TD SYNNEX Q3 2024 Earnings Report

TD SYNNEX (NYSE:SNX), a leading IT distributor, reported a robust performance in its third-quarter fiscal 2024 earnings call. CFO David Jordan and CEO Patrick Zammit announced a 9% year-over-year increase in gross billings to $20.3 billion. The company’s non-GAAP diluted earnings per share (EPS) stood at $2.86, slightly surpassing guidance.

TD SYNNEX emphasized its critical role in the IT ecosystem, focusing on revenue growth through geographical expansion, improved pricing, and margin management. For Q4, the company expects gross billings between $20.5 billion and $21.5 billion, with non-GAAP diluted EPS projected at $2.80 to $3.30. It aims to generate approximately $1 billion in free cash flow and continues to prioritize returning excess cash to shareholders.

Key Takeaways

• Gross billings increased by 9% year-over-year to $20.3 billion.
• Non-GAAP diluted EPS for Q3 was $2.86, slightly above guidance.
• Q4 gross billings are projected between $20.5 billion and $21.5 billion.
• Free cash flow target for the fiscal year is about $1 billion.
• Investments in strategic technologies, including cloud, security, and AI, are driving growth.
• The PC market shows signs of recovery, with AI PCs expected to gain traction.
• Optimism remains regarding IT market recovery, particularly in Europe and Asia-Pacific.

Company Outlook

• Increased IT spending is anticipated in Q4, impacting working capital but leading to positive returns in fiscal ’25.
• TD SYNNEX maintains a strong balance sheet for benefiting from market recovery.
• Hyve’s growth is expected to positively influence margins, with ongoing investments in capabilities.
• The “Destination AI” initiative aims to enhance value across technology categories.

Bearish Highlights

• Concerns exist regarding working capital needs, especially related to Hyve’s longer carrying costs.
• The PC market’s growth is slower than expected, with actual growth in low single digits.
• Cautious interest in generative AI among enterprises, with slower-than-anticipated AI PC adoption.

Bullish Highlights

• Strategic technology sectors such as cloud and AI show strong growth, bolstered by significant investment from hyperscalers.
• Confidence in IT spending recovery, especially across Europe and Asia-Pacific.

Misses

• Anticipated growth in the PC market has not materialized to expectations.
• AI PC adoption is ramping up slower than anticipated, with cautious enterprise interest.

Q&A Highlights

• CEO Patrick Zammit predicts quicker AI PC adoption with new product offerings from Qualcomm and Intel.
• The “Destination AI” initiative is gradually gaining traction as it helps resellers identify generative AI use cases.
• Demand from large corporate customers in North America remains muted, with no immediate revenue impact for Q3 or Q4.

TD SYNNEX’s Q3 earnings call illustrated the company’s navigation through the complexities of the IT market, emphasizing growth and capital allocation. Leadership remains optimistic about overall IT spending recovery despite areas showing slower-than-expected performance.

InvestingPro Insights

TD SYNNEX has demonstrated a commitment to shareholder value through share buybacks and consistent dividend payments, maintaining dividend payments for 11 consecutive years and raising it for three consecutive years. The company’s P/E ratio of 16.55 reflects balanced market sentiment about its earnings capability, while a low revenue valuation multiple may indicate potential undervaluation.

With a market cap of $10.07 billion and a gross profit margin of 7.06%, TD SYNNEX is poised for continued growth despite a recent revenue growth decline of -7.4% over the last twelve months as of Q2 2024.

Full Transcript – TD Synnex Corp (SNX) Q3 2024

Operator

Good morning. My name is Audra, and I will be your conference operator today. I would like to welcome everyone to the TD SYNNEX Third Quarter Fiscal 2024 Earnings Call. Today’s call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. At this time for opening remarks, I would like to pass the call over to David Jordan, CFO of the Americas and Head of Investor Relations at TD SYNNEX. David, you may begin.

David Jordan

Thank you. Good morning, everyone, and thank you for joining us for today’s call. With me today is Patrick Zammit, CEO; and Marshall Witt, CFO. Before we continue, let me remind you that today’s discussion contains forward-looking statements within the meaning of the federal securities laws.

We do not intend to update any forward-looking statements. During this call, we will reference certain non-GAAP financial information, including gross billings. Reconciliations are available on our Investor Relations website, ir.tdsynnex.com. This conference call is the property of TD SYNNEX and may not be recorded or rebroadcast without our permission.

I will now turn the call over to Patrick. Patrick?

Patrick Zammit

Thank you, David. Good morning, everyone. I’m excited to address you today for the first time as CEO of TD SYNNEX. I want to thank our team, partners, and vendors for their collaboration and trust. We remain a vital link in the IT ecosystem, helping vendors access 150,000 IT solution providers globally. Our custom value propositions and high-quality partnerships drive our growth. Our focus is on revenue growth through geographical expansion, pricing and margin management, and operational cost management.

In Q3, gross billings grew 9% to $20.3 billion. Expecting growth in the IT market, we remain optimistic about our future performance and our team’s dedication helps us be the partner of choice in IT distribution.