SYNNEX Corporation (NYSE: SNX) stock lost over 5.5% on 25th March, 2020 (as of 9:36 am GMT-4; Source: Google finance) (Source: Google finance) after the company posted mixed results for the first quarter of FY 20. Due to the challenging current environment, SYNNEX has not provided financial guidance for the second quarter of fiscal 2020 and suspended its quarterly cash dividend, effective immediately. Regarding the company’s stock buyback portion of the capital program, SNX had no buybacks in Q1 and terminated the repurchase program in early March. Further, with the banking partners, the company has made significant progress on the final spin financing for Concentrix and has completed most of the internal administration related to the spin. As a result, the company has planned to announce that the spin would occur more likely than not at the start of the Q3 or June 1 of this year. The company are still currently committed to doing the spin, but it will be delayed as the company’s main focus will continue to be on managing the business on a day-to-day basis.
Moreover, the headline revenue growth was muted though the underlying fundamentals were strong. The company’s Concentrix business grew to SNX’s expectations and it would have been better likely, if not for the initial phases of COVID-19 in Asia that had affected some of the company’s operations starting in late January. The company’s TS distribution business was very strong with above-market growth overall. Similar to Concentrix, there was some weakness at the end of the first quarter mainly due to the disruption in the supply chain related to the initial phases of the virus. Weighed on TS growth was the company’s Hive cloud manufacturing business as the company posted a year-over-year top line decline.
SNX in the first quarter of FY 20 has reported the adjusted earnings per share of $3.26, beating the analysts’ estimates for the adjusted earnings per share of $3.14, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 0.3 percent to $5.26 billion in the first quarter of FY 20, missing the analysts’ estimates for revenue by 2.37%.
Additionally, to a varying degree, due to COVID-19, the company is facing disruption in every region in which it operates. Currently, the company had 230,000 staff in the Concentrix business, of which more than 150,000 are living within restricted movement and work situations that are indicated to last a few days to a few more weeks, but most likely will be extended. Of the 150,000 staff in restricted movement locations, about 70,000 are unable to work currently at all.