Synnex Corporation Debt surged on 78.0% and Net Debt / EBITDA surged on 1.8x from 2.1x to 3.9x
01/10/2019 • About Synnex Corporation (
$SNX) • By InTwits
Synnex Corporation reported FY2018 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Synnex Corporation is a growth stock: FY2018 revenue growth was 17.6%, 5 year revenue CAGR was 13.1% at FY2018 ROIC 9.6%
- EBITDA Margin is relatively stable: 3.9% in FY2018 vs. 3.9% in FY2017 vs. 2.9% in FY2014
- Synnex Corporation has low CAPEX intensity: 5 year average CAPEX/Revenue was 0.6%.
- In the last 5 years the company invested considerably less than D&A: $504m vs. $702m. In FY2018 this situation was still the same: CAPEX was 125 while D&A was 225
- The company has business model with low profitability: ROIC is 9.6%
- It operates with high leverage: Net Debt/EBITDA is 3.9x while industry average is 0.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue surged on 17.6%. Revenue growth showed slowdown in FY18Q4 - it was 5.8% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.6 pp from 20.0% to 21.7% in 2018. EBITDA Margin followed a growing trend at 0.24 pp per annum in the last 5 years.
Gross Margin increased slightly on 0.51 pp from 9.1% to 9.6% in FY2018. Gross Margin followed a growing trend at 0.35 pp per annum in the last 5 years. SG&A as a % of Revenue increased slightly on 0.75 pp from 6.1% to 6.9% in FY2018. Stock Based Compensation (SBC) as a % of Revenue showed almost no change in FY2018. During FY2014-FY2018 SBC as a % of Revenue bottomed in FY2016 at 0.040% and was growing since that time.
Net Income margin showed almost no change in FY2018. During the last 5 years Net Income margin topped in FY2017 at 1.8%. The efficient tax rate was 34.3% in FY2018 while the average for the last five years was 35.1%.
Investments (CAPEX, working capital and M&A)
Synnex Corporation's CAPEX/Revenue was 0.62% in FY2018. The company showed almost no change in CAPEX/Revenue from FY2015 to FY2018. It's average CAPEX/Revenue for the last three years was 0.69%.
Accounts receivable as a % of Revenue increased slightly on 1.5 pp from 16.7% to 18.2% in FY2018. Inventories as a % of Revenue decreased slightly on 0.76 pp from 12.7% to 11.9% in FY2018. Accounts payable as a % of Revenue showed almost no change in FY2018.
Synnex Corporation has spent
$1,070m on M&A in FY2018 which accounts for 5.3% of revenue.
Return on investment
The company operates at low ROIC (9.6%) and ROE (10.4%). ROIC decreased on 4.1 pp from 13.7% to 9.6% in FY2018. ROE decreased on 3.6 pp from 14.0% to 10.4% in FY2018. During FY2014-FY2018 ROE topped in FY2017 at 14.0%.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.9x and Debt / EBITDA is 4.5x. Net Debt / EBITDA jumped on 1.8x from 2.1x to 3.9x in FY2018. Debt jumped on 78.0% while cash dropped on 16.1%. During the last 5 years Net Debt/EBITDA bottomed in FY2015 at 0.9x and was growing since that time.
Synnex Corporation has short term refinancing risk: cash is only 55.4% of short term debt.
Valuation and dividends
Synnex Corporation's trades at EV/EBITDA 9.8x and P/E 15.4x.
The company paid 20.0% of Net Income as dividends in FY2018. Dividends grew on average at 64.4% per annum in the last 5 years).
Management team
Dennis Polk is a Synnex Corporation's CEO. Dennis Polk is a founder and has spent 1 year with the company. CEO total compensation was
$7,665,246 in FY2018 which included
$842,732 salary. Marshall W Witt is a the company's CFO. Marshall W Witt has spent 6 years at the company.
1.9% of the company is owned by insiders. Insider ownership didn't change in 2018.
The company has 229,000 employees. The number of employees surged on 113%. Average revenue per employee in FY2018 was
$87,571 and it dropped on 44.8%.
Financial and operational results
FY ended 11/30/2018
Synnex Corporation ($SNX) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 13,840 | 13,338 | 14,062 | 17,046 | 20,054 | 17.6% |
| Gross Profit | 1,099 | 1,192 | 1,283 | 1,551 | 1,928 | 24.3% |
| SG&A | 790 | 837 | 903 | 1,042 | 1,377 | 32.1% |
| EBITDA | 400 | 458 | 501 | 669 | 776 | 16.1% |
| EBIT | 309 | 355 | 380 | 509 | 551 | 8.3% |
| Tax | 104 | 119 | 121 | 164 | 157 | -4.1% |
| Net Income | 180 | 209 | 235 | 301 | 301 | -0.2% |
| Stock Based Compensation | 14 | 13 | 6 | 12 | 23 | 91.8% |
Balance Sheet
|
|---|
| Cash | 180 | 336 | 381 | 551 | 462 | -16.1% |
| Accounts Receivable | 2,092 | 1,759 | 1,756 | 2,846 | 3,640 | 27.9% |
| Inventory | 1,398 | 1,329 | 1,742 | 2,163 | 2,393 | 10.6% |
| Accounts Payable | 1,586 | 1,445 | 1,683 | 2,627 | 3,048 | 16.0% |
| Short Term Debt | 716 | 92 | 363 | 805 | 833 | 3.4% |
| Long Term Debt | 264 | 639 | 601 | 1,136 | 2,623 | 130.9% |
Cash flow
|
|---|
| Capex | 57 | 100 | 123 | 98 | 125 | 28.5% |
| Dividends | 5 | 23 | 34 | 42 | 60 | 42.9% |
| Acquisitions | 385 | -37 | 415 | 527 | 1,070 | 103.2% |
Ratios
|
|---|
| Revenue growth | 27.6% | -3.6% | 5.4% | 21.2% | 17.6% | |
| EBITDA growth | 50.9% | 14.5% | 9.3% | 33.5% | 16.1% | |
|
|---|
| Gross Margin | 7.9% | 8.9% | 9.1% | 9.1% | 9.6% | 0.5% |
| EBITDA Margin | 2.9% | 3.4% | 3.6% | 3.9% | 3.9% | -0.1% |
| EBIT Margin | 2.2% | 2.7% | 2.7% | 3.0% | 2.7% | -0.2% |
| SG&A, % of revenue | 5.7% | 6.3% | 6.4% | 6.1% | 6.9% | 0.8% |
| SBC, % of revenue | 0.1% | 0.1% | 0.0% | 0.1% | 0.1% | 0.0% |
| Net Income Margin | 1.3% | 1.6% | 1.7% | 1.8% | 1.5% | -0.3% |
| CAPEX, % of revenue | 0.4% | 0.8% | 0.9% | 0.6% | 0.6% | 0.1% |
|
|---|
| ROIC | 13.6% | 13.3% | 13.5% | 13.7% | 9.6% | -4.1% |
| ROE | 11.6% | 11.9% | 12.3% | 14.0% | 10.4% | -3.6% |
| Net Debt/EBITDA | 2.0x | 0.9x | 1.2x | 2.1x | 3.9x | 1.8x |
People
|
|---|
| Insider ownership | 1.9% | 1.9% | 1.9% | 1.9% | 1.9% | 0.0% |
| Employees | 59,000 | 72,500 | 105,500 | 107,400 | 229,000 | 113.2% |
| Revenue/Employee, th. $ | 235 | 184 | 133 | 159 | 88 | -44.8% |
Synnex Corporation ($SNX) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 4,493 | 4,908 | 4,907 | 5,622 | | 27.6% | 24.7% | 14.7% | 5.8% |
| EBITDA | 160 | 173 | 166 | 277 | | 16.3% | 7.6% | 4.1% | 31.2% |
| Net Income | 24 | 94 | 69 | 113 | | -61.0% | 28.2% | -7.8% | 24.3% |
Balance Sheet
|
|---|
| Cash | 372 | 354 | 204 | 462 | | 77.2% | 15.9% | -16.1% | -16.1% |
| Short Term Debt | 695 | 705 | 732 | 833 | | 65.8% | 38.1% | 49.5% | 3.4% |
| Long Term Debt | 1,121 | 1,107 | 1,091 | 2,623 | | 89.9% | 91.1% | 93.3% | 130.9% |
Ratios
|
|---|
| Gross Margin | 9.2% | 8.7% | 8.8% | 11.6% | | -0.5% | -0.7% | 0.1% | 2.9% |
| EBITDA Margin | 3.6% | 3.5% | 3.4% | 4.9% | | -0.3% | -0.6% | -0.3% | 1.0% |
| Net Income Margin | 0.5% | 1.9% | 1.4% | 2.0% | | -1.2% | 0.1% | -0.3% | 0.3% |
Peers in Technology Distributors
Below you can find Synnex Corporation benchmarking vs. other companies in Technology Distributors industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Tech Data Corporation ($TECD) | | 3.2% | -4.7% | -8.3% | 38.9% |
| EACO Corp ($EACO) | | 4.1% | 5.9% | 5.7% | 23.1% |
| Richardson Electronics, Ltd. ($RELL) | | -0.7% | 3.7% | -3.6% | 19.2% |
| Wayside Technology Group, Inc. ($WSTG) | | 12.1% | 9.4% | -61.6% | 13.0% |
| Arrow Electronics, Inc. ($ARW) | | 2.3% | 0.9% | 13.1% | 11.8% |
| |
|---|
| Median (16 companies) | | 4.5% | 4.6% | 4.2% | 8.3% |
|---|
| Synnex Corporation ($SNX) | | -3.6% | 5.4% | 21.2% | 17.6% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Taitron Components Incorporated ($TAIT) | 25.4% | 31.1% | -10.8% | 39.4% | 44.0% |
| Richardson Electronics, Ltd. ($RELL) | 29.7% | 30.0% | 31.6% | 32.1% | 33.7% |
| EACO Corp ($EACO) | 27.5% | 29.3% | 29.3% | 28.5% | 28.5% |
| Surge Components Inc ($SPRS) | 24.5% | 25.0% | 25.2% | 25.2% | 25.6% |
| ADDvantage Technologies Group, Inc. ($AEY) | 32.3% | 35.0% | 32.2% | 30.4% | 23.7% |
| |
|---|
| Median (16 companies) | 15.9% | 16.3% | 14.2% | 16.9% | 16.3% |
|---|
| Synnex Corporation ($SNX) | 7.9% | 8.9% | 9.1% | 9.1% | 9.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Taitron Components Incorporated ($TAIT) | -8.6% | -3.2% | -39.0% | 13.0% | 19.2% |
| CDW Corporation ($CDW) | 7.3% | 7.5% | 7.7% | 7.6% | 7.7% |
| ePlus inc. ($PLUS) | 7.3% | 7.5% | 7.6% | 7.3% | 7.1% |
| EACO Corp ($EACO) | 4.0% | 4.5% | 4.7% | 4.5% | 5.9% |
| Surge Components Inc ($SPRS) | 2.8% | 3.8% | -1.5% | 1.2% | 4.8% |
| |
|---|
| Median (16 companies) | 3.2% | 3.5% | 3.4% | 3.5% | 4.1% |
|---|
| Synnex Corporation ($SNX) | 2.9% | 3.4% | 3.6% | 3.9% | 3.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Richardson Electronics, Ltd. ($RELL) | 2.0% | 3.5% | 3.4% | 3.8% | 3.2% |
| ePlus inc. ($PLUS) | 0.9% | 1.0% | 2.1% | 1.5% | 1.0% |
| EACO Corp ($EACO) | 0.6% | 0.4% | 0.3% | 5.5% | 0.8% |
| Avnet, Inc. ($AVT) | 0.4% | 0.6% | 0.8% | 0.7% | 0.8% |
| PC Connection, Inc. ($CNXN) | 0.3% | 0.5% | 0.4% | 0.4% | 0.8% |
| |
|---|
| Median (16 companies) | 0.5% | 0.5% | 0.4% | 0.5% | 0.5% |
|---|
| Synnex Corporation ($SNX) | 0.4% | 0.8% | 0.9% | 0.6% | 0.6% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Surge Components Inc ($SPRS) | 6.7% | 9.5% | -4.0% | 3.9% | 24.6% |
| CDW Corporation ($CDW) | 16.5% | 17.3% | 18.8% | 20.1% | 23.1% |
| EACO Corp ($EACO) | 19.6% | 21.8% | 22.2% | 16.1% | 21.2% |
| ePlus inc. ($PLUS) | 20.1% | 21.0% | 21.5% | 22.8% | 20.8% |
| Insight Enterprises, Inc. ($NSIT) | 17.0% | 17.4% | 20.7% | 19.3% | 20.0% |
| |
|---|
| Median (17 companies) | 11.9% | 11.9% | 12.1% | 9.9% | 11.8% |
|---|
| Synnex Corporation ($SNX) | 13.6% | 13.3% | 13.5% | 13.7% | 9.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Anixter International Inc. ($AXE) | 3.2x | 4.7x | 3.6x | 3.0x | 3.1x |
| ScanSource, Inc. ($SCSC) | -1.4x | -0.9x | 0.2x | 0.6x | 2.5x |
| CDW Corporation ($CDW) | 3.2x | 3.3x | 2.8x | 2.7x | 2.4x |
| Arrow Electronics, Inc. ($ARW) | 1.8x | 2.2x | 2.2x | 2.3x | 2.2x |
| Avnet, Inc. ($AVT) | 1.2x | 1.1x | 2.2x | 1.5x | 2.2x |
| |
|---|
| Median (15 companies) | -0.2x | -0.4x | 0.1x | 0.9x | 0.5x |
|---|
| Synnex Corporation ($SNX) | 2.0x | 0.9x | 1.2x | 2.1x | 3.9x |
