SYNNEX Corporation Reports Third Quarter Fiscal 2020 Results

Rhea-AI Summary

SYNNEX Corporation (NYSE: SNX) reported strong financial results for Q3 FY20, with revenue reaching $6.465 billion, a 4.2% increase from Q3 FY19. Operating income rose slightly to $209.1 million, while net income increased 9.2% to $134.5 million. Diluted EPS improved by 8.3% to $2.60. Despite these gains, non-GAAP operating income and margins saw declines. The company anticipates further growth with the proposed spin-off of Concentrix, which may boost stakeholder value.

Positive

• Revenue increased by 4.2% to $6.465 billion year-over-year.
• Net income improved by 9.2% to $134.5 million.
• Diluted EPS rose by 8.3% to $2.60.

Negative

• Non-GAAP operating income decreased by 3.8% compared to the prior year.
• Operating margin declined by 13 bps from 3.37% to 3.24%.

FREMONT, Calif., Sept. 29, 2020 /PRNewswire/ -- SYNNEX Corporation (NYSE: SNX), a leading business process services company, today announced financial results for the fiscal third quarter ended August 31, 2020. 

		Q3 FY20				Q3 FY19				Net change
Revenue ($M)		$	6,465			$	6,204			4.2	%
Operating income ($M)		$	209.1			$	208.9			0.1	%
Non-GAAP operating income ($M)(1)		$	260.1			$	270.5			-3.8	%
Operating margin			3.24	%			3.37	%		-13	bps
Non-GAAP operating margin(1)			4.02	%			4.36	%		-34	bps
Net income ($M)		$	134.5			$	123.1			9.2	%
Non-GAAP net income ($M)(1)		$	172.6			$	169.2			2.0	%
Diluted earnings per common share ("EPS")		$	2.60			$	2.40			8.3	%
Non-GAAP Diluted EPS(1)		$	3.33			$	3.30			0.9	%

"Our strong third quarter performance is a reflection of our resiliency, our ongoing focus on serving our partners and clients and the continued dedication of our associates on the growth and improvement of our business during these unprecedented times," said Dennis Polk, SYNNEX President and CEO. "We remain on track with the proposed spin-off of Concentrix and believe this will result in incremental value for all of our stakeholders."

Third Quarter Fiscal 2020 Highlights

• Technology Solutions: Revenue was $5.3 billion, up 5.1% over the prior fiscal year third quarter. Operating income was $132 million, or 2.5% of segment revenue, compared to $139 million, or 2.8% of segment revenue, in the prior fiscal year third quarter. Non-GAAP operating income was $142 million, or 2.7% of segment revenue, compared to $150 million, or 3.0% of segment revenue, in the prior fiscal year third quarter.
• Concentrix: Revenue was $1.2 billion, up 0.2% from the prior fiscal year third quarter. Operating income was $77 million, or 6.6% of segment revenue, compared to $70 million, or 6.0% of segment revenue in the prior fiscal year third quarter. Non-GAAP operating income was $118 million, or 10.1% of segment revenue, compared to $121 million, or 10.4% of segment revenue, in the prior fiscal year third quarter.
• The trailing fiscal four quarters Return on Invested Capital ("ROIC") was 9.1% compared to 8.6% in the prior fiscal year third quarter. The adjusted trailing fiscal four quarters ROIC was 10.7%.
• Cash generated from operations was approximately $321 million for the quarter.

Fourth Quarter Fiscal 2020 Outlook

The following statements are based on SYNNEX current expectations for the fiscal 2020 fourth quarter. Non-GAAP financial measures exclude the impact of acquisition-related and integration expenses, the amortization of intangibles and the related tax effects thereon. These statements are forward-looking and actual results may differ materially.

• Revenue is expected to be in the range of $6.45 billion to $6.65 billion.
• Net income is expected to be in the range of $153.0 million to $166.0 million and on a non-GAAP basis, net income is expected to be in the range of $190.5 million to $203.5 million.
• Diluted earnings per share is expected to be in the range of $2.95 to $3.20 and on a non-GAAP basis, diluted earnings per share is expected to be in the range of $3.68 to $3.93, based on estimated outstanding diluted weighted average shares of 51.5 million.
• After-tax amortization of intangibles is expected to be $35.2 million, or $0.68 per share.
• After-tax acquisition-related and integration expense is expected to be $2.3 million, or $0.04 per share.

Conference Call and Webcast

SYNNEX will host a conference call to discuss third quarter fiscal 2020 results:

Tuesday, September 29, 2020
2:00 PM (PT) / 5:00 PM (ET)
Conference ID 8016677
Live call (866) 393-4306 or (763) 488-9145 (Int'l)

Live audio webcast of the earnings call will be accessible at ir.synnex.com, and a replay of the webcast will be available following the call.

About SYNNEX

SYNNEX Corporation (NYSE: SNX) is a Fortune 200 corporation and a leading business process services company, providing a comprehensive range of distribution, logistics and integration services for the technology industry and providing outsourced services focused on customer engagement to a broad range of enterprises.  SYNNEX distributes a broad range of information technology systems and products, and also provides systems design and integration solutions. Founded in 1980, SYNNEX Corporation operates in numerous countries throughout North and South America, Asia-Pacific and Europe. Additional information about SYNNEX may be found online at synnex.com.

About Concentrix

Concentrix, a wholly-owned subsidiary of SYNNEX Corporation (NYSE: SNX), is a technology-enabled global business services company specializing in customer engagement and improving business performance for some of the world's best brands. Every day, from more than 40 countries and across 6 continents, our staff delivers next generation customer experience and helps companies better connect with their customers. We create better business outcomes and help differentiate our clients through technology, design, data, process, and people. Concentrix provides services to clients in five primary industry verticals: technology and consumer electronics; communications and media; retail, travel and ecommerce; banking, financial services and insurance; and healthcare. We are Different by Design. Visit concentrix.com to learn more.

⁽¹⁾Use of Non-GAAP Financial Information

In addition to the financial results presented in accordance with GAAP, SYNNEX also uses adjusted selling, general and administrative expenses, non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, and non-GAAP diluted earnings per share, which are non-GAAP financial measures that exclude acquisition-related and integration expenses, restructuring costs, the amortization of intangible assets and the related tax effects thereon. The Company also uses adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") which excludes other income (expense), net and acquisition-related and integration expenses. In fiscal year 2019, non-GAAP net income and non-GAAP diluted earnings per share also exclude gains upon the settlement of contingent consideration and a contingent gain related to the Westcon-Comstor Americas acquisition. In fiscal year 2018, non-GAAP net income and non-GAAP diluted earnings per share also exclude the impact of an adjustment relating to the enactment of the Tax Cuts and Jobs Act of 2017. This adjustment includes a transition tax on accumulated overseas profits and the remeasurement of deferred tax assets and liabilities to the new U.S. tax rate.

SYNNEX' acquisition activities have resulted in the recognition of intangible assets which consist primarily of customer relationships, vendor lists and technology. Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable. The amortization of intangible assets is reflected in the Company's statements of operations within each segment. Although intangible assets contribute to the Company's revenue generation, the amortization of intangible assets does not directly relate to the sale of the Company's products and the services performed for the Company's clients. Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of the Company's acquisition activity. Accordingly, the Company believes excluding the amortization of intangible assets, along with the other non-GAAP adjustments which neither relate to the ordinary course of the Company's business nor reflect the Company's underlying business performance, enhances the Company's and investors' ability to compare the Company's past financial performance with its current performance and to analyze underlying business performance and trends. Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within the Company's GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure. Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

Additionally, SYNNEX refers to revenue at constant currency or adjusting for the translation effect of foreign currencies so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of SYNNEX' business performance. Financial results adjusted for currency are calculated by translating current period activity in the transaction currency using the comparable prior year periods' currency conversion rate. Generally, when the dollar either strengthens or weakens against other currencies, revenue at constant currency rates or adjusting for currency will be higher or lower than revenue reported at actual exchange rates.

Trailing fiscal four quarters ROIC is defined as the last four quarters' tax effected operating income divided by the average of the last five quarterly balances of borrowings (excluding book overdraft) and equity, net of cash and cash equivalents in the United States. Adjusted ROIC is calculated by excluding the tax effected impact of acquisition-related and integration expenses, restructuring costs and the amortization of intangibles from operating income and equity and the impact of the contingent consideration gain and a contingent gain and the U.S. tax reform adjustment on equity.

SYNNEX also uses free cash flow, which is cash flow from operating activities, reduced by purchases of property and equipment. SYNNEX uses free cash flow to conduct and evaluate its business because, although it is similar to cash flow from operations, SYNNEX believes it is a more conservative measure of cash flows since purchases of fixed assets are a necessary component of ongoing operations. Free cash flow reflects an additional way of viewing SYNNEX' liquidity that, when viewed with its GAAP results, provides a more complete understanding of factors and trends affecting its cash flows. Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not incorporate payments for business acquisitions. Therefore, SYNNEX believes it is important to view free cash flow as a complement to its entire consolidated statements of cash flows.

SYNNEX management uses non-GAAP financial measures internally to understand, manage and evaluate the business, to establish operational goals, and in some cases for measuring performance for compensation purposes. These non-GAAP measures are intended to provide investors with an understanding of SYNNEX' operational results and trends that more readily enable investors to analyze SYNNEX' base financial and operating performance and to facilitate period-to-period comparisons and analysis of operational trends, as well as for planning and forecasting in future periods. Management believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. As these non-GAAP financial measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for the comparable GAAP measures, and should be read only in conjunction with SYNNEX' consolidated financial statements prepared in accordance with GAAP. A reconciliation of SYNNEX' GAAP to non-GAAP financial information is set forth in the supplemental information section at the end of this press release.

Safe Harbor Statement

Statements in this news release regarding SYNNEX Corporation that are not historical facts are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may be identified by terms such as believe, foresee, expect, may, will, provide, could and should and the negative of these terms or other similar expressions. These forward-looking statements include, but are not limited to, statements regarding the proposed spin-off of Concentrix, including status, timing, what shareholders will own immediately following the spin-off and shareholder value; our expectations and outlook for the fiscal 2020 fourth quarter as to revenue, net income, non-GAAP net income, diluted earnings per share, non-GAAP diluted earnings per share, outstanding diluted weighted average shares, tax rate, after-tax amortization of intangibles, after-tax acquisition-related and integration expenses; and the anticipated benefits of the non-GAAP financial measures.

The forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. These risks and uncertainties include, but are not limited to: the impact of COVID-19 or coronavirus, or other pandemics, and the impact of related governmental, individual and business responses, including the ability of our staff to travel to work, our ability to maintain adequate inventories, delivery capabilities, the impact on our customers and supply chain, and the impact on demand in general; general economic and market conditions; the ability to realize the anticipated benefits of the previously-announced separation of SYNNEX and Concentrix and the disruption such transaction might cause to our business; negative effects of the transaction announcement or the consummation of the proposed separation on the market price of the capital stock of SYNNEX; the unfavorable outcome of any legal proceedings that have been or may be instituted against us; the ability to retain key personnel; any weakness in information technology and consumer electronics spending; the loss or consolidation of one or more of our significant original equipment manufacturer, or OEM, suppliers or customers; market acceptance and product life of the products we assemble and distribute; competitive conditions in our industry and their impact on our margins; pricing, margin and other terms with our OEM suppliers; our ability to gain market share; variations in supplier-sponsored programs; changes in our costs and operating expenses; changes in foreign currency exchange rates; changes in tax laws; risks associated with our international operations; uncertainties and variability in demand by our reseller and integration customers; supply shortages or delays; any termination or reduction in our floor plan financing arrangements; credit exposure to our reseller customers and negative trends in their businesses; any future incidents of theft; and other risks and uncertainties detailed in our Form 10-K for the fiscal year ended November 30, 2019 and subsequent SEC filings. Statements included in this press release are based upon information known to SYNNEX Corporation as of the date of this release, and SYNNEX Corporation does not intend to update information contained in this press release, except as required by law.

Copyright 2020 SYNNEX Corporation. All rights reserved. SYNNEX, the SYNNEX Logo, CONCENTRIX, and all other SYNNEX company, product and services names and slogans are trademarks or registered trademarks of SYNNEX Corporation. SYNNEX, the SYNNEX Logo, and CONCENTRIX Reg. U.S. Pat. & Tm. Off. DIFFERENT BY DESIGN is a trademark or registered trademark of Concentrix Corporation. Other names and marks are the property of their respective owners.

 

SYNNEX Corporation Consolidated Balance Sheets (currency and share amounts in thousands, except par value) (Amounts may not add due to rounding) (unaudited)
		August 31, 2020				November 30, 2019
ASSETS
Current assets:
Cash and cash equivalents		$	1,452,273			$	225,529
Accounts receivable, net			3,580,970				3,926,709
Receivables from vendors, net			323,027				368,505
Inventories			2,832,607				2,547,224
Other current assets			375,273				385,024
Total current assets			8,564,151				7,452,992
Property and equipment, net			583,951				569,899
Goodwill			2,257,292				2,254,402
Intangible assets, net			1,031,168				1,162,212
Deferred tax assets			116,263				97,539
Other assets, net			710,283				160,917
Total assets		$	13,263,107			$	11,697,960
LIABILITIES AND EQUITY
Current liabilities:
Borrowings, current		$	244,114			$	298,969
Accounts payable			3,655,215				3,149,443
Accrued compensation and benefits			447,661				402,771
Other accrued liabilities			1,257,160				723,716
Income taxes payable			27,998				32,223
Total current liabilities			5,632,148				4,607,122
Long-term borrowings			2,609,809				2,718,267
Other long-term liabilities			722,343				361,911
Deferred tax liabilities			205,225				222,210
Total liabilities			9,169,525				7,909,510
Stockholders' equity:
Preferred stock, $0.001 par value, 5,000 shares authorized, no shares issued or outstanding			—				—
Common stock, $0.001 par value, 100,000 shares authorized, 53,380 and 53,154 shares issued as of August 31, 2020 and November 30, 2019, respectively			53				53
Additional paid-in capital			1,579,026				1,545,421
Treasury stock, 2,454 and 2,399 shares as of August 31, 2020 and November 30, 2019, respectively			(178,775)				(172,627)
Accumulated other comprehensive income (loss)			(224,628)				(209,077)
Retained earnings			2,917,906				2,624,680
Total stockholders' equity			4,093,582				3,788,450
Total liabilities and equity		$	13,263,107			$	11,697,960

 

SYNNEX Corporation Consolidated Statements of Operations (currency and share amounts in thousands, except per share amounts) (Amounts may not add due to rounding) (unaudited)
		Three Months Ended								Nine Months Ended
		August 31, 2020				August 31, 2019				August 31, 2020				August 31, 2019
Revenue:
Products		$	5,306,361			$	5,047,968			$	13,858,313			$	13,695,725
Services			1,158,421				1,155,690				3,403,305				3,480,275
Total revenue			6,464,782				6,203,659				17,261,619				17,176,000
Cost of revenue:
Products			(5,008,881)				(4,746,197)				(13,031,113)				(12,876,410)
Services			(747,809)				(731,472)				(2,206,256)				(2,196,212)
Gross profit			708,092				725,990				2,024,249				2,103,379
Selling, general and administrative expenses			(498,956)				(517,135)				(1,514,734)				(1,557,906)
Operating income			209,136				208,855				509,515				545,473
Interest expense and finance charges, net			(28,749)				(42,945)				(99,046)				(127,695)
Other income (expense), net			(567)				(1,087)				3,280				19,764
Income before income taxes			179,819				164,823				413,748				437,542
Provision for income taxes			(45,356)				(41,691)				(99,740)				(112,831)
Net income		$	134,464			$	123,132			$	314,008			$	324,711
Earnings per common share:
Basic		$	2.61			$	2.41			$	6.10			$	6.35
Diluted		$	2.60			$	2.40			$	6.07			$	6.32
Weighted-average common shares outstanding:
Basic			50,890				50,601				50,851				50,661
Diluted			51,241				50,845				51,172				50,903

 

SYNNEX Corporation Segment Information (currency in thousands) (Amounts may not add due to rounding) (unaudited)
		Three Months Ended								Nine Months Ended
		August 31, 2020				August 31, 2019				August 31, 2020				August 31, 2019
Revenue:
Technology Solutions		$	5,306,361			$	5,047,970			$	13,858,313			$	13,695,729
Concentrix			1,163,694				1,160,928				3,418,676				3,495,076
Inter-segment elimination			(5,273)				(5,240)				(15,371)				(14,805)
Consolidated		$	6,464,782			$	6,203,659			$	17,261,619			$	17,176,000
Operating income:
Technology Solutions		$	132,373			$	138,830			$	320,962			$	352,594
Concentrix			76,763				70,025				188,554				192,879
Consolidated		$	209,136			$	208,855			$	509,515			$	545,473

 

SYNNEX Corporation Reconciliation of GAAP to Non-GAAP financial measures (currency in thousands) (Amounts may not add due to rounding)
		Three Months Ended								Nine Months Ended
		August 31, 2020				August 31, 2019				August 31, 2020				August 31, 2019
Revenue in constant currency
Consolidated
Revenue		$	6,464,782			$	6,203,659			$	17,261,619			$	17,176,000
Foreign currency translation			35,239								111,756
Revenue in constant currency		$	6,500,021			$	6,203,659			$	17,373,375			$	17,176,000
Technology Solutions
Revenue		$	5,306,361			$	5,047,970			$	13,858,313			$	13,695,729
Foreign currency translation			32,798								79,488
Revenue in constant currency		$	5,339,159			$	5,047,970			$	13,937,801			$	13,695,729
Concentrix
Revenue		$	1,163,694			$	1,160,928			$	3,418,676			$	3,495,076
Foreign currency translation			2,441								32,268
Revenue in constant currency		$	1,166,135			$	1,160,928			$	3,450,944			$	3,495,076
		Three Months Ended								Nine Months Ended
		August 31, 2020				August 31, 2019				August 31, 2020				August 31, 2019
Selling, general and administrative expenses
Consolidated
GAAP selling, general and administrative expenses		$	498,956			$	517,135			$	1,514,734			$	1,557,906
Acquisition-related and integration expenses			4,163				9,200				22,701				53,582
Amortization of intangibles			46,533				52,066				139,435				156,964
Adjusted selling, general and administrative expenses		$	448,260			$	455,869			$	1,352,598			$	1,347,360
Technology Solutions
GAAP selling, general and administrative expenses		$	165,107			$	162,944			$	506,239			$	466,725
Acquisition-related and integration expenses			—				—				—				981
Amortization of intangibles			9,995				10,999				30,130				32,968
Adjusted selling, general and administrative expenses		$	155,112			$	151,945			$	476,109			$	432,776
Concentrix
GAAP selling, general and administrative expenses		$	335,770			$	356,155			$	1,014,339			$	1,097,139
Acquisition-related and integration expenses			4,163				9,200				22,701				52,601
Amortization of intangibles			36,538				41,067				109,305				123,996
Adjusted selling, general and administrative expenses		$	295,069			$	305,888			$	882,333			$	920,542

 

SYNNEX Corporation Reconciliation of GAAP to Non-GAAP financial measures (currency in thousands) (Amounts may not add due to rounding) (continued)
		Three Months Ended								Nine Months Ended
		August 31, 2020				August 31, 2019				August 31, 2020				August 31, 2019
Operating income and Operating margin
Consolidated
Revenue		$	6,464,782			$	6,203,659			$	17,261,619			$	17,176,000
GAAP operating income		$	209,136			$	208,855			$	509,515			$	545,473
Acquisition-related and integration expenses			4,163				9,200				22,701				53,582
Amortization of intangibles			46,828				52,428				140,320				158,149
Non-GAAP operating income		$	260,127			$	270,483			$	672,536			$	757,204
GAAP operating margin			3.24	%			3.37	%			2.95	%			3.18	%
Non-GAAP operating margin			4.02	%			4.36	%			3.90	%			4.41	%
Technology Solutions
Segment revenue		$	5,306,361			$	5,047,970			$	13,858,313			$	13,695,729
GAAP operating income		$	132,373			$	138,830			$	320,962			$	352,594
Acquisition-related and integration expenses			—				—				—				981
Amortization of intangibles			9,995				10,999				30,130				32,968
Non-GAAP operating income		$	142,368			$	149,829			$	351,092			$	386,543
GAAP operating margin			2.49	%			2.75	%			2.32	%			2.57	%
Non-GAAP operating margin			2.68	%			2.97	%			2.53	%			2.82	%
Concentrix
Segment revenue		$	1,163,694			$	1,160,928			$	3,418,676			$	3,495,076
GAAP operating income		$	76,763			$	70,025			$	188,554			$	192,879
Acquisition-related and integration expenses			4,163				9,200				22,701				52,601
Amortization of intangibles			36,833				41,429				110,190				125,181
Non-GAAP operating income		$	117,759			$	120,654			$	321,445			$	370,661
GAAP operating margin			6.60	%			6.03	%			5.52	%			5.52	%
Non-GAAP operating margin			10.12	%			10.39	%			9.40	%			10.61	%

 

SYNNEX Corporation Reconciliation of GAAP to Non-GAAP financial measures (currency and share amounts in thousands, except per share amounts) (Amounts may not add due to rounding) (continued)
		Three Months Ended								Nine Months Ended
		August 31, 2020				August 31, 2019				August 31, 2020				August 31, 2019
Adjusted EBITDA
Consolidated
Net income		$	134,464			$	123,132			$	314,008			$	324,711
Interest expense and finance charges, net			28,749				42,945				99,046				127,695
Provision for income taxes			45,356				41,691				99,740				112,831
Depreciation (excluding accelerated depreciation included in acquisition-related and integration expenses below)			37,446				38,597				110,981				119,004
Amortization of intangibles			46,828				52,428				140,320				158,149
EBITDA		$	292,843			$	298,793			$	764,095			$	842,390
Other (income) expense, net (excluding amounts included in acquisition-related and integration expenses below)			567				1,087				(3,798)				(19,593)
Acquisition-related and integration expenses			4,163				9,200				23,219				53,411
Adjusted EBITDA		$	297,573			$	309,080			$	783,516			$	876,208
Technology Solutions
Net income		$	85,531			$	87,778			$	204,237			$	236,080
Interest expense and finance charges, net			19,747				17,775				59,531				55,725
Provision for income taxes			27,119				29,739				56,189				77,873
Depreciation			5,937				5,875				17,650				16,719
Amortization of intangibles			9,995				10,999				30,130				32,968
EBITDA		$	148,329			$	152,166			$	367,737			$	419,365
Other (income) expense, net			(25)				3,538				1,004				(17,083)
Acquisition-related and integration expenses			—				—				—				981
Adjusted EBITDA		$	148,304			$	155,704			$	368,741			$	403,263
Concentrix
Net income		$	48,933			$	35,354			$	109,771			$	88,631
Interest expense and finance charges, net			9,002				25,170				39,515				71,970
Provision for income taxes			18,236				11,952				43,551				34,958
Depreciation (excluding accelerated depreciation included in acquisition-related and integration expenses below)			31,509				32,722				93,331				102,285
Amortization of intangibles			36,833				41,429				110,190				125,181
EBITDA		$	144,513			$	146,627			$	396,358			$	423,025
Other (income) expense, net (excluding amounts included in acquisition-related and integration expenses below)			592				(2,450)				(4,802)				(2,510)
Acquisition-related and integration expenses			4,163				9,200				23,219				52,430
Adjusted EBITDA		$	149,268			$	153,377			$	414,775			$	472,945

 

SYNNEX Corporation Reconciliation of GAAP to Non-GAAP financial measures (currency and share amounts in thousands, except per share amounts) (Amounts may not add due to rounding) (continued)
		Three Months Ended								Nine Months Ended
		August 31, 2020				August 31, 2019				August 31, 2020				August 31, 2019
Net income
Net income		$	134,464			$	123,132			$	314,008			$	324,711
Acquisition-related and integration expenses			4,163				9,200				23,219				53,411
Amortization of intangibles			46,828				52,428				140,320				158,149
Contingent consideration			—				—				—				(19,034)
Income taxes related to the above(1)			(12,899)				(15,548)				(41,407)				(55,328)
Non-GAAP net income		$	172,556			$	169,212			$	436,140			$	461,909
Diluted earnings per common share ("EPS")(2)
Net income		$	134,464			$	123,132			$	314,008			$	324,711
Less: net income allocated to participating securities			1,481				1,066				3,602				2,883
Net income attributable to common stockholders			132,983				122,066				310,406				321,828
Acquisition-related and integration expenses attributable to common stockholders			4,117				9,121				22,960				52,938
Amortization of intangibles attributable to common stockholders			46,312				51,975				138,755				156,748
Contingent consideration attributable to common stockholders			—				—				—				(18,865)
Income taxes related to the above attributable to common stockholders(1)			(12,757)				(15,414)				(40,945)				(54,838)
Non-GAAP net income attributable to common stockholders		$	170,655			$	167,748			$	431,176			$	457,810
Weighted-average number of common shares - diluted:			51,241				50,845				51,172				50,903
Diluted EPS(2)		$	2.60			$	2.40			$	6.07			$	6.32
Acquisition-related and integration expenses			0.08				0.18				0.45				1.04
Amortization of intangibles			0.90				1.02				2.71				3.08
Contingent consideration			—				—				—				(0.37)
Income taxes related to the above(1)			(0.25)				(0.30)				(0.80)				(1.08)
Non-GAAP diluted EPS		$	3.33			$	3.30			$	8.43			$	8.99

 

 

SYNNEX Corporation Reconciliation of GAAP to Non-GAAP financial measures (Amounts may not add due to rounding) (continued)
		Three Months Ended								Nine Months Ended
(Amounts in thousands)		August 31, 2020				August 31, 2019				August 31, 2020				August 31, 2019
Free cash flow
Net cash provided by (used in) operating activities		$	320,617			$	249,853			$	1,547,098			$	202,473
Purchases of property and equipment			(42,705)				(33,020)				(127,326)				(93,432)
Free cash flow		$	277,912			$	216,833			$	1,419,772			$	109,041

		Forecast
		Three Months Ending November 30, 2020
(Amounts in millions, except per share amounts)		Low				High
Net income		$	153.0			$	166.0
Acquisition-related and integration expenses			3.0				3.0
Amortization of intangibles			47.0				47.0
Income taxes related to the above(1)			(12.5)				(12.5)
Non-GAAP net income		$	190.5			$	203.5
Diluted EPS(2)		$	2.95			$	3.20
Acquisition-related and integration expenses			0.06				0.06
Amortization of intangibles			0.90				0.90
Income taxes related to the above(1)			(0.24)				(0.24)
Non-GAAP diluted EPS		$	3.68			$	3.93

(1)The tax effect of taxable and deductible non-GAAP adjustments was calculated using the effective year-to-date tax rate during the respective periods.

(2)Diluted EPS is calculated using the two-class method. Unvested restricted stock awards granted to employees are considered participating securities. For purposes of calculating Diluted EPS, Net income allocated to participating securities was approximately 1.1% and 1.2% of Net income for the three and nine months ended August 31, 2020, respectively and approximately 0.9% for both the three and nine months ended August 31, 2019. Net income allocable to participating securities is estimated to be approximately 0.9% of the forecasted Net income for the three months ending November 30, 2020.

 

SYNNEX Corporation Calculation of Financial Metrics (currency in thousands) (Amounts may not add or compute due to rounding)   Return on Invested Capital ("ROIC")
		August 31, 2020				August 31, 2019
ROIC
Operating income (trailing fiscal four quarters)		$	777,803			$	746,368
Income taxes on operating income(1)			(193,398)				(201,002)
Operating income after taxes		$	584,405			$	545,366
Total borrowings, excluding book overdraft (last five quarters average)		$	3,019,573			$	3,126,339
Total equity (last five quarters average)			3,834,782				3,282,537
Less: U.S. cash and cash equivalents (last five quarters average)			(398,398)				(67,727)
Total invested capital		$	6,455,957			$	6,341,149
ROIC			9.1	%			8.6	%
Adjusted ROIC
Non-GAAP operating income (trailing fiscal four quarters)		$	1,011,028			$	1,024,961
Income taxes on Non-GAAP operating income(1)			(253,279)				(263,045)
Non-GAAP operating income after taxes		$	757,749			$	761,916
Total invested capital		$	6,455,957			$	6,341,149
Tax effected impact of cumulative non-GAAP adjustments (last five    quarters average)			616,468				439,557
Total Non-GAAP invested capital		$	7,072,425			$	6,780,706
Adjusted ROIC			10.7	%			11.2	%

(1)Income taxes on GAAP operating income was calculated using the effective year-to-date tax rates during the respective periods. Income taxes on non-GAAP operating income was calculated by excluding the tax effect of taxable and deductible non-GAAP adjustments using the effective year-to-date tax rate during the respective periods. In fiscal year 2018, the effective tax rate for non-GAAP operating income excludes the impact of the transition tax on accumulated overseas profits and the remeasurement of deferred tax assets and liabilities to the new U.S. tax rate related to the enactment of the Tax Cuts and Jobs Act of 2017.

 

Debt to Adjusted EBITDA leverage ratio
				August 31, 2020				August 31, 2019
Total borrowings, excluding book overdraft		(a)		$	2,851,890			$	3,323,416
Less: cash and cash equivalents		(b)			1,452,273				262,279
Net debt		(c)=(a)-(b)		$	1,399,617			$	3,061,137
Trailing four quarters Adjusted EBITDA		(d)		$	1,160,281			$	1,177,889
Debt to Adjusted EBITDA leverage ratio		(e)=(a)/(d)			2.5				2.8
Net debt to Adjusted EBITDA leverage ratio		(f)=(c)/(d)			1.2				2.6

 

SYNNEX Corporation Calculation of Financial Metrics (currency in thousands) (Amounts may not add or compute due to rounding) (continued)   Cash Conversion Cycle
				Three Months Ended
				August 31, 2020				August 31, 2019
Days sales outstanding
Revenue (products and services)		(a)		$	6,464,782			$	6,203,659
Accounts receivable, net		(b)			3,580,970				3,452,976
Days sales outstanding		(c) = (b)/((a)/the number of days during the period)			51				51
Days inventory outstanding
Cost of revenue (products and services)		(d)		$	5,756,690			$	5,477,669
Inventories		(e)			2,832,607				2,787,159
Days inventory outstanding		(f) = (e)/((d)/the number of days during the period)			45				47
Days payable outstanding
Cost of revenue (products and services)		(g)		$	5,756,690			$	5,477,669
Accounts payable		(h)			3,655,215				2,932,046
Days payable outstanding		(i) = (h)/((g)/the number of days during the period)			58				49
Cash conversion cycle		(j) = (c)+(f)-(i)			38				49

 

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SOURCE SYNNEX Corporation