Q1 2025 Earnings Summary
- Strong growth across strategic technologies with cloud, cybersecurity, data and analytics growing by over 20% in Q1, positioning the company well in high-growth segments of the IT market while maintaining mid-single-digit overall growth
- Disciplined operational execution in distribution with 50% of gross profit growth dropping through to the bottom line, demonstrating the company's commitment to profitable growth and operating efficiencies despite macroeconomic challenges
- Geographic expansion opportunity with double-digit growth in Latin America and APJ regions where TD SYNNEX has a modest market share compared to North America and Europe, providing runway for continued growth while focusing on higher-margin SMB markets in these regions
- Significant issues with the Hyve business segment, including a "temporary demand pause" from a major customer that could last "a few quarters," component shipment delays, and the need to maintain specialized resources despite lower demand, all negatively impacting margins and profitability
- Severe cash flow problems with $800 million in free cash flow usage for Q1, driven primarily by a $1 billion increase in net working capital due to elevated Hyve inventory, with recovery expected to take multiple quarters to normalize
- Declining profitability metrics with gross profit margin down 40 basis points year-over-year and non-GAAP operating income as a percentage of gross billings declining 28 basis points year-over-year, primarily attributed to Hyve performance issues
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | ~4% increase (from $13,975.3M to $14,531.7M) | Total Revenue grew by 4% YoY driven by robust performance in key regions—Americas (+6.15%) and APJ (+5.2%)—which offset the largely flat growth in Europe; this improvement reflects underlying market recovery and strong portfolio performance compared to the prior period. |
Americas Revenue | +6.15% (from $7,903.1M to $8,389.3M) | Americas revenue increased by 6.15% YoY fueled by continued expansion in advanced solutions and favorable regional market conditions, building on prior period momentum that delivered higher sales volumes and improved product mix. |
APJ Revenue | +5.2% (from $954.9M to $1,004.6M) | APJ revenue grew by 5.2% YoY as increased demand in the region, alongside beneficial operational adjustments and an expanding advanced solutions portfolio, built on the previous quarter’s improvements. |
Europe Revenue | ~0.4% increase (from $5,117.3M to $5,137.8M) | Europe's revenue remained essentially flat with only a marginal 0.4% increase, indicating that market conditions and product mix in the region have stayed stable, echoing the subdued trends from the prior period. |
Operating Income | ~0.6% increase (nearly unchanged) | Operating Income was nearly flat with a modest 0.6% increase as revenue gains were largely offset by rising costs and expense pressures, reflecting a similar interplay of factors as observed in previous quarters. |
Net Income | -2.7% decrease (from $172,128K to $167,537K) | Net Income declined by 2.7% YoY despite revenue gains, indicating that increased operating expenses or non-operating costs (such as higher interest expenses or share repurchases) have compressed margins relative to the previous period. |
Total Current Assets | +7.4% increase (to $19,958,873K) | Total current assets expanded by approximately 7.4% YoY, reaching $19,958,873K, which suggests improved liquidity; the increase is likely attributable to higher balances in inventories and receivables, building on trends observed in earlier periods. |
Operating Cash Flow | Turned strongly negative (from $384,709K to -$747,997K) | Operating cash flow shifted from a positive $384,709K to –$747,997K YoY, highlighting potential cash management concerns; significant changes in working capital—such as reduced accounts payable and increased inventory investments—have undermined cash flow compared to the previous period. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Gross Billings ($USD Billions) | Q1 2025 | $19.7 billion to $20.7 billion | no current guidance | no current guidance |
Net Revenue ($USD Billions) | Q1 2025 | $14.4 billion to $15.2 billion | no current guidance | no current guidance |
Net Income ($USD Millions) | Q1 2025 | $224 million to $266 million | no current guidance | no current guidance |
Diluted EPS ($USD) | Q1 2025 | $2.65 to $3.15 per diluted share | no current guidance | no current guidance |
Tax Rate (%) | Q1 2025 | 23% | no current guidance | no current guidance |
Interest Expense ($USD Millions) | Q1 2025 | $78 million | no current guidance | no current guidance |
Gross Billings ($USD Billions) | Q2 2025 | no prior guidance | $19.7 billion to $20.7 billion | no prior guidance |
Net Revenue ($USD Billions) | Q2 2025 | no prior guidance | $13.9 billion to $14.7 billion | no prior guidance |
Non-GAAP Net Income ($USD Millions) | Q2 2025 | no prior guidance | $205 million to $247 million | no prior guidance |
Diluted EPS ($USD) | Q2 2025 | no prior guidance | $2.45 to $2.95 per diluted share | no prior guidance |
Tax Rate (%) | Q2 2025 | no prior guidance | 23% | no prior guidance |
Interest Expense ($USD Millions) | Q2 2025 | no prior guidance | $86 million | no prior guidance |
Currency Impact | Q2 2025 | no prior guidance | No material currency impact anticipated at a euro-to-dollar exchange rate of 1.08 | no prior guidance |
Free Cash Flow ($USD Billions) | FY 2025 | $1.1 billion | no current guidance | no current guidance |
Full FY 2025 Gross Billings Growth | FY 2025 | Mid-single-digit percentage | no current guidance | no current guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Net Revenue | Q1 2025 | $14.4B to $15.2B | $14,531.7 million | Met |
Net Income | Q1 2025 | $224 million to $266 million | $167.537 million | Missed |
Diluted Earnings Per Share | Q1 2025 | $2.65 to $3.15 | $1.98 | Missed |
Interest Expense | Q1 2025 | $78 million | $87.88 million | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Strategic Technology Growth | Q2, Q3, and Q4 calls consistently highlighted strong, double‐digit growth in cloud, cybersecurity, data analytics, and AI—with evolving emphasis on integrated AI initiatives and robust performance across geo‐segments | Q1 2025 reported over 20% growth, with AI-related products ramping up and playing an increasingly larger role in the portfolio | Consistent robust growth with an increasing strategic focus on AI integration |
Hyve Business Performance | Earlier periods (Q2–Q4) showed strong revenue growth with recurring challenges—temporary demand pauses, margin headwinds from cost recoveries, and operational nuances affecting profitability | Q1 2025 again registered double-digit growth despite a temporary demand pause from one customer and higher inventory levels, with management expecting normalization soon | Steady long-term growth with recurring short-term operational challenges that are expected to normalize |
Margin Pressure and Profitability Concerns | Q2–Q4 discussions detailed margin declines due mainly to tough comparisons in Hyve, cost recoveries, and shifts in business mix, but noted ongoing cost discipline | Q1 2025 continued to experience margin pressure, particularly attributed to Hyve’s temporary issues and investments in design and assembly, though strategic tech growth is seen as a counterbalance | Persistent margin pressures remain while strategic investments and cost discipline provide some offset |
PC and Networking Market Trends and Recovery | Q2 to Q4 calls described a recovering PC market—with low to mid single-digit growth—and highlighted normalization in networking amid tough prior-year comparisons, with expectations bolstered by WiFi 7 and data center upgrades | Q1 2025 evidenced high single-digit PC growth with a positive outlook on networking recovery as market dynamics continue to evolve | A steady recovery is evident with modest improvements and an overall positive future outlook in both segments |
Global Expansion and Regional Market Opportunities | In earlier periods, expansion was emphasized with successes in India, Japan (cybersecurity), and strong performance in APJ and European markets | Q1 2025 continued the momentum with a widened global reach—30,000 partners, robust digital marketplace growth, and double-digit constant currency growth in APJ and Latin America | Consistent emphasis on global expansion, now supported by enhanced digital initiatives and stronger regional performance |
Cash Flow Generation and Liquidity Management | Q2–Q4 showcased strong free cash flow generation, disciplined capital returns, and improvements in the cash conversion cycle, reflecting a robust liquidity profile | Q1 2025 noted higher free cash flow usage (around $800 million) driven by increased working capital (especially due to Hyve inventory), yet liquidity indicators remain healthy | Generally strong liquidity management with short-term working capital challenges from inventory levels impacting current cash flow |
Operational Execution and Efficiency Improvements | Q2–Q4 calls repeatedly emphasized improvements through digital transformation, ERP consolidation, and cost discipline (reflected in improved SG&A-to-gross profit ratios) | Q1 2025 maintained the focus on operational efficiency with improved SG&A efficiency, ongoing digital platform initiatives (Digital Bridge, PACE), and cost controls | A continuous drive for higher operational efficiency, leveraging digital tools and cost management for stable performance |
Macroeconomic and Geopolitical Uncertainties | Q4 2024 mentioned European macro-political uncertainties while Q2 and Q3 did not address these factors explicitly | Q1 2025 acknowledged an evolving macroeconomic environment and external uncertainties, emphasizing disciplined execution and strategic resilience across regions | An increased emphasis on managing external uncertainties through geographical diversification and resilient operational strategies |
Delayed Adoption of AI Products and GenAI Impact | Q2 and Q3 discussions noted slower-than-expected ramp-up of AI PCs and projected GenAI impacts materializing more in the longer term; Q4 also touched on AI compute opportunities | Q1 2025 did not explicitly flag delays; instead, it highlighted a continuous quarter-over-quarter increase in the weight of AI products, suggesting the ramp is gaining momentum | A shift from earlier concerns about delayed AI adoption toward a more positive narrative as AI product presence grows steadily |
Shareholder Returns and Capital Allocation Strategies | Q2–Q4 maintained a disciplined approach to returning free cash flow via a balanced mix of share buybacks and dividends, with consistent dividend increases and repurchase authorizations | Q1 2025 continued this trend with $138 million returned to shareholders and an approved dividend, reaffirming a steady, opportunistic capital allocation framework | A consistent and disciplined capital allocation strategy, with steady shareholder returns reinforcing financial stability |
Customer Investment Pauses Impacting Revenue | Q2 2024 acknowledged that any customer investment pauses, particularly in AI, would be short-term (3–6 months) without long-term revenue impact | Q1 2025 specifically noted temporary demand pauses impacting Hyve revenue, with management expecting normalization in the upcoming quarters | Recognition of short-term customer investment pauses that are anticipated to be transient and normalized over the near term |
Growth in Endpoint and Advanced Solutions Segments | Q2–Q4 demonstrated steady growth with Endpoint Solutions showing modest increases (ranging from 1% to 5%) and Advanced Solutions achieving stronger growth (5% to 12%) driven by multiple technology areas | Q1 2025 reported 8% growth in Endpoint Solutions and 7% growth in Advanced Solutions, confirming consistent revenue expansion across both segments | Ongoing steady growth in both segments with relatively stable performance, despite moderate fluctuations across quarters |
SNX Q1 2025 Earnings Call Q&A Summary
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Hyve Performance
Q: What caused Hyve's underperformance this quarter?
A: Hyve grew double digits but fell short of expectations due to a delayed component shipment from Q1 to Q2 and demand shortfalls from a customer that ramped last year, which may last a few quarters. Management remains confident in Hyve's long-term outlook given the $250 billion hyperscaler market, though it's temporarily impacting margins and cash flow. -
Cash Flow Outlook
Q: Why was cash flow weak and what's the outlook?
A: Free cash flow usage was approximately $800 million primarily due to elevated Hyve inventory and timing of payables. Management expects recovery of 2-3 days per quarter in cash conversion, targeting 20-day cash conversion by end of FY25. They remain committed to the $1.1 billion free cash flow target for the year. -
Full Year Guidance
Q: Any changes to the full year guidance?
A: Management maintains mid-single-digit gross billings growth for FY25 despite Hyve's temporary shortfalls. They expect mid-single-digit distribution growth with strategic technologies (security, cloud, data analytics) growing over 20%, which will offset Hyve softness. They remain committed to generating $1.1 billion of free cash flow. -
Distribution Business
Q: How is the core distribution business performing?
A: Distribution showed mid-single-digit growth with stable operating margins and strong profitability, dropping through more than 50% of GP growth to the bottom line. Management is cautiously optimistic about the market, seeing strength in PC refresh, cloud, security, and emerging AI-related products. -
Capital Allocation
Q: What are capital allocation priorities given stock performance?
A: Management returned $138 million to stockholders in Q1 through $101 million in share repurchases and $37 million in dividends. They remain opportunistic on buybacks, having allocated 72% of free cash flow to shareholders in FY24 and plan similar allocation in FY25 given the favorable ROI. -
Geographic Performance
Q: How did different regions perform?
A: All regions showed growth, with Latin America and APJ growing double digits in constant currency. Europe grew faster than the market despite some vendor mix headwinds affecting back-end margins. Management sees significant growth opportunity in APJ and Latin America where they focus on higher-margin SMB segments. -
Vendor Price Increases
Q: Are vendor price increases affecting demand?
A: Some vendors are beginning to raise prices, but these increases are "relatively limited" and not widespread. Management will pass these increases through to the channel, creating a potential short-term tailwind, though the impact on volumes remains to be seen. -
Digital Initiatives
Q: How are digital initiatives helping in the current environment?
A: Digital Bridge and their platform offerings are helping customers automate transactions and reduce costs. The new Microsoft Teams app connector enables partners to access TD SYNNEX platforms directly from applications they use daily, creating efficiencies and differentiating the company in the market. -
Peripherals Market
Q: Why weren't peripherals strong despite PC growth?
A: Peripherals were affected by two factors: the printing market continues to face challenges with low single-digit decline, and in North America, they declined a large unprofitable business. Management is now focusing on higher-margin SMB segments to improve profitability.