution in our broadline services.

For Concentrix, non-GAAP operating income in the quarter was $37.8 million or 7.9% of revenue, up from the prior year quarter results of $19.9 million or 5.78% of revenue. Net total interest expense and finance charges for Q1 were $8.2 million, up from $6.2 million from the prior year quarter due to higher borrowings to fund the Minacs acquisition and growth in our Technology Solutions segment.

Net other expense was $0.3 million in the first quarter of 2016 compared with other income of $4.0 million in the prior year quarter. The prior year quarter reflected a class-action legal settlement related to LCD large screen products in our Canadian Technology Solutions business.

The tax rate for the first quarter of fiscal 2017 was 33.7% compared to 36.5% in the prior year period. The improvement was due to changes in income mix in various tax jurisdictions and the release of certain reserves. For the remainder of fiscal 2017, we anticipate the tax rate to be in the range of 34% to 35%. Our first quarter non-GAAP net income attributable to SYNNEX Corporation was $73.1 million or $1.82 per diluted share.

Turning to the balance sheet. Our accounts receivable totaled $1.7 billion on February 28, 2017, for a DSO of 44 days, up 1 day from the prior year quarter. Inventories totaled $1.9 billion or 52 days at the end of the first quarter, up 11 days from the first quarter of 2016. The increase in our inventory days is primarily due to strategic buys in our Hyve business, primarily for memory and SSDs and investments in last-time buys in our North American distribution business.

Days payable outstanding was 43 days, up 4 days from the prior year first quarter. Hence, our overall cash conversion cycle for Q1 2017 was 53 days, an increase of 8 days from Q1 of 2016. The increase was a result of the aforementioned inventory investment and also due to the point-in-time nature of this metric. We expect the CCC will trend back to historical norms in the next quarter or 2.

From a financing perspective, our debt-to-capitalization ratio this quarter was 33%. Preliminary cash flows used in operations were approximately $186 million for the first quarter. At the end of Q1, between our cash and credit facilities, SYNNEX had over $1.1 billion available to fund growth. Other financial data and metrics of note for the first quarter are as follows: Depreciation expense was $19 million; Amortization expense was $16 million; HP Inc. at approximately 14% of sales was the only vendor accounting for more than 10% of sales; Capital expenditures for the quarter were $22 million, primarily due to continued Concentrix investments. Trailing 4 quarters ROIC was 10.5%. The trailing 4 quarters adjusted ROIC was 11.7%. As described in our earnings release, the Board of Directors approved a regular quarterly cash dividend of $0.25 per common share to be paid on April 28, 2017, to stockholders of record as of close of business on April 14, 2017.

Now moving to our 2017 second quarter expectations. We expect revenue to be in the range of $3.57 billion to $3.77 billion. For non-GAAP net income, the forecast is expected to be in the range of $68.3 million to $71.5 million. Non-GAAP diluted EPS is anticipated to be in the range of $1.70 to $1.78. Non-GAAP net income and non-GAAP diluted EPS guidance excludes after-tax costs of approximately $10.6 million or $0.26 per share related to the amortization of intangibles. Weighted average shares estimated for diluted EPS are 39.8 million. Please note that these statements of Q2 expectations are forward looking, and actual results may differ materially.

I will now turn the call over to Kevin.

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [4]

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Thank you, Marshall, and good afternoon to everyone on the call. I'm pleased to report that SYNNEX had a successful start to fiscal 2017. The momentum that we created in 2016 continued into our first quarter with year-on-year revenue growth of over 12%. And with good execution, we leveraged the scale and grew our non-GAAP EPS by over 30%, delivering $1.82 per share.

I will next provide an overview of our first quarter before turning the call over to Chris. I will then discuss the current market environment.

Our Technology Solutions segment revenues grew by over 9%, much better than the overall market. Our strong performance came from our focus on key product and market growth segments combined with our investments in systems integration design and cloud services capabilities. During the quarter, we believe that we gained market share in the U.S. while maintaining our strong market position in Canada. The improvements we are making in Japan are starting to show results as our business there returned to profitability.

Within our core technology business, we experienced better-than-average growth in network security and software, while client devices and peripherals were below average. The industry shortage of SSDs and memory likely contributed to an overall flat market environment. From an end market perspective, demand in commercial and SMB were stronger than average with consumer a bit weaker than average.

Now turning to our Concentrix segment. The first quarter headlines were: We grew revenue by 38.7% with our new Minacs portfolio contributing and good results in the healthcare, banking, automotive and technology verticals. Our non-GAAP operating margin increased from the prior year quarter to 7.9%, making good progress toward our goal of double-digit margins.

Now for more color on the Concentrix business, I'll turn the call over to Chris Caldwell. Chris?

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Christopher Caldwell, SYNNEX Corporation - Executive Vice-President and President of Concentrix Corporation [5]

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Thanks, Kevin. I've been very happy with how we have executed over the quarter and the start we have had to our fiscal year for 2017. While our revenues grew over 38% year-over-year for the same quarter, adjusted EBITDA grew over 72% from the same period last year. This is in line with our focus on growing the bottom line. Non-GAAP operating income at 7.9% is up approximately 210 basis points over last year. Our focus is on our stated goal of leaving 2017 with double-digit operating income run rate.

There were a few drivers to our Q1 performance. We certainly are seeing the benefits we expected from our latest acquisition, both in terms of savings and leveraging the client base, but we are also seeing the investments we made in the prior year in facilities and infrastructure starting to be fully utilized. Lastly, we benefited from some of the contracts we won last year starting to come into full production now.

From a sales perspective, we signed 8 new client relationships this quarter with a few that I would like to call out for their unique and innovative solutions. Within our Asia-Pac region, we signed a multi-year deal that transforms how a business collects and manages toll revenue for their highways by putting in a new digital infrastructure as well as services to lower their cost of operations but increasing their customer service levels.

Within our insurance business, we signed a 15-year deal, the largest in our history in this segment, to completely take over our client's back office with technology and services to service the North American marketplace. This solution encompasses full policy administration, bill collection, claims management and a customer service offering, which will be running on our proprietary [GS] platform.

In our European theater, we signed a deal to help a disruptive transportation company enter a new market and grow in the Japanese marketplace based on our global consistency and local intimacy methodology. As we have grown, we continue to be recognized for innovation and design thinking by clients and analysts.

We are extremely proud of our placement in Gartner's Magic Quadrant this quarter. Gartner has just ranked Concentrix first above all others for ability to execute and third for our completeness of vision in its recently published Magic Quadrant for customer management worldwide. Gartner cited Concentrix's strategic insight and extensive operational expertise to help clients achieve their customer experience objectives and realize tangible results. In total, we have earned 23 awards this quarter, which is a new record for this time frame.

Turning to Q2. We see the client demand environment relatively stable, although buying decisions are taking a little longer than normal. There is additional strength in a few markets we participate in outside of North America that we want to take advantage of in the coming quarters. From a volume perspective, some of our clients have seen lower seasonal business than they expected, primarily in consumer electronics, which we are managing to. Overall, we continue to see the right opportunities in front of us to grow both our revenue and profitability within our existing client base and new client pipeline.

I'd like to close by thanking all of our staff and the clients around the globe for their commitment to excellence and passion that they have demonstrated every day.

With that, I'll turn it back to Kevin. Kevin?

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [6]

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Thank you, Chris. Now looking at our current quarter, we're forecasting our overall performance to be in line with historical seasonality. Within the technology market, we see demand as stable across the U.S., Canada and Japan and expect that our focused growth segments will continue to grow faster than the overall market. The market remains competitive, but our principle of establishing strategic relationships with our partners continues to reap benefits. And within the BPO services market, overall demand is stable and growing, and we see incremental growth opportunities with the expanded portfolio of services we have.

As I mentioned on the last few calls, I feel positive about the investments we've made in both our business segments. The growth profile of the markets we serve is not homogeneous, so a key part of our strategy is to be where growth is. I believe that SYNNEX has done a good job in anticipating growth trends and adjusting our resources and capabilities to capture that growth.

Our partner base is growing. Our customers see the value we can bring to their businesses, and we continue to be a stable and growing presence in a market that has experienced a significant amount of disruption over the past few quarters.

For those of you that have been tracking our progress against the 3-year goals we established in 2015 at our last Analyst Day, we are coming down the homestretch, and I feel we have the momentum to achieve these goals as we exit 2017. And finally, I want to take this opportunity to once again thank all of our employees around the world for their hard work and dedication and also thank our business partners and shareholders for their support.

So with that, let's turn the call over to the operator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from Adam Tindle of Raymond James.

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Adam Tyler Tindle, Raymond James & Associates, Inc., Research Division - Research Analyst [2]

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Just wanted to start, Kevin, on the May guidance. It suggests 4% sequential revenue growth and a 3% sequential operating profit dollar decline. You did just significantly exceed your implied operating profit dollar forecast this quarter. Was there anything temporary about this result? Or might there just be a more conservative cadence being established here?

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [3]

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Well, I think we do have a -- we do take a conservative approach when we establish our guidance, but really, that's also informed, Adam, by, number one, with a strong fourth quarter finish, we did reap some of the benefit in our first quarter, in particular in the Technology Solutions segment. And that typically appears in our gross margin and ultimately, in our operating margin. And then number two, with some level of flex or flux right now in FX rates and just overall macro things that are going on in the world, we're a little bit conservative in our view of the current quarter.

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Adam Tyler Tindle, Raymond James & Associates, Inc., Research Division - Research Analyst [4]

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Okay. And I wanted to ask Chris specifically. I think the guidance implies Concentrix, specifically operating profit dollars, will be down around 20% sequentially despite revenue. It looks like it's going to be growing sequentially. So could you just help us understand what drives this trend? I know you spoke about some of the headwinds but hoping you can give us any further detail on anything you can help us quantify in terms of temporary items here.

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Christopher Caldwell, SYNNEX Corporation - Executive Vice-President and President of Concentrix Corporation [5]

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So generally, as we go into the second quarter, we do have some clients who have some seasonal business just within the second quarter that we ramp up and ramp down very quickly around. But we're focused right now on sort of onboarding our new clients, some I mentioned in the opening remarks as well as others that, as we always ramp those on, it takes a little bit to get them to full production revenue.

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Adam Tyler Tindle, Raymond James & Associates, Inc., Research Division - Research Analyst [6]

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Okay. And maybe one just final clarification. I know you don't guide beyond the current quarter, but you did provide some color in your 10-K filing that suggested Concentrix seasonality has become more weighted towards 2Q and 4Q. I think you previously said 3Q and 4Q. So just wanted to clarify, does this perhaps suggest Concentrix revenue could be flat to down 3Q sequentially versus up historically?

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Christopher Caldwell, SYNNEX Corporation - Executive Vice-President and President of Concentrix Corporation [7]

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Yes. I wouldn't guide to quarters above what we're talking about. What I will tell you is that, as you've seen historically, Q4 is our biggest quarter, and that really is the big seasonality. We do have occasional clients that will have some seasonality within 2, but I would really focus on Q4 as being our big seasonal quarter.

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Operator [8]

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Our next question is from Jim Suva of Citi.

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Jim Suva, Citigroup Inc., Research Division - Director [9]

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It's Jim Suva, and I have 2 questions. I'll ask them both at the same time. The first is kind of on the macro environment given the new administration, and I know there's a lot of uncertainty out there. But is there, with your onshoring, offshoring in your Concentrix business, like more active dialogue going on about where employees are located, how to service them and -- it seems like we turn on TV and see news reports of companies onshoring versus offshoring more and talking about that. Can you update us on that? And then my second question is, you'd mentioned some of your [upside] from the (inaudible), [amount] of it was due to the cloud. Is that due to the Hyve business or like some of your cloud services or both? Or how should we think about that statement?

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Christopher Caldwell, SYNNEX Corporation - Executive Vice-President and President of Concentrix Corporation [10]

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So Jim, it's Chris. In terms of the macro environment, we have seen -- and I mentioned this in the prepared remarks, that some buying decisions are taking a little longer, but it's really not changing, overall, the direction or strategy of the companies. And from our perspective, the way we engage our clients is really not necessarily caring about where the work is placed. Just that it's placed in the right place for the scale requirements and service that it needs to deliver. So it hasn't had an impact to our business at this point.

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [11]

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And Jim, on your second question, really, when you look at the profile of our Technology Solutions business today versus only a couple of years ago, it's really changed quite a bit. We've been focused on moving more and more of our business towards where the high-growth segments are. Hyve is certainly one component of that, but in addition to that, network security, software, also other cloud services as part of our whole CLOUDSolv ecosystem, those have all been very high-growth segments for us and collectively, is really where it drove growth.

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Operator [12]

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Our next question is from Rich Kugele of Needham & Company.

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Richard Kugele, Needham & Company, LLC, Research Division - Senior Analyst [13]

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So Kevin, can you just talk about the turnaround in Japan? I know, last quarter, you had talked about how you had moved some expats over there. Can you just talk about how you were able to bring it to profitability?

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [14]

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Sure. So -- and just to do a very quick recap on some of the changes that we've made, we did appoint an individual, TJ Trojan, who was an executive here in the U.S. for almost the past 10 years to move over and lead our Japanese business. Really, it's been a focus on actually a very similar business strategy to what we've implemented here in North America, much tighter, strategic relationships with key vendors, more engagement with key customers and certainly, some process work, process improvement work as well. So it's still early days. TJ's actually been onboard in Japan since the beginning of December, but in that short period of time, we have seen some positive results. And certainly, in our first quarter, we did see profitability. So I'm optimistic about where he's taking the business. We are entering, by the way, the slowest 2 quarters in Japan, Q2 and Q3, but we expect that the improvements that he's making are going to continue to gain traction.

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Richard Kugele, Needham & Company, LLC, Research Division - Senior Analyst [15]

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Okay. And then just lastly, you discussed how component availability may have impacted some demand that you're referring to on the TS side, and getting components to the Hyve business is key. But have you had any issues with any other vendors getting you [full] solutions?

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [16]

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Yes. And that's really what my comment was referring to in the prepared remarks, which is from a finished goods perspective in the legacy distribution business with the component shortages that are pretty well known out there, we have had some level of product shortages, and it certainly has, I believe, caused some impact on overall demand.

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Operator [17]

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Our next question is from Shannon Cross of Cross Research.

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Shannon Siemsen Cross, Cross Research LLC - Co-Founder, Principal and Analyst [18]

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I had a follow-up on the Hyve question and memory. I'm curious from a pricing standpoint. I know some of the -- your partners have put in place some pricing increases to try to offset the higher memory and DRAM costs. And then I'm curious as to how -- what your customers have sort of reacted or what they're thinking about it just in terms of trying to gauge elasticity of demand given the tight memory environment.

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Dennis Polk, SYNNEX Corporation - COO and Director [19]

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Shannon, this is Dennis. Yes, there is quite a bit of activity going on in the market with the shortages around SSDs and memory, and then the pricing challenge has come out as a result. Managing components in our business is a day-to-day challenge not just in the most recent times with the shortages that we're seeing, but it's an everyday activity that we have to manage. So we work with our customers on strategies to address any memory or other pricing changes, SSDs, et cetera, and factor that into our long-term relationship with them, long-term pricing agreements, where possible and then manage the shortages in due course with those arrangements.

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Shannon Siemsen Cross, Cross Research LLC - Co-Founder, Principal and Analyst [20]

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And then just a follow-up on Hyve, HPE obviously had some challenges with one of their larger customers in the last quarter with regard to some hyper-scale orders. And we've heard from some of the other large data center companies that they're kind of -- they've built a lot of capacity in the last couple of years, and now perhaps, they're trying to milk it to get a bit of leverage. I'm curious if you're seeing that within your customer base or -- I know it's always lumpy. But has there been any sort of change in sort of the overall demand profile when you look at some of the cloud vendors and people you work with?

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [21]

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Actually, if anything, we're seeing continued strong demand overall. And really, the view that we have on the growth in our business is not just leveraging the growth that our existing clients have but also signing on net new clients where we have more of a "tip of the iceberg" opportunity to gain more and more share with them. So our prospects there are positive.

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Shannon Siemsen Cross, Cross Research LLC - Co-Founder, Principal and Analyst [22]

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Okay. Great. And then just one quick question. Kevin, if you could talk a bit about what you're thinking in terms of acquisitions and growth as you look forward in the next couple of years. I assume it still remains a focus of yours, but I'm curious as to what the market opportunity looks like these days?

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [23]

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Well, I'll tell you, Shannon, just to level set, we operate in 2 different markets that we love. Both offer significant growth opportunities certainly in different ways, and our focus has been on growth. With good growth, it brings a lot of good things, including increased earnings growth. And we have been acquisitive in the past, but we also invest pretty heavily in greenfield opportunities where we see growth opportunities. So we're going to continue to do all of the above. We see good opportunities in both the Concentrix side of our business and Technology Solutions, and we also see good opportunities in continuing to invest in greenfield opportunities where we see good growth and trends driving [those] growth.

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Operator [24]

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(Operator Instructions) Our next question is from Matt Sheerin of Stifel.

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Matthew Sheerin, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [25]

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Wanted to actually ask yet another question on the memory and PC component situation. I understand, certainly with the Hyve business, there's a lot of component pass-through, but you also have a stand-alone component business selling into the market. And has that been beneficial to your margins since you have had an inventory position and you've been in that business for many years and appear to be able to manage that business as well as others?

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [26]

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I mean, as a general rule, Matt, no. Our margin, our profitability in our -- what we call our systems integration design components business has been relatively stable. And from time to time, certain shortages and demand-supply differences do generate profit opportunities, but at least right now it's been stable.

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Matthew Sheerin, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [27]

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Okay. And then a question for Chris on the Concentrix and the target to get to the double-digit EBIT margin by -- basically, by the end of this fiscal year on a run rate. So are we talking about sort of sustainably through quarters or basically on an annual basis with some seasonality in there? And then in terms of how you get there, you talked about some puts and takes on the volume side and the growth side. But do you need volume growth? Or is that also a function of mix and getting cost out of the Minacs acquisition and other things that you're doing?

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Christopher Caldwell, SYNNEX Corporation - Executive Vice-President and President of Concentrix Corporation [28]

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So Matt, it's on an annual basis for the double-digit operating margin. Clearly you saw we achieved a very strong result in Q4, but annualized, we want to make sure that we're above 10%. In terms of what drives us to get us there, it's a couple of things. One, it's mix of business. As we continue to grow some of our high-value verticals, you'll see the margin expansion. It just takes a while to get those contracts closed. And then they're heavier and more expensive to ramp up. But then once they get there, they're clearly helping to contribute to grow that margin. Some of it is also taking out some of the costs. We've clearly made a significant amount of investments in our infrastructure over the last 1.5 years, 2 years. We're starting to see the benefits of that, we'll continue to see some of the benefits of those investments over the next [preceding] quarters. And that'll both be taking out costs as well as just getting more leverage within the existing business. So it's a combination of those 2 that gives us the confidence of driving us to where we need to get to.

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Matthew Sheerin, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [29]

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Okay. And just my last question just regarding the Tech Data Avnet acquisition. I know, Kevin, you talked last quarter about that being an opportunity for SYNNEX. Now we're a few weeks into that deal having been done here. Any update on your thoughts there and market share opportunities?

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [30]

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Well, Matt, I guess, in addition to that, there are other changes that have happened recently within the distribution landscape. And for us, we are the stable, consistent performer. And as I said, one thing that does make us different is the depth of relationship that we have with key partners and our ability to perform. So through any kind of disruption, we certainly expect to reap the benefits out of the changes that are happening in the marketplace.

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Matthew Sheerin, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [31]

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But will there be investments that you would need to put in place in order to really sort of take advantage of that and grow your market share?

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Kevin M. Murai, SYNNEX Corporation - CEO, President and Director [32]

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Just the things that you would probably expect, Matt, more of a focus, perhaps a shift of resource against some of the key partner opportunities that we see out there. But beyond that, we feel that we've already invested in the capabilities that we need to compete effectively.

And I believe that was our last question. So on behalf of all of us here at SYNNEX, thank you, everyone, for joining our call.

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Operator [33]

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Thank you, and that concludes today's conference. Thank you for your participation. You may now disconnect.