Release Date: June 24, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TD Synnex Corp (SNX, Financial) reported a strong second quarter with gross billings growing 12% year over year, exceeding the high end of their guidance.
- The company experienced significant growth in software billings, particularly in cloud, cybersecurity, and infrastructure software, with a 20% increase.
- TD Synnex Corp (SNX) was recognized with over 40 honors in the channel, including being named HPE's global distribution partner of the year.
- The company achieved a four-day improvement in its cash conversion cycle and generated approximately $543 million in free cash flow for the quarter.
- TD Synnex Corp (SNX) continues to see strong growth in PCs, driven by the refresh cycle, and has also seen a return to growth in networking after multiple weak quarters.
Negative Points
- Despite strong growth, TD Synnex Corp (SNX) is cautious about the macroeconomic environment, including potential impacts from global trade developments and geopolitical tensions.
- Gross margins declined by 21 basis points year over year, primarily due to unrealized FX losses and program mix.
- The company noted a demand pull forward, particularly in PCs, which may impact future quarters' performance.
- Interest expenses and finance charges were slightly higher than expectations, impacting overall financial performance.
- There is uncertainty regarding the impact of tariffs and other economic factors, leading to a cautious outlook for the second half of the year.
Q & A Highlights
Q: Can you provide more details on the demand pull forward noted in your remarks, particularly regarding PCs, and any financial impacts?
A: Patrick Zammit, CEO: We saw some demand pull forward, particularly in PCs, which benefited from $100 million to $200 million in sales. The demand for PCs remains strong, driven by the refresh cycle and Windows 11 upgrades. Marshall Witt, CFO: The pull forward contributed approximately $10 million in gross profit. We expect the ES and AS mix to remain balanced in the second half.
Q: Given the pull-forward dynamic and typical public sector strength in Q3, why does the Q3 guidance appear sub-seasonal?
A: Marshall Witt, CFO: We are being prudent due to expected demand softening in the second half, consistent with our Analyst Day outlook. We anticipate 3% to 4% growth in Q4, with typical seasonality. Patrick Zammit, CEO: We remain positive on public sector prospects, especially in the Fed business, but are cautious due to macroeconomic uncertainties.
Q: Can you elaborate on the demand linearity during the quarter and any notable trends in AS or ES?
A: Marshall Witt, CFO: We saw strong growth in March and April, with some softening in May. Overall, it was a solid quarter. Hyve performed exceptionally well, growing in the high teens. Patrick Zammit, CEO: Software, public cloud, and security remain strong. PCs continue to benefit from the refresh cycle, and networking has returned to growth.
Q: Are you seeing any current weaknesses in regions or product lines, or is it more about macroeconomic concerns?
A: Patrick Zammit, CEO: Currently, everything is in line with our guidance. We are cautious due to potential impacts from tariffs and geopolitical issues, but no immediate concerns have arisen.
Q: Can you discuss the strong growth in Hyve and its impact on margins?
A: Patrick Zammit, CEO: Hyve saw strong growth, particularly in the ODM/CM segment, driven by our largest customer. Demand from a second customer has returned. Marshall Witt, CFO: Margins were impacted by unrealized FX losses, which we expect to recover. The mix of programs also affected margins, but we anticipate improvement in Q3.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
