Tech Data Corporation Reports First Quarter Fiscal Year 2019 Results
Tech Data Corporation Reports First Quarter Fiscal Year 2019 Results
CLEARWATER, Fla., May 31, 2018 /PRNewswire/ -- Tech Data (NASDAQ: TECD) (the "Company") today announced its financial results for the first quarter ended April 30, 2018.
First quarter ended April 30,
-----------------------------
($ in millions, 2018 2017 Y/Y
except per share amounts) Change
------------------------ ------
Net Sales $8,548.3 $7,023.6 22%
Operating income (GAAP) $70.5 $75.1 -6%
Operating margin (GAAP) 0.82% 1.07% -25 bps
Operating income (Non-GAAP) $124.1 $123.2 1%
Operating margin (Non-GAAP) 1.45% 1.75% -30 bps
Net income (GAAP) $33.7 $30.7 10%
Net income (Non-GAAP) $70.8 $70.1 1%
EPS - diluted (GAAP) $0.87 $0.82 6%
EPS - diluted (Non-GAAP) $1.84 $1.87 -2%
----------------------- ----- ----- ---
Net sales and operating margin percentages for fiscal year 2018 have been adjusted to reflect the adoption on a full retrospective basis of the new revenue recognition standard ("ASC 606") that the Company adopted as of February 1, 2018.
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 www.techdata.com/investor.
Financial Highlights for the First Quarter Ended April 30, 2018:
-- Net sales were $8.5 billion, an increase of 22 percent compared to the
prior-year quarter. The increase in net sales year-over-year is
primarily attributed to changes in foreign currency exchange rates and
an additional month of Technology Solutions' ("TS") sales. On a constant
currency basis, net sales increased 13 percent.
-- Americas: Net sales were $3.6 billion (42 percent of worldwide net
sales), an increase of 15 percent compared to the prior-year
quarter. The increase in net sales is primarily attributed to an
additional month of TS sales.
-- Europe: Net sales were $4.7 billion (55 percent of worldwide net
sales), an increase of 26 percent compared to the prior-year
quarter. The increase in net sales year-over-year is primarily
attributed to changes in foreign currency exchange rates and an
additional month of TS sales. On a constant currency basis, net
sales increased 10 percent.
-- Asia Pacific: Net sales were $0.3 billion (3 percent of worldwide
net sales), an increase of 48 percent compared to the prior-year
quarter. The increase in net sales is primarily attributed to an
additional month of TS sales. On a constant currency basis, net
sales increased 46 percent.
-- Gross profit was $523.1 million, an increase of $66.0 million, or 14
percent compared to the prior-year quarter. The increase in gross profit
is primarily attributed to an additional month of TS results and changes
in foreign currency exchange rates. As a percentage of net sales, gross
profit was 6.12 percent compared to 6.51 percent in the prior-year
quarter.
-- Selling, general and administrative ("SG&A") expenses were $422.4
million, or 4.94 percent of net sales, compared to $352.6 million, or
5.02 percent of net sales in the prior-year quarter. Non-GAAP SG&A
expenses were $399.1 million, an increase of $65.2 million, or 20
percent, compared to the prior-year quarter. As a percentage of net
sales, non-GAAP SG&A expenses were 4.67 percent, compared to 4.75
percent in the prior-year quarter. The increase in dollars, on both a
GAAP and non-GAAP basis, is primarily attributed to the additional month
of TS results and changes in foreign currency exchange rates.
-- Worldwide operating income was $70.5 million, or 0.82 percent of net
sales compared to $75.1 million or 1.07 percent of net sales in the
prior-year quarter. Non-GAAP operating income was $124.1 million, an
increase of $0.9 million, or 1 percent, compared to the prior-year
quarter. As a percentage of net sales, non-GAAP operating income was
1.45 percent compared to 1.75 percent in the prior-year quarter.
-- Americas: Operating income was $61.3 million, or 1.70 percent of net
sales, compared to $50.9 million, or 1.62 percent of net sales in
the prior-year quarter. Non-GAAP operating income was $85.9 million,
an increase of $7.4 million, or 9 percent, compared to the
prior-year quarter. As a percentage of net sales, non-GAAP operating
income was 2.38 percent compared to 2.50 percent in the prior-year
quarter.
-- Europe: Operating income was $17.3 million, or 0.37 percent of net
sales, compared to $24.8 million, or 0.67 percent of net sales in
the prior-year quarter. Non-GAAP operating income was $43.6 million,
a decrease of $0.5 million, or 1 percent, compared to the prior-year
quarter. As a percentage of net sales, non-GAAP operating income was
0.94 percent compared to 1.19 percent in the prior-year quarter.
-- Asia Pacific: Operating loss was ($0.6) million, or (0.21) percent
of net sales, compared to operating income of $4.3 million, or 2.37
percent of net sales in the prior-year quarter. Non-GAAP operating
income was $1.1 million, a decrease of $4.1 million, or 79 percent,
compared to the prior-year quarter. As a percentage of net sales,
non-GAAP operating income was 0.40 percent compared to 2.87 percent
in the prior-year quarter.
-- Stock-based compensation expense was $7.6 million, an increase of
$2.7 million, compared to the prior-year quarter. This includes $1.0
million of acquisition and integration-related stock compensation
expense. 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 income was $33.7 million, compared to $30.7 million in the
prior-year quarter. Non-GAAP net income was $70.8 million, an increase
of $0.8 million, or 1 percent, compared to the prior-year quarter.
-- Earnings per share on a diluted basis ("EPS") were $0.87, compared to
$0.82 in the prior year quarter. Non-GAAP EPS was $1.84, a decrease of
$0.03, or 2 percent compared to the prior-year quarter.
-- Net cash used by operations during the quarter was $567 million.
-- Return on invested capital for the trailing twelve months was 4 percent,
compared to 11 percent in the prior year. Adjusted return on invested
capital for the trailing twelve months was 11 percent, compared to 13
percent in the prior year.
"During Q1, our teams capitalized on upside demand, prudently controlled costs and effectively managed through vendor program changes. The result was topline growth and operating results that exceeded our expectations. Our performance is a testament to the flexibility of our business model, our strong relationships with channel partners, and to our teams' ability to execute and deliver a solid performance," said Robert M. Dutkowsky, chairman and chief executive officer. "Our end-to-end solutions model has set the standard for IT distribution and we are prepared and excited to enter our next chapter as the IT Distributor of the Future. Tech Data's success story is built on our ability over the years to evolve and transform with the IT market. By following this path, we ensure that we strengthen our role as the vital link in the IT ecosystem for our channel partners and, in turn, create value for our shareholders."
Business Outlook
-- For the quarter ending July 31, 2018, the Company anticipates worldwide
net sales to be in the range of $8.6 billion to $8.9 billion.
-- For the quarter ending July 31, 2018, the Company anticipates EPS to be
in the range of $1.13 to $1.43 and non-GAAP EPS to be in the range of
$1.95 to $2.25.
-- This guidance assumes an average U.S. dollar to euro exchange rate of
$1.18 to EUR1.00.
-- This guidance assumes weighted average diluted shares outstanding of
38.8 million.
-- For the quarter ending July 31, 2018, and the fiscal year ending January
31, 2019, the Company anticipates its effective tax rate will be in the
range of 25 percent to 27 percent.
Webcast Details
Tech Data will hold a conference call today at 9:00 a.m. (ET) to discuss its financial results for the first quarter ended April 30, 2018. A webcast of the call, including supplemental schedules, will be available to all interested parties and can be obtained at www.techdata.com/investor. The webcast will be available for replay for three months.
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, value-added tax assessments and related interest expense, tax indemnifications, acquisition-related financing expenses, changes in deferred tax valuation allowances and the impact of US 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. This information can also be obtained from the Company's Investor Relations website at www.techdata.com/investor.
Forward-Looking Statements
Certain statements in this communication may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements, including statements regarding Tech Data's plans, objectives, expectations and intentions, Tech Data's financial results and estimates and/or business prospects, involve a number of risks and uncertainties and actual results could differ materially from those projected. These forward looking statements are based on current expectations, estimates, forecasts, and projections about the operating environment, economies and markets in which Tech Data operates and the beliefs and assumptions of our management. Words such as "expects," "anticipates," "targets," "goals," "projects," "intends," "plans," "believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward looking statements. In addition, any statements that refer to projections of Tech Data's future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward looking statements. These forward looking statements are only predictions and are subject to risks, uncertainties, and assumptions. Therefore, actual results may differ materially and adversely from those expressed in any forward looking statements.
For additional information with respect to risks and other factors which could occur, see Tech Data's Annual Report on Form 10-K for the year ended January 31, 2018, including Part I, Item 1A, "Risk Factors" therein, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other securities filings with the Securities and Exchange Commission (the "SEC") that are available at the SEC's website at www.sec.gov and other securities regulators. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Many of these factors are beyond Tech Data's control. Unless otherwise required by applicable securities laws, Tech Data disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Tech Data undertakes no duty to update any forward looking statements contained herein to reflect actual results or changes in Tech Data's expectations.
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. 83 on the Fortune 500® and has been named one of Fortune's "World's Most Admired Companies" for nine straight years. To find out more, visit www.techdata.com or follow us on Twitter, LinkedIn, and Facebook.
Contacts:
Charles V. Dannewitz, Executive Vice President,Chief Financial Officer
727-532-8028 (chuck.dannewitz@techdata.com)
Arleen Quiñones, Corporate Vice President, Investor Relations and Corporate Communications
727-532-8866 (arleen.quinones@techdata.com)
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months ended
April 30,
---------
2018 2017
(As Adjusted (1))
----------------
Net sales $8,548,319 $7,023,620
Cost of products sold 8,025,202 6,566,532
--------- ---------
Gross profit 523,117 457,088
Operating expenses:
Selling, general and administrative expenses 422,361 352,632
Acquisition, integration and restructuring expenses 33,225 42,066
LCD settlements and other, net (2,965) (12,688)
------ -------
452,621 382,010
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Operating income 70,496 75,078
Interest expense 25,922 31,008
Other expense (income), net 1,917 (415)
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Income before income taxes 42,657 44,485
Provision for income taxes 8,958 13,831
----- ------
Net income $33,699 $30,654
======= =======
Earnings per share:
Basic $0.88 $0.82
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Diluted $0.87 $0.82
===== =====
Weighted average common shares outstanding:
Basic 38,281 37,251
====== ======
Diluted 38,561 37,468
====== ======
1 Amounts have been adjusted to reflect the adoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606) on a full retrospective basis.
TECH DATA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except par value and share amounts)
April 30, January 31,
2018 2018
ASSETS (unaudited) (As Adjusted (1))
---------- ----------------
Current assets:
Cash and cash equivalents $345,577 $955,628
Accounts receivable, net 5,250,159 6,035,716
Inventories 2,917,468 2,965,521
Prepaid expenses and other assets 418,179 403,548
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Total current assets 8,931,383 10,360,413
Property and equipment, net 270,738 279,091
Goodwill 958,190 969,168
Intangible assets, net 1,051,408 1,086,772
Other assets, net 208,065 224,915
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Total assets $11,419,784 $12,920,359
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,701,778 $6,962,193
Accrued expenses and other liabilities 1,012,750 1,169,986
Revolving credit loans and current maturities of long-term debt, net 114,417 132,661
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Total current liabilities 6,828,945 8,264,840
Long-term debt, less current maturities 1,505,174 1,505,248
Other long-term liabilities 216,953 228,779
------- -------
Total liabilities $8,551,072 $9,998,867
---------- ----------
Shareholders' equity:
Common stock, par value $0.0015; 200,000,000 shares authorized; 59,245,585 shares issued at April 30, 2018 and January 31, 2018 $89 $89
Additional paid-in capital 822,117 827,301
Treasury stock, at cost (20,927,954 and 21,083,972 shares at April 30, 2018 and January 31, 2018) (933,167) (940,124)
Retained earnings 2,779,633 2,745,934
Accumulated other comprehensive income 200,040 288,292
------- -------
Total shareholders' equity 2,868,712 2,921,492
--------- ---------
Total liabilities and shareholders' equity $11,419,784 $12,920,359
=========== ===========
1 Amounts have been adjusted to reflect the adoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASC 606) on a full retrospective basis.
TECH DATA CORPORATION AND SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATION
(In thousands)
Three months ended April 30, 2018
---------------------------------
Americas(1) Europe(1) APAC(1) Stock Consolidated
Compensation
Expense
---
Net Sales $3,618,206 $4,661,702 $268,411 $8,548,319
========== ========== ======== ==========
GAAP operating income (loss)(1) $61,342 $17,318 $(577) $(7,587) $70,496
Acquisition, integration and restructuring expenses 13,916 17,988 321 1,000 33,225
Acquisition-related intangible assets amortization
expense 13,643 8,329 1,332 23,304
LCD settlements and other, net (2,965) - - (2,965)
Total non-GAAP operating income adjustments $24,594 $26,317 $1,653 $1,000 $53,564
------- ------- ------ ------ -------
Non-GAAP operating income $85,936 $43,635 $1,076 $(6,587) $124,060
======= ======= ====== ======= ========
GAAP operating margin 1.70% 0.37% -0.21% 0.82%
Non-GAAP operating margin 2.38% 0.94% 0.40% 1.45%
(1) GAAP operating income does not include stock compensation expense at the regional level.
Three months ended April 30, 2017
---------------------------------
Americas(1) Europe(1) APAC(1) Stock Consolidated
Compensation
Expense
---
Net Sales $3,135,322 $3,707,265 $181,033 $7,023,620
========== ========== ======== ==========
GAAP operating income(1) $50,900 $24,799 $4,297 $(4,918) $75,078
Acquisition, integration and restructuring expenses 30,182 11,572 - 312 42,066
Acquisition-related intangible assets amortization
expense 10,101 7,748 900 18,749
LCD settlements and other, net (12,688) - - (12,688)
Total non-GAAP operating income adjustments $27,595 $19,320 $900 $312 $48,127
------- ------- ---- ---- -------
Non-GAAP operating income $78,495 $44,119 $5,197 $(4,606) $123,205
======= ======= ====== ======= ========
GAAP operating margin 1.62% 0.67% 2.37% 1.07%
Non-GAAP operating margin 2.50% 1.19% 2.87% 1.75%
(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,
----------------------------
2018 2017
---- ----
Net Sales $8,548,319 $7,023,620
========== ==========
GAAP SG&A 422,361 352,632
Acquisition-related intangible assets amortization expense (23,304) (18,749)
Non-GAAP SG&A $399,057 $333,883
======== ========
GAAP SG&A percentage of net sales 4.94% 5.02%
Non- GAAP SG&A percentage of net sales 4.67% 4.75%
Three months ended April 30,
----------------------------
2018 2017
---- ----
Net Income Diluted EPS Net Income Diluted EPS
GAAP Results $33,699 $0.87 $30,654 $0.82
Acquisition, integration and restructuring expenses 33,225 0.86 42,066 1.12
Acquisition-related intangible assets amortization expense 23,304 0.61 18,749 0.50
LCD settlements and other, net (2,965) (0.08) (12,688) (0.34)
Acquisition-related financing expenses - - 8,807 0.24
Value added tax assessments and related interest expense (928) (0.02) - -
Income tax effect of adjustments above (12,908) (0.33) (17,529) (0.47)
Reversal of deferred tax valuation allowances (2,600) (0.07) - -
Non-GAAP results $70,827 $1.84 $70,059 $1.87
======= ===== ======= =====
Return on Invested Capital (ROIC)
Twelve months ended April 30,
TTM Net Operating Profit After Tax (NOPAT)*: 2018 2017
---- ----
Operating income $405,497 $314,422
Income taxes on operating income(1) (242,229) (75,583)
NOPAT $163,268 $238,839
======== ========
Average Invested Capital:
Short-term debt (5-qtr end average) $262,413 $251,115
Long-term debt (5-qtr end average) 1,683,828 697,482
Shareholders' Equity (5-qtr end average) 2,745,501 2,197,319
--------- ---------
Total average capital 4,691,742 3,145,916
Less: Cash (5-qtr end average) (751,732) (1,040,295)
-------- ----------
Average invested capital less average cash $3,940,010 $2,105,621
========== ==========
ROIC 4% 11%
* Trailing Twelve Months is abbreviated as TTM.
(1) Income taxes on operating income was calculated using the trailing 12 months effective tax rate during the respective periods.
Adjusted Return on Invested Capital (ROIC)
Twelve months ended April 30,
TTM Net Operating Profit After Tax (NOPAT), as adjusted *: 2018 2017
---- ----
Non-GAAP operating income(1) $603,559 $404,583
Income taxes on non-GAAP operating income(2) (178,518) (117,875)
NOPAT, as adjusted $425,041 $286,708
======== ========
Average Invested Capital, as adjusted:
Short-term debt (5-qtr end average) $262,413 $251,115
Long-term debt (5-qtr end average) 1,683,828 697,482
Shareholders' Equity (5-qtr end average) 2,745,501 2,197,319
Tax effected impact of non-GAAP adjustments(3) 95,713 20,249
------ ------
Total average capital, as adjusted 4,787,455 3,166,165
Less: Cash (5-qtr end average) (751,732) (1,040,295)
-------- ----------
Average invested capital less average cash $4,035,723 $2,125,870
========== ==========
Adjusted ROIC 11% 13%
* Trailing Twelve Months is abbreviated as TTM.
(1) Represents operating income as adjusted to exclude acquisition, integration and restructuring expenses, LCD settlements and other, net, value added tax assessments and acquisition-related intangible assets amortization
expense
(2) Income taxes on non-GAAP operating income was calculated using the trailing 12 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.
Guidance Reconciliation
Three months ending July 31,
2018
------------------------------
Low end of High end of
guidance range guidance range
-------------- --------------
Earnings per share - diluted $1.13 $1.43
Acquisition, integration and restructuring expenses 0.49 0.49
Acquisition-related intangible assets amortization expense 0.60 0.60
Income tax effect of the above adjustments (0.27) (0.27)
Non-GAAP earnings per share - diluted $1.95 $2.25
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SOURCE Tech Data Corporation
