TD SYNNEX Corporation Q3 FY2025 earnings call

• Strong execution, differentiated go-to-market strategy, and global end-to-end portfolio contributed to record non-GAAP gross billings and diluted earnings per share. • Onboarded a cybersecurity vendor, growing the business from 0 to hundreds of millions in 18-24 months. • Enhanced AI enablement program with AgenTiKi, security for AI, and AI factory. • HIVE had strong performance with diversified portfolio and customer mix shift. • Launched TD SYNNEX Partner First in North America, a unified portal to optimize partner experience.

Consolidated gross billings were $22.7 billion, growing 12% in constant currency. Excluding HIVE, gross billings increased 9% year over year. Hive had gross billings increasing in the mid-thirties year over year, and ODM Centimeters gross billings increasing 57% year over year. Endpoint solutions portfolio increased gross billings 10% year over year driven by PCs and AI PCs. Advanced Solutions portfolio increased gross billings by 13% year over year, 8% year over year when excluding Hive. Software experienced a 26% increase in gross billings. Latin America and Asia Pacific and Japan each had strong double-digit gross billings growth in the quarter.

• Q4 gross billings expected in the range of $23 to $24 billion, representing an increase of approximately 11% at the midpoint. • Net revenue expected in the range of $16.5 billion to $17.3 billion. • Non-GAAP net income expected in the range of $281 million to $322 million, non-GAAP diluted earnings per share in the range of $3.45 to $3.95 per diluted share. • Board approved a cash dividend of $0.44 per common share payable on 10/31/2025.

• Actual results may differ from forward-looking statements due to risks in SEC filings. • Federal business softness offset by state and local strength in US public sector. • HIVE is a lumpy business with potential capacity and supply chain risks.

Q: Last quarter you talked about the potential for Hive potentially decline in the fiscal 4Q on tough compares. Given the strong results in the August and the November guide and the momentum we're seeing in cloud CapEx trends more broadly, should we think about Hive Dynamics in fiscal 4Q? And then, any high-level color on as we look to next year?

A: Yeah. So indeed that we were a little bit cautious quarter. As you know, I mean, HIVE is a lumpy business. But, I mean, the quarter did I mean, went extremely well as the distribution, by the way. So, what explains the overperformance? First, I mean, we saw growth, significant growth across all the programs and all the customers. So that's point number one. Point number two, we see our second customer demand come back and, we are confident by the way, for for next quarter too. It's the second thing. Then also, we saw more demand for supply chain services than expected. And, so the combination explains the other performance of HIVE. We believe that I mean, those dynamics will remain in Q4 and is reflected our guidance. And, Maya, this is Marshall. Just thinking about the the growth expectations being above what we initially had thought. As we said in previous discussions, we continue to make investments in skill sets, engineering capabilities, capacity, manufacturing, etcetera, to ensure that we stay ahead of capacity requirements.

Q: Just any comments around the pull forward for PCs in the quarter? I believe last quarter anywhere from $100 million to $200 million. And if I could stick one other question in on free cash flow, should we still expect $1.1 billion for 2025?

A: On the first one, so again, we looked at it. As as you know, it difficult to assess, but we think it's very limited. Mean, what we see is we continue to see very good momentum on PCs. Across the world. So all regions are contributing to to it. And, again, it's driven really by the refresh related to Windows 11, the refresh of the base, was built during the pandemic, we also see the start of some momentum on AIPC. So some customers coming to us, because they want an AI PC. Again, the vast majority is related to the refresh. And, David, in regards to free cash flow expectations for the year, our expectation is that the free cash flow will be approximately $800 million for the year. Let me give you some some color behind that. As we were thinking about h two coming out of h one, we had given a miss single digit growth rate to the overall portfolio with distribution being a little bit above and and high being that flat to down. Clearly, the results for quarter '3 showed a 10% growth rate and expectations again for a 10% growth rate in Q4. So in essence, that has lifted the overall working capital requirement for the entire portfolio, both distribution and HIVE. As you know, HIVE has a little bit longer cash conversion cycle given what is required in terms of raw material to ultimately finish rack and how that fell through. And staying ahead of our customers' requirements in terms of ensuring they have a a smooth supply chain. If we think about quarter four, which ultimately is where this goes, we if you look at our our press release, you could see that our year to date free cash flow was zero. Coming into Q4 So how do we get there? And thinking about four cash flow, we think that's gonna be around free cash flow is maybe around $850 million. It's roughly divided evenly between earnings growth for the quarter and expected cash conversion improvement of two to three days. I will say with that and and thinking about what we had said at Investor Day, we still believe over the medium term, cycle that netting net income to free cash flow conversion should stay right around 95%.

Q: How sustainable do we see this being? Is there any pull forward that we saw from the, you know, fourth quarter fourth quarter and the third quarter?

A: Yeah. So so good morning. Again, I mean, if you look at what is driving the other performance, so if I I think about distribution, it's it's PCs, it's software, it's cybersecurity, it's compute, I mean, we believe that, that dynamic will continue into Q4. And then HIVE benefits from a very favorable environment, Hyperscalers are confirming or increasing their spend. And we are positioned on programs where the demand continues to be healthy.

Q: I was just wondering if you could talk a little bit about the progress in onboarding, new customers beyond the the two main ones that you have? And then, you know, secondly, could you just talk about whether the growth in high volumes tend to be more from the traditional server side or AI server side?

A: So we continue to make good progress in what we'll call programs as Patrick mentioned earlier. Programs to us is the way we define our ability to continue to to grow our presence in in Hive and ODMCM. And data center supply chain management. We do expect to continue to diversify our portfolio, our pipeline remains quite healthy and strong that continues to grow. We're we will continue to seek out more customers in the super six and beyond that. And so we feel good about where that's heading. Just adding that the growth is coming from networking, and compute, and more traditional compute. We have some GPU projects in in the pipe, but, when you look at Q3, the vast majority of Q4, again, the demand will come from networking and and traditional compute.