TD SYNNEX CORP (SNX) Q1 2025 Earnings Summary

Executive Summary

• Q1 FY25 revenue grew 4.0% to $14.53B; non-GAAP EPS was $2.80, both within guidance but below Wall Street consensus on EPS and revenue; gross margin improved sequentially, though year-over-year compression persisted .
• Hyve experienced a temporary demand pause and a large strategic component shipment pushed from Q1 to Q2, pressuring margins and free cash flow; management expects normalization and inventory sell-through over the next 1–2 quarters .
• Q2 FY25 guidance implies mid-single-digit gross billings growth, with tax rate ~23% and interest expense ~$86M; dividend maintained at $0.44/share (up 10% YoY) .
• Near-term catalysts: Investor Day (Apr 10) to detail strategy and medium-term targets; watch Hyve’s demand recovery, PC refresh tailwinds, and mix shifts toward software impacting gross-to-net dynamics .

What Went Well and What Went Wrong

• What Went Well

  • “Gross billings in constant currency grew by 9.5% year-over-year in Q1 with all regions and major technologies contributing,” highlighting broad-based strength across cloud, cybersecurity, data/analytics and Hyve; Endpoint and Advanced Solutions both grew YoY .
  • Americas operating income rose 21% YoY with non-GAAP operating margin steady at ~3.0%, reflecting disciplined execution and cost management .
  • Distribution dropped through ~50% of gross profit growth to operating income, demonstrating focus on profitable growth amid efficiency gains .

• What Went Wrong

  • Hyve margin headwinds: temporary project mix and commitment to retain specialized labor reduced margin by ~10 bps and pressured non-GAAP operating margin and cash flow in Q1 .
  • Free cash flow swung to -$790M from +$344M YoY on elevated Hyve inventory, timing of payables, and working capital build; CCC extended to 27 days vs 21 YoY .
  • Europe non-GAAP operating margin declined (2.4% vs 2.9% YoY) on vendor mix/back-end margin pressure; APJ operating margin down on higher net presentation and demand dynamics .

Financial Results

Estimate comparison (Q1 FY25):

• EPS: $2.80 vs $2.906 consensus (miss)*
• Revenue: $14.53B vs $14.79B consensus (miss)*
• EPS (# of estimates): 10*; Revenue (# of estimates): 9*
  Values retrieved from S&P Global.

Regional breakdown (Q1 FY25 vs Q1 FY24):

Key KPIs:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “Gross billings grew by 7.5% year-over-year and 9.5% in constant currency… Advanced Solutions grew by 7%… Endpoint Solutions grew by 8%… all our geographic segments” .
• CEO: “Within strategic technologies, all portfolios, including cloud, cybersecurity, data and analytics and Hyve once again grew by double digits in Q1… Latin America and APG once again grew by double digits in Q1 in constant currency” .
• CFO: “Non-GAAP SG&A expense was $599 million or 2.89% of gross billings… From a distribution perspective, we dropped through 50% of gross profit growth” .
• CFO: “For the second quarter, we expect gross billings… $19.7B to $20.7B… Net revenue $13.9B to $14.7B… Non-GAAP EPS $2.45 to $2.95… tax rate ~23%… interest expense $86M” .

Q&A Highlights

• Hyve dynamics: a newer hyperscaler customer paused demand temporarily; a large strategic component buy expected to ship in Q1 slipped to Q2; margin compressed due to project mix and retaining skilled labor; inventory expected to sell through over coming quarters .
• Tariffs and pre-buying: limited tariff-driven pre-buying; PC growth driven by fleet refresh and Windows 11; Hyve passes tariff costs through and benefits from onshore capabilities vs 2016/17 period .
• Mix and gross-to-net: gross-to-net at ~30% (higher than expected) driven by infrastructure software mix; expectation for ~28–30% range next three quarters .
• Europe and margins: Europe grew but saw vendor mix/back-end margin pressure; teams offset with cost control to maintain operating margin; APJ and LatAm prioritized SMB segments for higher margin growth .
• Peripherals: printing remains challenged; exited a large low-margin NA contract to preserve returns; pivoting to SMB where margins are higher .

Estimates Context

• Q1 FY25 results vs S&P Global consensus:
  • EPS: $2.80 vs $2.9056 consensus (miss)*
  • Revenue: $14.53B vs $14.7897B consensus (miss)*
  • EPS estimates: 10*; Revenue estimates: 9*
    Values retrieved from S&P Global.

Key Takeaways for Investors

• Distribution engine is resilient with strong drop-through and efficiency, even as Hyve faces temporary demand/mix pressures .
• Watch for Hyve shipment recovery and inventory normalization over the next 1–2 quarters; this is the primary swing factor for margins and free cash flow trajectory .
• Mix shift toward software/services continues to elevate gross-to-net, requiring investors to track gross billings alongside revenue to gauge activity volume .
• PCs and mobile remain tailwinds near term; peripherals/printing is structurally weaker—portfolio/pricing discipline is intact .
• Europe grew but margin mix is a watch item; Americas delivered solid operating margin expansion; APJ/LatAm offer higher-growth SMB opportunities at attractive margins .
• Q2 FY25 guide suggests steady mid-single-digit gross billings growth, tax ~23%, interest expense ~$86M; risk/reward hinges on Hyve normalization and continued strategic tech momentum .
• Near-term catalyst: Investor Day (Apr 10) to detail strategy, targets, and capital allocation priorities; potential to reset expectations and highlight digital platform (Digital Bridge, PACE) scale benefits .