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SYNNEX SNX delivered stellar second-quarter fiscal 2021 results, wherein the top and bottom lines surpassed the respective Zacks Consensus Estimate and marked year-over-year improvements as well. The company’s fiscal second-quarter non-GAAP earnings of $2.09 per share topped the Zacks Consensus Estimate by 10.5% and improved 65.9% year over year.
Revenues grew 31% from the year-earlier quarter to $5.86 billion. The top-line figure also beat the Zacks Consensus Estimate of $4.91 billion.
Strong demand for the company’s technology products and services drove the top line. Moreover, a steady IT spending environment on the back of rapid digital transformation was a positive.
SYNNEX Corporation Price, Consensus and EPS Surprise
SYNNEX Corporation price-consensus-eps-surprise-chart | SYNNEX Corporation Quote
Importantly, SYNNEX also announced that it is on track to close the $7.2-billion merger transaction with Tech Data in the second half of 2021.
Recapitulating the company’s post-merger projections discussed previously, adjusted EBITDA is expected to be approximately $1.5 billion and combined debt is anticipated to be approximately $4 billion at the time of the close of the transaction.
Non-GAAP earnings per share are expected to increase more than 25% in the first year after the close of the deal, with further accretion expected in the second year. Also, the combined company expects to generate net optimization and synergy benefits of $100 million in the first year after closing and achieve at least $200 million by the end of the second year.
SYNNEX’s shareholders are expected to own approximately 55% of the combined company and Apollo Funds are expected to own roughly 45%.
Notably, the company splits its Concentrix business into a separate publicly traded company on Dec 1, 2020. With this separation, SYNNEX is now left with its Technology Solution business. The separated business has been named Concentrix Corporation (CNXC). Management believes that this strategic action would help add shareholder value and enhance the company's competitive edge.
To reflect the separation, data from the prior-year quarter have been adjusted in order to make more accurate year-on-year comparisons.
Gross profit grew 20% year over year to $329 million, while gross margin contracted 50 basis points (bps) to 5.6%. Total selling, general & administrative (SG&A) expenses decreased to $159 million from the year-ago quarter’s $173 million, due to higher COVID-related expenses in the prior-year quarter.
In the reported quarter, non-GAAP operating income was up 67% to $170 million. Also, non-GAAP operating margin expanded 62 bps on a year-over-year basis to 2.9%.
SYNNEX ended the fiscal second quarter with cash and cash equivalents of $1.7 billion compared with $1.44 billion witnessed at the end of the fiscal first quarter.
During the fiscal second quarter, net cash of $27.9 million was provided by continuing operations and $27.4 million of free cash flow, from continuing operations.
Additionally, the company announced that its board of directors declared a quarterly cash dividend of 20 cents per share. The newly-approved dividend will be payable on Jul 30 to shareholders of record as of Jul 16, 2021.
For the third quarter of fiscal 2021, revenues are expected between $4.95 billion and $5.45 billion.
Non-GAAP net income is estimated in the range of $99.9-$110.4 million. Moreover, the company projects non-GAAP earnings between $1.90 and $2.10 per share.
Zacks Rank & Stocks to Consider
SYNNEX currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader technology sector include Silicon Motion Technology Corporation SIMO, Digital Turbine, Inc. APPS and Zoom Video Communications ZM, all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Silicon Motion, Digital Turbine and Zoom is currently pegged at 8%, 50% and 15.6%, respectively.
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