Synnex’s planned merger with rival IT distributor Tech Data remains on-track as the company continues to receive positive feedback and finalize regulatory approvals despite lingering impact from the COVID-19 coronavirus pandemic, President and CEO Dennis Polk said Thursday.
Polk, speaking to financial analysts during the Fremont, Calif.-based distributor’s second fiscal quarter 2021 quarterly analyst conference call, said during his prepared remarks that everything is going well with the proposed merger of the Synnex and Tech Data.
“We are set up for an effective financing of the transaction,” he said. “Our proxy has been filed, and our shareholder meeting will be held next week. And, from a regulatory standpoint, we have received clearance from a number of governmental authorities, and expect the rest to process though normal course. As would be expected, the COVID pandemic has led to a few delays in some countries.”
The acquisition is still expected to close in the second half of 2021, which reflects the typical six months to eight months announce-to-close time frame of a deal this size and complexity, Polk said.
Synnex continues to receive internal and external support for the merger, Polk said.
“The integration work we have performed since the announcement, albeit limited due to regulatory rules, further supports the strategic benefits of this deal that we discussed in March.”
When asked by an analyst about the approval process, Polk said Synnex already has about 20 regulatory approvals yet to finish. “And I’d say at this point we’re more than half-way through,” he said.
When asked by another analyst for specific details about the feedback to the merger, Polk replied that Synnex has received positive feedback from its four main constituents: associates, customers, vendors, and shareholders.
“Our customers are positive because they see us having a larger platform to service all their needs,” he said. ”Synnex, prior to the merger, was more niche from a vendor perspective and a geography perspective. But combined with Tech Data, we‘ll be able to service customers with all product sets and in all geographies.”
The vendor side has also been positive about the merger, Polk said.
“Again, positive feedback from the fact that we‘ll have, again, a global platform to service vendor needs wherever they want to sell their product,” he said. “And, as important, we’ll be combined and able to consolidate our investments to invest where their business is going, either in as-a-service, cloud, or any other next-gen IT product.”
When asked by another analyst about supply chain constraints, Polk said there are constraints pretty much across the board, including client devices, networking, CPUs, and even some displays and print products.
“There wasn‘t a major product category that we serve that has not been affected by supply chain challenges, certainly over the last quarter, but really, frankly, over the last 15 to 18 months,” he said.
Synnex, for its second fiscal quarter 2021, reported increased revenue and earnings over last year, but noted that this being the first full quarter to report since the COVID-19 coronavirus pandemic began impacted comparisons.
In his opening statement, Polk said that results were above internal expectations “due to continued demand for remote capabilities, digital transformation, the on-going recovery of office and data center IT purchasing, and overall above-market growth. Essentially, every product category we participate in saw strength in the quarter, most notably notebooks, Chromebooks, cloud, security, services, networking, and collaboration.”
The strong demand came across all of Synnex‘s customer segments, with SMB and public sector leading the way, and all geographical regions met expectations or better, Polk said.
For the quarter, which ended 31 May, Synnex reported revenue of US$5,857 billion, up 31 percent over the US$4.471 billion the company reported for its second fiscal quarter 2020.
For the quarter, Synnex also reported GAAP net income of US$93.1 million, or US$1.79 per share, up solidly from the US$57 million, or US$1.11 per share, it reported for the same period last year.
On a non-GAAP basis, Synnex reported income from continuing operations of US$108 million, or US$2.09 per share, up from last year’s US$137 million, or US$2.68 per share.
Looking forward, Synnex expect revenue to be in the range of US$4.95 billion to US$5.45 billion. Net income is expected to be in the range of US$84.2 million to US$94.7 million, or in the range of US$99.9 million to US$110.4 million on a non-GAAP basis. GAAP earnings per share is expected to be in the range of US$1.60 to US$1.80, and in the range of US$1.90 to US$2.10 on a non-GAAP basis.
Synnex expects growth going forward based in part on the widespread availability of the COVID-19 vaccine, Polk said.
“We are thankful for the effectiveness of the vaccine, and are hopeful that all who desire one will have access as soon as possible,” he said. ”Overall, we are optimistic about the IT spending environment given the current strong demand, the expectation of more geographies reopening, and the resumption of on-premises IT projects. We believe these factors represent potential tailwinds for our business.”
When projecting guidance, Synnex is planning for continued growth in its distribution business, but has sprinkled in some conservatism due to the widely-reported supply chain challenges, Polk said.
“Consider our current backlog, still very strong, we know the business is there,” he said. ”It just remains to be seen when it will transact.”