Synnex Reports Q3 Revenue Hit From Services Business As $2.4B Convergys Deal Nears Close

ARTICLE TITLE HERE

Synnex on Wednesday said strong growth in its Technology Solutions business helped propel the company's third quarter revenue in fiscal 2018.

However, a slowdown in Synnex's Concentrix business services and solutions business dragged down overall revenue growth, giving the Fremont, Calif.-based IT distributor an increase in non-GAAP operating and net income but a drop in GAAP-based net income.

Synnex on Wednesday also said it will close its $2.4-billion acquisition of Convergys by Friday of this week, after which it will be integrated with Concentrix.

[Related: Synnex To Acquire Convergys In $2.4B Deal]

id
unit-1659132512259
type
Sponsored post

Concentrix is a wholly-owned subsidiary and top global provider of customer engagement CRM BPO services. It was formed with Synnex's 2006 acquisition of Concentrix, a global provider of call center, database analysis, and print-on-demand services.

Convergys is a Cincinnati, Ohio-based global leader in call center operations, or "customer experience outsourcing," in the company's parlance. The company handles 8 billion contacts a year from its over 150 locations in 31 countries around the world, providing services in 58 languages. Synnex previously said it expects the acquisition to bring it over 6,000 certified professionals.

Dennis Polk, who early this year took over as Synnex's president and CEO, said in a prepared statement that his company is excited about the coming closing of the Convergys acquisition.

"The talented and dedicated global associates of Convergys will significantly amplify Concentrix and our value proposition. … We look forward to the growth and value that the combination of these two companies will create, and it will enhance our leadership position as a premier global customer engagement services company," Polk said.

The third fiscal quarter of 2018 was a mixed bag for Synnex, which reported total revenue for the quarter of $4.91 billion, up 14.7 percent from the $4.23 billion the company reported in the third fiscal quarter of 2017.

Synnex's Technology Solutions business saw revenue of $4.4 billion in the quarter, up 17 percent over the same quarter of last year. However, its Concentrix revenue was reported as $492 million for the third quarter, down 1 percent from last year's revenue.

Third quarter net income on a GAAP basis was reported at $69.3 million, down 7.8 percent from last year's $75.2 million. GAAP-based operating income for the third quarter was $116.9 million, down 4.4 percent over the $122.2 million reported last year.

Non-GAAP net income for the distributor was $102.3 million, up 17.8 percent over last year's $86.8 million. Non-GAAP operating income was $162.7 million, up 16.2 percent over last year's $139.9 million.

Synnex also reported third fiscal quarter 2018 earnings per share of $1.74 on a GAAP basis, down 7.0 percent from last year's $1.87 per share. On a non-GAAP basis, earning per share was reported at $2.57, up 19.0 percent from last year's $2.16.

For its Technology Solutions business, Synnex reported GAAP-based operating income of $105 million, up from last year's $100 million. On a non-GAAP basis, operating income was $120 million, up from last year's $101 million.

Synnex's Concentrix business saw operating income of $12 million, down from last year's $22 million on a GAAP basis, while non-GAAP operating income was $43 million, up from last year's $39 million.

Looking forward, Synnex said it expects fourth fiscal quarter 2018 revenue in the range of $5.2 billion to $5.4 billion. That is about flat with the $5.3 billion revenue the company reported in its fourth fiscal quarter 2017.

Synnex also expects fourth quarter net income on a GAAP basis of $48.3 million to $57.9 million, or in the range of $1.02 to $1.23 per share. That is down significantly from last year's $91.1 million, or $2.26 per share. On a non-GAAP basis, Synnex expects net income is expected to be in the range of $136.8 million to $146.4 million, up from last year's $112.4 million, or $2.79 per share.