Financial News

Tech Data Reports First Quarter Fiscal Year 2021 Results

Tech Data (NASDAQ: TECD) (the “Company”) today announced its financial results for the first quarter ended April 30, 2020.

 
 
First quarter ended April 30,
($ in millions,
except per share amounts)

2020

2019

Y/Y
Change

Net Sales

$8,175.2

$8,406.4

-3%

Gross profit

$531.7

$509.4

4%

Gross margin

6.50%

6.06%

44 bps

SG&A expenses (GAAP)

$427.9

$405.5

6%

% of net sales

5.23%

4.82%

41 bps

SG&A expenses (Non-GAAP)

$402.8

$384.6

5%

% of net sales

4.93%

4.58%

35 bps

Operating income (GAAP)

$86.1

$97.6

-12%

Operating margin (GAAP)

1.05%

1.16%

-11 bps

Operating income (Non-GAAP)

$128.9

$124.8

3%

Operating margin (Non-GAAP)

1.58%

1.48%

10 bps

Net income (GAAP)

$48.1

$55.4

-13%

Net income (Non-GAAP)

$80.1

$75.9

5%

EPS - diluted (GAAP)

$1.34

$1.49

-10%

EPS - diluted (Non-GAAP)

$2.22

$2.04

9%

 

A reconciliation of GAAP to non-GAAP financial measures is presented in the financial tables of this press release.

This information is also available on the Investor Relations section of Tech Data’s website at https://investor.techdata.com/.

Regional Financial Highlights for the First Quarter Ended April 30, 2020:

First quarter ended April 30,
($ in millions)

2020

2019

Y/Y
Change

AMERICAS

Net Sales

$3,944.8

$3,789.2

4%

% of WW net sales

48%

45%

Operating income (GAAP)

$49.8

$68.6

-27%

% of net sales

1.26%

1.81%

-55 bps

Operating income (Non-GAAP)

$83.7

$84.7

-1%

% of net sales

2.12%

2.24%

-12 bps

EUROPE

Net Sales

$3,971.1

$4,309.5

-8%

% of WW net sales

49%

51%

Operating income (GAAP)

$45.9

$36.4

26%

% of net sales

1.16%

0.85%

31 bps

Operating income (Non-GAAP)

$52.0

$45.6

14%

% of net sales

1.31%

1.06%

25 bps

ASIA PACIFIC

Net Sales

$259.3

$307.7

-16%

% of WW net sales

3%

4%

Operating (loss) income (GAAP)

($3.2)

$0.9

NM

% of net sales

-1.25%

0.28%

-153 bps

Operating (loss) income (Non-GAAP)

($0.5)

$2.8

NM

% of net sales

-0.19%

0.91%

-110 bps

Note: NM = not meaningful, WW = worldwide

Stock-based compensation expense was $6.3 million, a decrease of $2.0 million, compared to the prior-year quarter. These expenses are excluded from the regional operating results and presented as a separate line item in the company’s segment reporting (see the GAAP to non-GAAP reconciliation in the financial tables of this press release).

  • Net sales were $8.2 billion, a decrease of 3 percent compared to the prior-year quarter. Portfolio optimization actions reduced net sales by approximately 3 percent. On a constant currency basis, net sales decreased 1 percent.
    • Americas: Net sales were $3.9 billion, an increase of 4 percent compared to the prior-year quarter. Portfolio optimization actions reduced net sales by approximately 2 percent. On a constant currency basis, net sales increased 5 percent.
    • Europe: Net sales were $4.0 billion, a decrease of 8 percent compared to the prior-year quarter. Portfolio optimization actions reduced net sales by approximately 3 percent. On a constant currency basis, net sales decreased 5 percent.
    • Asia Pacific: Net sales were $0.3 billion, a decrease of 16 percent compared to the prior-year quarter. Portfolio optimization actions reduced net sales by approximately 12 percent. On a constant currency basis, net sales decreased 12 percent.
  • Gross profit was $531.7 million, an increase of 4 percent compared to the prior-year quarter. As a percentage of net sales, gross profit was 6.50 percent, an improvement of 44 basis points compared to the prior-year quarter. On a constant currency basis, gross profit increased 7 percent.
  • Net cash used by operations during the quarter was $8 million.
  • Return on invested capital for the trailing twelve months was 12 percent, compared to 13 percent in the prior year. Adjusted return on invested capital for the trailing twelve months was 15 percent, compared to 14 percent in the prior year.

“With the onset of the global COVID-19 crisis, the first quarter brought challenges to businesses across geographies and sectors, including the IT ecosystem. With this backdrop, Tech Data once again is proving its role as the vital link in the IT supply chain, delivering the critical technologies and solutions needed to address rapidly evolving business needs, including enabling remote work. Throughout Q1, we experienced strong demand for Endpoint Solutions driven by remote work and business continuity needs. I’d like to acknowledge the dedication and commitment of our worldwide colleagues who continue to support our channel partners and each other with excellence in these unprecedented times,” said Rich Hume, chief executive officer, Tech Data. “The quarter also brought with it another milestone toward completing our acquisition by Apollo when we received shareholder approval of the transaction, which we look forward to closing upon completion of customary closing conditions.”

Acquisition Update

On November 12, 2019, the Company entered into an Agreement and Plan of Merger, as subsequently amended on November 27, 2019 (the ''Merger Agreement''), with the affiliates of certain funds (the “Apollo Funds”), managed by affiliates of Apollo Global Management, LLC (“Apollo”), a leading global alternative investment manager. Pursuant to the Merger Agreement, the affiliates of the Apollo Funds will acquire all the outstanding shares of the Company’s common stock for $145 per share in cash (the “Merger”). On February 12, 2020, the Company’s shareholders held a special meeting and approved the Merger Agreement.

The Company has received all regulatory approvals necessary to complete the Merger, except for the approval of the Australian Foreign Investment Review Board (“AFIRB”), which has the matter under consideration. The Company and Apollo are still targeting a closing in the first half of calendar year 2020, although this timing may shift based on the timeline for receipt of Australian regulatory approval. We expect to proceed with closing the transaction promptly after the final approval from the AFIRB is received, taking into account the timing requirements of the Merger Agreement, including the Marketing Period (as defined in the Merger Agreement).

In light of the pending acquisition by Apollo, the Company does not plan to host an earnings conference call nor provide forward-looking guidance. A copy of this press release, along with a supplemental slide deck can be accessed at https://investor.techdata.com/overview/default.aspx.

COVID-19 Response

The Company’s focus remains on protecting the health and well-being of our colleagues, while continuing to provide the best possible service levels to our channel partners and supporting our communities. Additional information about Tech Data’s COVID-19 response can be found at https://www.techdata.com/communications/default.aspx.

Non-GAAP Financial Information

The non-GAAP financial information contained in this release is included with the intention of providing investors a more complete understanding of the Company’s operational results and trends, but should only be used in conjunction with results reported in accordance with Generally Accepted Accounting Principles (“GAAP”). Certain non-GAAP measures presented in this release or other releases, presentations and similar documents issued by the Company include sales, income or expense items as adjusted for the impact of changes in foreign currencies (referred to as “constant currency”), non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP earnings per diluted share and Adjusted Return on Invested Capital. Certain non-GAAP measures also exclude acquisition-related intangible assets amortization expense, benefits associated with legal settlements, acquisition, integration and restructuring expenses, goodwill impairment, gain on disposal of subsidiary, tax indemnifications, changes in deferred tax valuation allowances and the impact of U.S. tax reform. A detailed reconciliation of the adjustments between results calculated using GAAP and non-GAAP in this release is contained in the attached financial schedules.

Forward-Looking Statements

This communication includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Such forward-looking statements are inherently uncertain, and shareholders and other potential investors must recognize that actual results may differ materially from Tech Data’s expectations as a result of a variety of factors. Such forward-looking statements are based upon management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which Tech Data is unable to predict or control, that may cause Tech Data’s actual results, performance, or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. Risks and uncertainties related to the proposed merger include, but are not limited to, the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; the failure of the parties to satisfy conditions to completion of the proposed merger, including the failure of the parties to obtain required regulatory approvals; the risk that regulatory or other approvals are delayed or are subject to terms and conditions that are not anticipated; and the risks, uncertainties, and other factors detailed from time to time in Tech Data’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed or furnished with the Securities and Exchange Commission (the “SEC”).

Many of these factors are beyond Tech Data’s control. Tech Data cautions investors that any forward-looking statements made by Tech Data are not guarantees of future performance. Tech Data disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.

About Tech Data

Tech Data connects the world with the power of technology. Our end-to-end portfolio of products, services and solutions, highly specialized skills, and expertise in next-generation technologies enable channel partners to bring to market the products and solutions the world needs to connect, grow and advance. Tech Data is ranked No. 90 on the Fortune 500® and has been named one of Fortune’s World’s Most Admired Companies for 11 straight years. To find out more, visit www.techdata.com or follow us on Twitter, LinkedIn, Facebook and Instagram.

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

 
Three months ended April 30,

2020

2019

Net sales

$

8,175,174

$

8,406,424

Cost of products sold

7,643,515

7,897,045

Gross profit

531,659

509,379

Operating expenses:
Selling, general and administrative expenses

427,863

405,534

Acquisition, integration and restructuring expenses

17,681

6,221

445,544

411,755

Operating income

86,115

97,624

Interest expense

17,034

26,257

Other expense (income), net

8,948

(693

)

Income before income taxes

60,133

72,060

Provision for income taxes

12,068

16,660

Net income

$

48,065

$

55,400

 
Earnings per share:
Basic

$

1.35

$

1.50

Diluted

$

1.34

$

1.49

Weighted average common shares outstanding:
Basic

35,688

37,011

Diluted

36,002

37,247

 

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except par value and share amounts)

 

April 30,

January 31,

2020

2020

ASSETS

(unaudited)

 
Current assets:
Cash and cash equivalents

$

828,941

$

841,366

Accounts receivable, net

5,367,227

6,192,203

Inventories

3,066,273

3,042,541

Prepaid expenses and other assets

388,790

362,182

Total current assets

9,651,231

10,438,292

Property and equipment, net

280,736

287,150

Goodwill

975,923

973,257

Intangible assets, net

1,052,033

1,094,676

Other assets, net

416,685

475,234

Total assets

$

12,376,608

$

13,268,609

 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable

$

6,393,221

$

7,259,246

Accrued expenses and other liabilities

1,122,656

1,112,457

Revolving credit loans and current maturities of long-term debt, net

108,157

112,882

Total current liabilities

7,624,034

8,484,585

Long-term debt, less current maturities

1,337,541

1,338,136

Other long-term liabilities

308,542

326,433

Total liabilities

$

9,270,117

$

10,149,154

 
Shareholders’ equity:
Common stock, par value $0.0015; 200,000,000 shares authorized; 59,245,585 shares issued at April 30, 2020 and January 31, 2020

$

89

$

89

Additional paid-in capital

838,882

855,020

Treasury stock, at cost (23,587,200 and 23,819,230 shares at April 30, 2020 and January 31, 2020)

(1,186,461

)

(1,198,132

)

Retained earnings

3,509,079

3,461,014

Accumulated other comprehensive (loss) income

(55,098

)

1,464

Total shareholders' equity

3,106,491

3,119,455

Total liabilities and shareholders' equity

$

12,376,608

$

13,268,609

 

TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)

 
Three months ended April 30,

2020

2019

Cash flows from operating activities:
Cash received from customers

$

11,386,818

$

11,913,347

Cash paid to vendors and employees

(11,356,142

)

(11,800,318

)

Interest paid, net

(30,207

)

(35,101

)

Income taxes paid

(8,198

)

(14,739

)

Net cash (used in) provided by operating activities

(7,729

)

63,189

Cash flows from investing activities:
Expenditures for property and equipment

(5,596

)

(7,745

)

Software and software development costs

(13,944

)

(7,534

)

Proceeds from settlement of net investment hedges

44,377

Other

(764

)

(548

)

Net cash provided by (used in) investing activities

24,073

(15,827

)

Cash flows from financing activities:
Principal borrowings (payments) on long-term debt

4,515

(5,224

)

Cash paid for debt issuance costs

(1,028

)

Net (repayments) borrowings on revolving credit loans

(472

)

14,227

Payments for employee tax withholdings on equity awards

(10,774

)

(8,602

)

Proceeds from the reissuance of treasury stock

495

Repurchases of common stock

(35,681

)

Other

(563

)

Net cash used in financing activities

(7,294

)

(35,813

)

Effect of exchange rate changes on cash and cash equivalents

(21,475

)

(13,172

)

Net decrease in cash and cash equivalents

(12,425

)

(1,623

)

Cash and cash equivalents at beginning of year

841,366

799,123

Cash and cash equivalents at end of period

$

828,941

$

797,500

 
Reconciliation of net income to net cash (used in) provided by operating activities:
Net income

$

48,065

$

55,400

Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization

41,991

37,257

Provision for losses on accounts receivable

10,832

1,765

Stock-based compensation expense

6,307

8,305

Accretion of debt discount and debt issuance costs

847

860

Changes in operating assets and liabilities:
Accounts receivable

690,145

751,836

Inventories

(60,180

)

2,450

Prepaid expenses and other assets

(37,739

)

1,763

Accounts payable

(752,022

)

(706,381

)

Accrued expenses and other liabilities

44,025

(90,066

)

Total adjustments

(55,794

)

7,789

Net cash (used in) provided by operating activities

$

(7,729

)

$

63,189

 

TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands)

 

Three months ended April 30, 2020

Americas (1)Europe (1)Asia Pacific
(1)
Stock
Compensation
Expense
Consolidated
Net Sales

$

3,944,760

$

3,971,130

$

259,284

$

8,175,174

Operating income (loss) (GAAP) (1)

$

49,783

$

45,884

$

(3,245

)

$

(6,307

)

$

86,115

Acquisition, integration and restructuring expenses

16,956

(178

)

903

-

17,681

Acquisition-related intangible assets amortization expense

16,925

6,311

1,253

24,489

Tax indemnifications

-

7

609

616

Total non-GAAP operating income adjustments

$

33,881

$

6,140

$

2,765

$

-

$

42,786

Operating income (loss) (non-GAAP)

$

83,664

$

52,024

$

(480

)

$

(6,307

)

$

128,901

Operating margin (GAAP)

1.26

%

1.16

%

-1.25

%

1.05

%

Operating margin (non-GAAP)

2.12

%

1.31

%

-0.19

%

1.58

%

 
(1) GAAP operating income does not include stock compensation expense at the regional level.
 
 

Three months ended April 30, 2019

Americas (1)Europe (1)Asia Pacific
(1)
Stock
Compensation
Expense
Consolidated
Net Sales

$

3,789,198

$

4,309,500

$

307,726

$

8,406,424

Operating income (GAAP) (1)

$

68,633

$

36,420

$

876

$

(8,305

)

$

97,624

Acquisition, integration and restructuring expenses

2,911

3,024

286

-

6,221

Legal settlements and other, net

(282

)

-

-

(282

)

Acquisition-related intangible assets amortization expense

13,440

6,115

1,324

20,879

Tax indemnifications

-

-

320

320

Total non-GAAP operating income adjustments

$

16,069

$

9,139

$

1,930

$

-

$

27,138

Operating income (non-GAAP)

$

84,702

$

45,559

$

2,806

$

(8,305

)

$

124,762

Operating margin (GAAP)

1.81

%

0.85

%

0.28

%

1.16

%

Operating margin (non-GAAP)

2.24

%

1.06

%

0.91

%

1.48

%

 
(1) GAAP operating income does not include stock compensation expense at the regional level.
 

TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands)

 
Selling, general and administrative expenses ("SG&A")Three months ended April 30,

2020

2019

Net Sales

$

8,175,174

$

8,406,424

SG&A Expenses (GAAP)

$

427,863

$

405,534

Tax indemnifications

(616

)

(320

)

Legal settlements

-

282

Acquisition-related intangible assets amortization expense

(24,489

)

(20,879

)

SG&A Expenses (non-GAAP)

$

402,758

$

384,617

 
SG&A Expenses (GAAP) %

5.23

%

4.82

%

SG&A Expenses (non-GAAP) %

4.93

%

4.58

%

 
Three months ended April 30,

2020

2019

Net IncomeDiluted EPSNet IncomeDiluted EPS
 
GAAP Results

$

48,065

$

1.34

$

55,400

$

1.49

Acquisition, integration and restructuring expenses

17,681

0.49

6,221

0.17

Legal settlements and other, net

-

-

(282

)

(0.01

)

Acquisition-related intangible assets amortization expense

24,489

0.68

20,879

0.56

Tax indemnifications

616

0.02

320

0.01

Income tax effect of tax indemnifications

(616

)

(0.02

)

(320

)

(0.01

)

Income tax effect of other adjustments above

(10,184

)

(0.29

)

(6,321

)

(0.17

)

 
Non-GAAP Results

$

80,051

$

2.22

$

75,897

$

2.04

 
 

Return on Invested Capital (ROIC)

 
Twelve months ended April 30,
TTM Net Operating Profit After Tax (NOPAT)*:

2020

2019

Operating income

$

570,820

$

520,930

Income taxes on operating income (1)

(127,358

)

(52,272

)

NOPAT

$

443,462

$

468,658

 
Average Invested Capital:
Short-term debt (5-qtr end average)

$

119,171

$

115,018

Long-term debt (5-qtr end average)

1,313,004

1,361,506

Shareholders' Equity (5-qtr end average)

2,999,952

2,881,968

Total average capital

4,432,127

4,358,492

Less: Cash (5-qtr end average)

(834,044

)

(676,308

)

Average invested capital less average cash

$

3,598,083

$

3,682,184

ROIC

12

%

13

%

 
* Trailing Twelve Months is abbreviated as TTM.
(1) Income taxes on operating income was calculated using the trailing twelve months effective tax rate.

Adjusted Return on Invested Capital (ROIC)

 
Twelve months ended April 30,
TTM Net Operating Profit After Tax (NOPAT), as adjusted*:

2020

2019

Non-GAAP operating income (1)

$

698,584

$

708,588

Income taxes on non-GAAP operating income (2)

(159,929

)

(179,283

)

NOPAT, as adjusted

$

538,655

$

529,305

 
Average Invested Capital, as adjusted:
Short-term debt (5-qtr end average)

$

119,171

$

115,018

Long-term debt (5-qtr end average)

1,313,004

1,361,506

Shareholders' Equity (5-qtr end average)

2,999,952

2,881,968

Tax effected impact of non-GAAP adjustments (3)

45,368

44,860

Total average capital, as adjusted

4,477,495

4,403,352

Less: Cash (5-qtr end average)

(834,044

)

(676,308

)

Average invested capital less average cash

$

3,643,451

$

3,727,044

Adjusted ROIC

15

%

14

%

 
* Trailing Twelve Months is abbreviated as TTM.
(1) Represents operating income as adjusted to exclude acquisition, integration and restructuring expenses, legal settlements and other, net, gain on disposal of subsidiary, acquisition-related intangible assets amortization expense, goodwill impairment and tax indemnifications.
(2) Income taxes on non-GAAP operating income was calculated using the trailing twelve months effective tax rate adjusted for the impact of non-GAAP adjustments during the respective periods.
(3) Represents the 5 quarter average of the year-to-date impact of non-GAAP adjustments.

Contacts:

Investor Contact
Arleen Quinones
Corporate Vice President, Investor Relations & Corporate Communications
+1 727.532.8866
arleen.quinones@techdata.com

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