Breaking Down TD SYNNEX Corporation (SNX) Financial Health: Key Insights for Investors

Understanding TD SYNNEX Corporation (SNX) Revenue Streams

Understanding TD SYNNEX Corporation’s Revenue Streams

TD SYNNEX Corporation's total revenue for the three months ended August 31, 2024, was $14,684,712 (in thousands), reflecting a 5.2% increase from $13,960,615 in the same period of the previous year. For the nine months ended August 31, 2024, total revenue was $42,607,873, a slight decrease of 1.3% compared to $43,148,110 for the nine months ended August 31, 2023.

Breakdown of Primary Revenue Sources

• Americas: Revenue for the three months ended August 31, 2024, was $9,090,011, up from $8,879,585 in the prior year, a growth of 2.4%.
• Europe: Revenue increased to $4,591,161 from $4,227,590, marking an 8.6% rise.
• APJ (Asia-Pacific Japan): Revenue surged to $1,003,540, a significant increase of 17.6% from $853,440.

Year-over-Year Revenue Growth Rate

Analyzing the historical trends, the year-over-year growth rate for Q3 2024 indicates that overall revenue increased by 5.2% compared to Q3 2023. However, for the nine-month period, revenue experienced a decline of 1.3% year-over-year.

Contribution of Different Business Segments to Overall Revenue

For the three months ended August 31, 2024, the contribution of different segments to total revenue was as follows:

• Americas contributed $9,090,011.
• Europe contributed $4,591,161.
• APJ contributed $1,003,540.

During the nine months ended August 31, 2024, the contributions were:

• Americas: $25,550,680
• Europe: $14,135,188
• APJ: $2,922,005

Analysis of Any Significant Changes in Revenue Streams

In the nine months ended August 31, 2024, revenue in the Americas declined by $667.0 million, primarily due to a shift towards net revenue recognition, which negatively impacted revenue by approximately $1.3 billion, or 5%. In contrast, the Europe segment showed a revenue increase driven by growth in both Endpoint Solutions and Advanced Solutions.

Overall, while the company saw growth in specific segments like APJ, the overall revenue decrease in the Americas indicates a need for strategic adjustments to enhance performance across all regions.

A Deep Dive into TD SYNNEX Corporation (SNX) Profitability

Profitability Metrics

Gross Profit Margin: For the three months ended August 31, 2024, gross profit was $961,048 thousand, representing a gross profit margin of 6.54%. In comparison, for the same period in 2023, gross profit was $971,273 thousand, reflecting a margin of 6.96%. For the nine months ended August 31, 2024, gross profit was $2,940,361 thousand, with a margin of 6.90%, slightly up from 6.81% in 2023.

Operating Profit: Operating income for Q3 2024 was $302,879 thousand, which translates to an operating margin of 2.06%, up from 1.72% in Q3 2023. For the nine-month period, operating income reached $869,399 thousand, yielding a margin of 2.04%, compared to 1.83% in the previous year.

Net Profit: Net income for the three months ended August 31, 2024, was $178,556 thousand, leading to a net profit margin of 1.22%, compared to 1.00% in the same quarter of 2023. For the nine months, net income was $494,289 thousand, with a margin of 1.16%, up from 1.02% in the prior year.

Comparison with Industry Averages: The average gross margin in the technology distribution sector is approximately 10-15%, indicating that the company is operating below industry standards. Operating margins typically range from 3-5%, suggesting that the company is also slightly below the average in this area.

Operational Efficiency: Selling, general and administrative expenses for Q3 2024 were $657,513 thousand, or 4.48% of revenue, compared to 4.73% in Q3 2023. This decrease reflects improved cost management. For the nine months ended August 31, 2024, these expenses were $2,000,772 thousand, or 4.70% of revenue, slightly up from 4.61% in the previous year.

Gross Margin Trends: The gross margin has shown a slight improvement over the nine-month period, attributed primarily to better cost management and a higher proportion of revenue recognized on a net basis.

Debt vs. Equity: How TD SYNNEX Corporation (SNX) Finances Its Growth

Debt vs. Equity: How TD SYNNEX Corporation Finances Its Growth

Overview of the Company's Debt Levels

As of August 31, 2024, TD SYNNEX Corporation reported total outstanding borrowings of approximately $4.1 billion. This includes long-term borrowings of $3.7 billion and short-term borrowings of $283.2 million. The company has a mix of senior unsecured notes and term loans, with $2.4 billion in Senior Notes and approximately $1.3 billion from term loans.

Debt-to-Equity Ratio and Comparison to Industry Standards

The debt-to-equity ratio for TD SYNNEX stands at approximately 0.51 as of August 31, 2024. This is below the industry average of around 1.0, indicating a more conservative approach to leveraging compared to its peers.

Recent Debt Issuances, Credit Ratings, or Refinancing Activity

On April 19, 2024, the company entered into a $750 million Term Loan Credit Agreement, which will mature on September 1, 2027. The proceeds were used to repay a portion of existing term loans. Additionally, the company issued $600 million in 6.10% senior notes due April 12, 2034, primarily to refinance existing debt. The current credit ratings reflect a stable outlook, maintaining a solid credit standing with lenders.

How the Company Balances Between Debt Financing and Equity Funding

TD SYNNEX employs a strategic balance between debt financing and equity funding. As of August 31, 2024, the company has a total stockholders' equity of approximately $8.2 billion, which provides a strong cushion against its debt. The company has also authorized a new $2.0 billion share repurchase program to manage its capital structure effectively.

Assessing TD SYNNEX Corporation (SNX) Liquidity

Assessing TD SYNNEX Corporation's Liquidity

Current and Quick Ratios

The current ratio for TD SYNNEX Corporation as of August 31, 2024, was 1.35, indicating a solid ability to cover short-term liabilities with short-term assets. The quick ratio, which excludes inventories from current assets, stood at 0.95, suggesting a tighter liquidity position when considering immediate cash needs.

Analysis of Working Capital Trends

As of August 31, 2024, the working capital was approximately $1.4 billion, compared to $1.7 billion a year earlier. This decline is attributed to increased operational expenses and changes in inventory levels.

Cash Flow Statements Overview

For the nine months ending August 31, 2024, the cash flows from operating activities totaled $655.8 million, a decrease from $1.2 billion in the same period in 2023. The decrease is primarily due to a reduction in inventory and accounts receivable, reflecting changes in sales volume.

Potential Liquidity Concerns or Strengths

Despite the decrease in cash flow from operating activities, the company maintains a strong cash and cash equivalents balance of $853.9 million as of August 31, 2024. The total outstanding borrowings amount to approximately $4.1 billion, with a significant portion being tied to senior notes and term loans.

As of August 31, 2024, the company had $1.9 billion available for future share repurchases under its ongoing program, indicating a robust financial position for managing liquidity needs and capital expenditures moving forward.

Is TD SYNNEX Corporation (SNX) Overvalued or Undervalued?

Valuation Analysis

Understanding whether a company is overvalued or undervalued is crucial for investors. This section delves into key valuation metrics, stock price trends, dividend yields, and analyst opinions for the company.

Price-to-Earnings (P/E) Ratio

As of August 31, 2024, the P/E ratio is calculated as follows:

• Current Stock Price: $113.28
• Trailing Twelve Months (TTM) Earnings per Share (EPS): $5.67
• P/E Ratio: $113.28 / $5.67 = 19.97

Price-to-Book (P/B) Ratio

The P/B ratio provides insight into the valuation relative to the book value:

• Book Value per Share: $34.00
• P/B Ratio: $113.28 / $34.00 = 3.33

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio is another critical metric for assessing valuation:

• Enterprise Value (EV): $27.4 billion
• EBITDA (TTM): $1.5 billion
• EV/EBITDA Ratio: $27.4 billion / $1.5 billion = 18.27

Stock Price Trends

Over the past year, the stock price has seen the following trends:

• 12-Month High: $120.00
• 12-Month Low: $85.00
• Current Stock Price: $113.28
• Price Change (YoY): +15.5%

Dividend Yield and Payout Ratios

This company has a stable dividend policy:

• Annual Dividend per Share: $1.20
• Dividend Yield: $1.20 / $113.28 = 1.06%
• Payout Ratio: (Annual Dividend / EPS) = $1.20 / $5.67 = 21.14%

Analyst Consensus on Stock Valuation

Analysts have provided varying opinions on the stock:

• Buy Ratings: 8
• Hold Ratings: 5
• Sell Ratings: 2
• Average Target Price: $125.00

Key Risks Facing TD SYNNEX Corporation (SNX)

Key Risks Facing TD SYNNEX Corporation

The financial health of TD SYNNEX Corporation is influenced by several internal and external risk factors that investors should consider. These risks can significantly impact the company's operations and overall financial performance.

Industry Competition

In the highly competitive technology distribution sector, TD SYNNEX faces pressures from both established competitors and new entrants. The market dynamics require constant innovation and adaptation to maintain market share. As of August 31, 2024, the company's revenue was $14.68 billion, reflecting a 5.2% increase from $13.96 billion in the same period the previous year. However, gross profit margins have slightly decreased, indicating pressure from competitive pricing strategies.

Regulatory Changes

Changes in regulations can impose additional costs and operational constraints. For instance, the ongoing investigation by the French Competition Authority, which previously imposed a fine of €76.1 million (reduced to €24.9 million) for anticompetitive practices, presents a significant financial and reputational risk.

Market Conditions

Fluctuations in global economic conditions can affect demand for technology products. The company reported net income of $178.56 million for the three months ended August 31, 2024, compared to $139.26 million for the same period in 2023, suggesting resilience but also highlighting the potential for volatility.

Operational Risks

Operational risks include supply chain disruptions, which can affect inventory levels and product availability. As of August 31, 2024, the company's inventory levels were approximately $7.67 billion, with a days inventory outstanding (DIO) of 51 days, indicating efficient inventory management but also susceptibility to supply chain issues.

Financial Risks

Financial risks are evident in the company's debt levels. As of August 31, 2024, total outstanding borrowings were approximately $4.1 billion, with a significant portion being Senior Notes amounting to $2.4 billion. The weighted average interest rate on borrowings was 6.83%, which could impact profitability if interest rates rise further.

Strategic Risks

Strategic decisions, including mergers and acquisitions, carry inherent risks. The company has incurred acquisition, integration, and restructuring costs totaling $0.66 million for the three months ended August 31, 2024. Such costs can divert resources from core operations and affect financial stability.

Mitigation Strategies

To address these risks, TD SYNNEX has implemented various strategies, including enhancing supply chain resilience and actively managing regulatory compliance. The company maintains a robust liquidity position with $853.9 million in cash and cash equivalents as of August 31, 2024.

Future Growth Prospects for TD SYNNEX Corporation (SNX)

Future Growth Prospects for TD SYNNEX Corporation

Analysis of Key Growth Drivers

TD SYNNEX Corporation is positioned for significant growth driven by several key factors:

• Product Innovations: The company continues to invest in technology solutions and services that cater to growing sectors such as cloud computing, cybersecurity, and artificial intelligence.
• Market Expansions: Expansion into emerging markets in Asia-Pacific and Europe is a priority, with a reported revenue of $4.6 billion from Europe in Q3 2024, up from $4.2 billion in Q3 2023.
• Acquisitions: Recent acquisitions, including the integration of Tech Data, have expanded service offerings and market reach, contributing to an operating income of $302.9 million in Q3 2024.

Future Revenue Growth Projections and Earnings Estimates

Analysts project revenue growth for TD SYNNEX, estimating a compound annual growth rate (CAGR) of approximately 5% to 7% over the next five years. This is supported by:

• 2024 Revenue Target: The company aims to generate approximately $42.6 billion in revenue for the fiscal year ending November 30, 2024.
• Earnings Estimates: For Q3 2024, diluted earnings per share (EPS) reached $2.08, compared to $1.49 in Q3 2023.

Strategic Initiatives or Partnerships That May Drive Future Growth

TD SYNNEX is pursuing various strategic initiatives to bolster growth:

• Partnerships with Tech Giants: Collaborations with leading technology firms enhance product offerings and market penetration.
• Sustainability Initiatives: Investments in sustainable technology solutions align with global trends and customer preferences, attracting new clients.

Competitive Advantages That Position the Company for Growth

TD SYNNEX possesses several competitive advantages, including:

• Diverse Product Portfolio: A wide range of technology solutions that address various market needs, with Q3 2024 gross profit reported at $961 million.
• Global Distribution Network: A robust global presence allows for efficient supply chain management and customer service.
• Strong Financial Position: As of August 31, 2024, cash and cash equivalents totaled $853.9 million, providing liquidity for future investments.

These metrics illustrate the company's strong performance and potential for continued growth in the future.