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SYNNEX (SNX) Q2 Earnings & Revenues Beat Estimates, Rise Y/Y

Zacks Equity Research

SYNNEX Corporation SNX delivered non-GAAP earnings of $2.86 per share for second-quarter fiscal 2019, which improved 20.2% from the year-ago quarter and also beat the Zacks Consensus Estimate of $2.71.

Moreover, revenues of $5.72 billion surpassed the Zacks Consensus Estimate of $5.53 billion and increased 17% year over year as well. Adjusted for foreign exchange, revenues rose 18% in the quarter.

Management noted that reasonable demand trends and IT spends coupled with a solid distribution channel drove results. Successful integration of the Convergys business is a key driver for the company. However, adverse foreign exchange fluctuations remain a concern.

Quarterly Details

SYNNEX’s Technology Solutions revenues were up 3.3% year over year to $4.6 billion. Gross-to-net revenues accounting induced a revenue headwind of $159 million. Gross revenues climbed nearly 7% on a year-over-year basis at constant currency, backed by solid demand across portfolio of products and services.

Management mentioned that its Hyve business also progressed well in the quarter. Profitability for Hyve improved too. By selling additional offerings to its main customers, SYNNEX improved its diversity quotient with the respective customer. Although improvement in mix is a positive, customer concentration remains a concern.

Concentrix revenues soared 136.3% from the prior-year quarter to $1.2 billion, driven by the Convergys acquisition closed last October.

In the reported quarter, non-GAAP operating income surged 60.2% to $244.1 million. Non-GAAP operating margin expanded 116 basis points (bps) on a year-over-year basis to 4.26%.

Non-GAAP operating income for the Technology Solutions was $124 million, up 12% from the year-ago quarter, driven by product mix. Non-GAAP operating margin grew 21 bps to 2.7%

For Concentrix segment, non-GAAP operating income was $120 million, skyrocketing 189% year over year. Non-GAAP operating margin expanded 189 bps to 10.3%, buoyed by the Convergys acquisition.

SYNNEX Corporation Price, Consensus and EPS Surprise

SYNNEX Corporation Price, Consensus and EPS Surprise

SYNNEX Corporation price-consensus-eps-surprise-chart | SYNNEX Corporation Quote

Balance Sheet and Other Details

SYNNEX ended the fiscal second quarter with cash and cash equivalents of nearly $271.5 million, up from $249.3 million as of the previous quarter.

During the quarter, cash flow from operations totaled approximately $108 million compared with $111 million sequentially.

Guidance

For the fiscal third quarter, SYNNEX expects revenues in the range of $5.55-$5.85 billion.  On a non-GAAP basis, earnings per share are envisioned in the band of $2.8-$2.92.

Zacks Rank and Stocks to Consider

Currently, SYNNEX has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are eGain Corporation EGAN, Rosetta Stone RST and j2 Global, Inc. JCOM, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for eGain, Rosetta Stone and j2 Global is currently projected at 30%, 12.5% and 8%, respectively.

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