• Gross Billings: $20.7 billion, up 7.5% year-over-year, 9.5% in constant currency.
• Net Revenue: $14.5 billion, up 4% year-over-year.
• Gross Profit: $1 billion or 4.82% of gross billings.
• Non-GAAP SG&A Expense: $599 million or 2.89% of gross billings.
• Non-GAAP Operating Income: $399 million or 1.92% of gross billings.
• Non-GAAP Net Income: $237 million.
• Non-GAAP Diluted Earnings Per Share: $2.80.
• Free Cash Flow Usage: Approximately $800 million.
• Cash and Cash Equivalents: $542 million.
• Debt: $4.3 billion.
• Gross Leverage Ratio: 2.5 times.
• Net Leverage Ratio: 2.2 times.
• Dividend: $0.44 per common share.

• Warning! GuruFocus has detected 5 Warning Signs with SNX.

Release Date: March 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• TD Synnex Corp (NYSE:SNX) reported a strong start to fiscal year 2025 with gross billings growing by 7.5% year-over-year and 9.5% in constant currency.
• Advanced Solutions and Endpoint Solutions both showed significant growth, with Advanced Solutions growing by 7% and Endpoint Solutions by 8% year-over-year.
• The company expanded its reach to 30,000 active partners and 500,000 end users transacting through its cloud marketplace.
• TD Synnex Corp (NYSE:SNX) was recognized as a distribution partner of the year by multiple industry leaders, including AWS, Palo Alto Networks, Insight Enterprises, and NVIDIA.
• The company maintained a strong cash position with $542 million in cash and cash equivalents and continued to return value to shareholders through $138 million in share repurchases and dividends in Q1.

Negative Points

• Hyve's performance was below expectations due to a component shipment delay and demand shortfalls, which may persist for a few quarters.
• Gross profit margin declined by 40 basis points year-over-year, primarily due to challenges in the Hyve business.
• Free cash flow usage was approximately $800 million, driven by higher working capital needs, particularly in Hyve.
• Interest expenses were higher than expected at $88 million, due to increased working capital requirements.
• The company faces challenges in the peripherals market, including a decline in printing and the loss of a large, unprofitable business in North America.

Q & A Highlights

Q: Can you provide more details on the Hyve component shortages and demand outlook? A: Patrick Zammit, CEO, explained that Hyve experienced a temporary delay in component shipments, which impacted Q1 results. The demand shortfall is expected to be temporary, with shipments anticipated to resume in Q2. Marshall Witt, CFO, added that a specific customer had a temporary demand pause, but overall demand is expected to recover in the coming quarters.

Q: Did you observe any pre-buying by customers to avoid tariff increases, and what is your outlook for billings growth? A: Patrick Zammit noted limited impact from tariffs on PC sales, attributing growth to a refresh cycle. Marshall Witt confirmed expectations for mid-single-digit billings growth throughout the year, with a mix shift in product categories influencing gross-to-net revenue adjustments.

Q: How are vendor price increases affecting demand, and what is your strategy for managing these changes? A: Patrick Zammit stated that while some vendors are increasing prices, the impact is currently limited. Any price increases will be passed through to the channel, potentially creating short-term tailwinds. The company is monitoring the situation and has factored it into their guidance.

Q: Can you elaborate on the impact of Hyve's temporary demand pause on cash flow and capital allocation? A: Marshall Witt explained that the temporary demand pause affected cash flow due to elevated inventory levels. The company expects cash flow to recover over the next few quarters as demand normalizes. They remain committed to opportunistic share buybacks and dividends as part of their capital allocation strategy.

Q: What are the benefits of initiatives like Digital Bridge and StreamOne in the current macro environment? A: Patrick Zammit highlighted that these digital initiatives enhance customer engagement by integrating TD SYNNEX's platform into customers' existing tools, improving transaction efficiency and reducing costs. These initiatives are designed to support growth and operational optimization for partners and vendors.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.