Good afternoon. My name is Cyndi, and I will be your conference operator today for the SYNNEX 2015 Third Quarter Earnings Conference Call. All lines have been placed on listen-only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Today’s conference is being recorded. If you have any objections, you may disconnect. Thank you. At this time, I would like to pass the call over to Phyllis Proffer, Director of Investor Relations at SYNNEX Corporation.

Thank you, Cyndi. Good afternoon, and welcome to the SYNNEX Corporation earnings conference call for the fiscal 2015 third quarter which ended August 31, 2015. Joining us on today’s call are Kevin Murai, President and CEO; Dennis Polk, Chief Operating Officer; Marshall Witt, Chief Financial Officer, and Chris Caldwell Executive Vice President and President of Concentrix Corporation. Please note that some of the information you will hear today consists of forward-looking statements within the meaning of the Federal Securities Laws. Such statements may relate to without limitation, demand, growth, IT market, profitability, revenue, non-GAAP net income and EPS, margin, tax cost, share, currency impact, tax rates, business plans, and opportunities, customer, contracts and dividend. Actual results or trends could differ materially from our expectations. For more information, please refer to the risk factors discussed in our Form 10-K for Fiscal 2014 and the discussion of forward-looking statements in our earnings release and Form 8-K filed with the SEC today. SYNNEX assume no obligation to update any forward-looking statement, which speak as of their respective dates. Also during this call, we will reference certain non-GAAP financial information. Reconciliation of non-GAAP and GAAP reporting is included in today's earnings release and the related Form 8-K available on our website at www.synnex.com. This conference call is the property of SYNNEX Corporation and may not be recorded or rebroadcast without our specific written permission. Now I’d like to turn the call over to Marshall.

Thank you, Phyllis. But before I begin my prepared remarks I first want to welcome Phyllis to the SYNNEX team. And Phyllis’ role is, she is going to continue to work closely with the SYNNEX management and executive management team. Phyllis has over 30 years of extensive experience in investor relations with various industries including distribution, retail and the manufacturing companies. She holds master’s degree in Business Administration from Duke University, a master's degree in Communications from St. Louis, and a Bachelor’s Degree in Journalism from Sothern Illinois University. We’re very lucky to have such a talented individual as Phyllis. So Phyllis, welcome.

Thank you.

So today what I'll first do is review our results of operations and key financial metrics, and then conclude with guidance for the fourth quarter of fiscal 2015 before turning the call over to Kevin. On a consolidated basis total revenue was 3.33 billion, down 5.7% compared with 3.54 billion in the same quarter of the prior year. Adjusting for FX of 126 million revenue in constant currency decreased 2.2% year-over-year which was primarily due to the loss of Beats which was approximately $180 million. Our gross profit on Q3 revenues was 291 million or 8.7% of revenues, compared with 300 million or 8.5% of revenues in Q3 of 2014. The decrease in gross profit dollars was due to lower sales in our technology solutions business segment, losses related to a certain Concentrix contracts and unfavorable foreign currency exchange impact. Technology solutions segment revenues were $2.98 billion representing a decrease of 7.1% compared to the prior year. Technology solution revenues were negatively impacted by approximately 100 million due to FX. On a constant currency basis technology solution segment revenues decreased approximately 4% year-over-year, as I mentioned previously Beats negatively impacted revenues by approximately $180 million. Concentrix segment revenues were 359 million, up from 334 million in the year ago quarter. Adjusting for negative impact of FX of 26 million, revenue in constant currency grew 15.5%. Q3 total selling, general and administrative expenses excluding one-time acquisition and other integration expenses and amortization costs increased as a percentage of revenue to 5.82% or $194 million compared to 5.48% of revenues or 194 million in the third quarter of fiscal 2014. The percentage increase was due primarily to the lower revenues in Q3 of fiscal 2015 and higher pension costs of 2.3 million associated with withdrawing from a multi-employer pension plan in Japan.…

Thank you, Marshall, and good afternoon to everyone on the call. I am pleased with our third quarter results which I believe highlights the health of our Technology Solutions and Concentrix business segment. As Marshall stated, our third quarter revenues at $3.3 billion met our expectations and increased by over 3% from a year ago when normalized for currency and 180 million of Beats business that did not repeat this year. We continue to execute well and our consolidated non-GAAP operating margin was strong at 2.91%. During the quarter we generated over $220 million of cash and I’m happy to report that our Board has approved the 60% increase for a quarterly dividend. As we stated before it is our intention to review our dividend on an annual basis. Within the technology solutions business, our U.S. business performed well, growing sales by mid-single digit percent when normalized for the Beats headwinds. Our commercial business has strong growth in SMB and we have double digit growth in many of our specialty business units, including integrated communications and enterprise mobility. In Canada our revenue grew by low single-digit percent in constant currency with solid growth in the commercial market offsetting softness in the consumer market. Within North America, we continue to achieve good results from our go-to-market strategy of creating relevant technology solution that solves problems and enhance effectiveness in a number of key vertical industries. Our work with Google, Microsoft and key hard work OEMs in the K12 education market is a prime example. This strategy is one of the differentiators that helps us to grow faster than the overall technology market and with enhanced stickiness in end markets. Another key differentiator is our high solutions business in which we provide design, assembly, test and deployment services for the white box…

Thanks, Kevin. I'm very pleased to report an excellent quarter for Concentrix. We executed extremely well across the board, achieved revenue above our expectations and continue to build our sales pipeline. Our revenue for the third quarter was 360 million, this represented another quarter of above market growth representing 7.7% year-over-year growth, while observing FX headwinds. In constant currency, we grew the business at 15.5%. In addition to growing double-digit year-over-year, we also reported a sequential quarter growth of above 5.2%. We're seeing the yields of our new clients accelerate with our ability to ramp faster than originally expected. As I mentioned last quarter, we're still working closely with one large contract which had negatively impacted the third quarter profit by approximately 6 million. I'll talk a little more about this contract a little later. As mentioned, our results exceeded our expectations and reflect growth with strategic blue-chip customers and continued traction in our key verticals, excluding the loss associated with the contract I discussed, our adjusted operating margin was around 9% and adjusted EBITDA was nearly 12% despite FX headwinds. We continue to make great progress in adding new clients with our talent, analytics, technology and stronger client base through reference. This quarter, we're pleased to say we added 14 new local clients, one in every major region we operate in. Some examples include, Fortune 100 client which strengthen our position in our key insurance vertical. Another a client being known for being a disruptor in their industry with rapid growth that we will be supporting in four countries around the globe. One of the largest telecom players in the Middle East that we'll be transforming to a new engagement model for the customers, using our technology also joined our flagship client set. Now turning our attention to Q4,…

Thank you, Chris. Now I will provide some further commentary on the fourth quarter guidance Marshall and Chris discussed. In our technology solutions business we’re forecasting sequential growth in line with historical seasonality. For your information each represented approximately $210 million in Q4 of last year. We believe the IT market in the U.S. and Canada will continue to be stable and growing and expect some improvement in the overall market in Japan. We anticipate a slight decline on a year-over-year basis on our Hyve solutions business, as our Hyve revenue in Q4 last year was unusually strong from un-forecasted demand. As we said in the past this project phase business tends to be more lumpy given our concentrated customer set. But as we grow the customer base we expect the lumpiness to smooth overtime and finally in our Concentrix business as Chris mentioned we are expecting another solid quarter as we continue to benefit from the momentum we’ve established over the past few quarters. I continue to be optimistic about our business and the markets in which we operate, we believe we’re well positioned to profitably grow our business and achieve the long-term goals we discussed during our Analyst Day this past July. Our business foundation is solid, execution is our differentiator, we view partner satisfaction as paramount and we continue to excel in finding more opportunities to grow. I want to thank all our associates around the world for their ongoing hard work and dedication and our business partners and shareholders for their continued support. So with that let’s turn the call over to the operator for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Your first question is coming from Mr. Ananda Baruah from Brean Capital. Your line is open.

Hey, guys. Thanks a lot for the question, appreciate it. I guess, Kevin, just a couple, if I could. The first is with regard to just your last comment about the forecast that you provided at the Analyst Day. And so it sounds like, if I recall -- it sounds like you're saying you feel entirely comfortable with the tenor of IT demand. And I remember your comments last quarter, which was essentially the same. So was there -- and you just sort of reiterated your conviction of being able to get -- drive to the ’17 forecast you provided at the Analyst Day. So the question is, is there anything that you've seen -- or what have you seen, if anything, be it you consider kind of like a tailwind to your headwind throughout this quarter that you would sort of point out to us as you drive to the -- and I think the midpoint is something like 15 billion in revenue in 2017? And then I have a follow-up, if I could.

Sure. Ananda, overall -- when we look at our overall business, we’ve got Concentrix that really has a lot of strong momentum behind it right now. We’ve talked about the long sales cycle in Concentrix in the past where it does take a long time to onboard new clients, but once we’re able to get them then we’re able to demonstrate through our quality of service that we can take on more and more business and frankly a good part of our growth both over this past year as well as looking forward is going to be coming from the combination of signing new logos and then increasing our share of wallet. So with that momentum that we’ve already started we feel optimistic about our growth prospects moving forward, and frankly as Chris mentioned from an overall profitability perspective in Concentrix the overall base business profitability is quite solid, understandably we have the one contract that we’re working through right now, but net of that you could see that our operating margins continue to improve and with the insight that we provided at Analyst Day on operating margin expansion over the next couple of years in Concentrix, we are aiming for double-digit in the foreseeable future. On the Technology Solutions side of the business, the markets continue to be healthy and steady, in particular in the U.S. and Canada and we continue to perform very well there. Japan is somewhat of a different story both with pretty significant headwind that we’ve been experiencing since the beginning of the year. We do expect that market to improve as those compares become a little bit better and in addition to that with the increased focus that we have on enhancing the Line Card in Japan we do expect that we’re going to start to gain share again. So overall there are a number of things that we can point to in terms of technologies that are growing, but in particular we believe that we have a solid strategy on embracing technology growth in areas like cloud with our Hyve Solutions business, with other parts of cloud and enterprise mobility that we’ve spoken to in the past. So execution has always been one of the key strengths that we have had and with the right strategy we’re optimistic about being able to hit those targets that we presented.

Thanks, Kevin. And then just with regards to your comments on Japan, you mentioned in the prepared remarks -- it was mentioned in the prepared remarks that you guys are hopeful to return to growth. And I guess I want to get the appropriate context, it sounded like you were saying, in the not too tremendously different future, could you give us some sense of when that might be? Not like a guidance, but like an anecdotal sort of idea of when you think that could happen?

In Japan we enjoyed the benefit a year ago of a number of things happening. We had the -- we had Windows 8 replacing -- sorry, Windows XP support going away being replaced by Windows 7 and Windows 8 that created a lot of tailwind, but probably even more so than that was the increase in consumption taxes. And so with 40% growth for two quarters in a row in Japan we knew we were facing pretty significant headwinds as we were coming on a year-on-year. Shortly after the consumption tax increased, Japan’s economy did strengthen a little bit and frankly IT demand has been a bit sluggish in returning back to even normal -- into normal levels. But in addition to that I think with that all being said, the market outlook is one that should be improving starting about now, but that’s probably the major factor in our ability to actually grow on a year-on-year basis, is having a market that is either stable or stable-flat or growing.

That's useful context. Do you think you can -- is there a possibility you could grow in fiscal ’16, or is this really a, let's get into’17 and really lap all the compares and the macro stuff?

Of course we don’t provide guidance specifically beyond the current quarter, but our goal of course is to grow our business in Japan in 2016.

Got it, thanks. And then just one last one, if I could. Chris, you made mention last quarter that you're on-ramping, I believe it was 3,500 folks in the August quarter for a contract that was going to begin to revenue in the November quarter. I was just hoping you could update us on that? And then that's it for me, thanks.

Ananda you're correct, as we mentioned we were a bit faster in our ramp, so we did capture some of that revenue within the third quarter, a very small amount, but unexpected at the beginning of the quarter. And we all have those in full production this quarter.

Thank you. Our next question is coming from Mr. Brian Alexander from Raymond James. Sir, your line is open.

All right, thanks. Good evening, guys. Maybe just with the revenue guidance, Kevin. It implies somewhere around 6% to 8% sequential growth for the Tech Solutions business, if I back into Tech Solutions from the overall revenue guidance. That seems to me to be a little bit below seasonal. I understand some of the year-over-year headwinds with Beats and currency, et cetera, but sequentially it looks to be a bit below seasonal. And I noticed your DSOs were down quite a bit at the end of the August quarter. So I'm not sure if the quarter ended on weakness or how to reconcile that with your overall comments that you're expecting normal seasonality in the fourth quarter.

Yeah, Brian there are just a couple of other moving parts and so your calculations are pretty much there. But if you add in more weakness in Japan, and even though Japan is not the biggest business we have. Last quarter as I said in local currency we did decline 20%, so that does have an impact on our sequential number. In addition to that as I mentioned we’re also expecting a slight decline in our Hyve Solutions business. So when you add those two together you kind of get back up to that seasonal increase in Q4.

And just a follow-up on Hyve and then I have one on Concentrix. I think you said two new customers, sounded like they could be sizeable. Just any context relative to the overall size of Hyve today, how material those could potentially be?

Yeah, Brian, as you know we don’t break that out separately. Hyve obviously a very strategic business to us and certainly a differentiator for us when you look at our business model in the cloud space. But it's a very important business, we don't give the size on it. But the clients there in that space that we address are predominantly the large data center operators among a few different industries. And so any clients that we’re able to entertain and again very long sales cycle in that business too, obviously have a pretty large spend. And so if we’re able to get our foot in the door and start doing business with some of these clients, it could spell out much larger business going forward.

And then on Concentrix, on this customer contract of 125 million that’s winding down, Chris, any more context on kind of the nature of the work that you are performing for that customer? Are they going with another BPO provider, are they in sourcing, was this price driven, was it capability driven? Shame on me if I didn't hear your telegraph this before, but it sounded like it was new information and I'm just trying to understand did you all expect this all along or is this more recent?

Hi Brian. We actually called it out on the initial conference call when we did the IBM deal. The client had been with IBM for a significant period of time and it's a government contract that has a very defined timeframe and they were actually finishing up the services as well as bringing some of it in-house and that was disclosed to us as part of the transaction. So we knew that it was going away. What our expectations had been was that we would retain some of it, but what we thought we were retaining, through the course of the contract we realized that probably that was not going to happen since those services wouldn't need to be delivered anymore. So didn't lose it, didn't go anywhere else, it sort of wrapped up a procurement cycle within the government body.

So when do you think we’ll start to see margins expand in Concentrix? I know the three year goal is 9% to 11%. I know Kevin you alluded to double-digits in the foreseeable future, but even if I adjust for the one-time customer issue of 6 million, which I think was a little bit above what you guys had forecasted at 4 million to 5 million for the quarter, still looks like margins are tracking below the low-end of your goal. So any help on when you'll start to see margins improve and when do you think we can get into that double-digit range?

So Brian few data points. I think we talked a little bit about this on the last call. I mean is, we on boarded little over 3,500 people last quarter depending on how long it takes for them to ramp up we cover all the payroll cost, the infrastructure build out cost well before they go into production. This quarter we’re bringing on 6,000 more individuals. So frankly, what we look at is when we bring on these deals, when they are in full production, are they accretive and meet our margin goal targets? And the answer is yes. So we’re not going to sacrifice our growth to hit these goal sooner, our preference is continue to win business at the right target margins and we’re being successful doing that and continue to grow and then see that slow increment as we get more and more scale within our business. We're just growing quite rapidly at the moment and that is compressing some of our margin business. And then certainly with the contracts it’s been a challenge this year, but as we talk about that it’ll be resolved in the next quarter.

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Just a couple of quick follow-ups from me, following up the other questions. On the Japan situation in terms of the week demand, has that also been a drag on margins? What’s the margin profile of the Japan operation now relative to Tech Solutions and are there things that you can do to improve profitability despite the fact that you don't have much growth there?

Japan profitability in this past quarter was a little bit of a drag on our overall margins, but just also understand the overall size of the business is less than 10% of the overall, so it has a measured but small impact on the business, certainly they marketing revenue decline had a bigger impact on our overall number. But we were profitable in Japan net of the extents that we had to take for the defined pension plans. However that being said, we did enjoy good profitability when we had significant growth from a year-ago and we know that we can get back up to those profitability levels as revenue returns in the right areas of the business. But there are always things that we can do and we are doing to continue to fine tune profitability. Number one of course Matt is just our overall portfolio of business. So we do put more emphasis on pursuing higher margin, more sticky business just as we do here in North America and then overall just continuing to focus on much more cost efficiency in the overall business. But the business as it is right now is a profitable business. We have more opportunity to improve that as we grow.

Okay that’s helpful, and on the consumer business with Beats, are you having any success in backfilling that with other products? And then along the same lines, I know you sell a lot of notebooks and desktops through your consumer business, are you seeing Windows 10 as a positive catalyst at all this quarter or going into the end of the year or do you think that's going to be pushed out to next year?

For Beats, yes, we are having success in backfilling it, we have not fully backfilled the hole that it’s created. But we're backfilling it not just with like product map but with other products as well including some new relationships that we have even with traditional consumer technology, you know, other manufacturers on the notebook space as well. So that is a continuing story of success and we're going to continue to grow that business net of Beats. However, keep in mind that we have this current quarter and then of the headwinds of compare. In Q1 of 2015, we also had some levels of Beats business. It was just under $70 million worth. Frankly because I know you guys are going to ask in Q1 we also expect seasonal trends in our overall core distribution business that tends to be about high-single digit, low-double digit decline from Q4. So we're right on track in terms of filling that business and growing out at that [ph] market. With regard to your question on Windows 10, in consumers, the take up has been good. I think the acceptance has been very good. From a commercial perspective we're expecting the very typical and traditional adoption of the new Windows operating system which is bit more of a delayed wait and see, once the operating system is deployed and tested for a good six to eight months [ph].

Thank you. Next question is coming from Mr. Jim Suva of Citi. Sir, your line is open.

Can you just help us understand a little bit about, you said you've got some Japan Line Cards that you're replacing, is that kind of a one quarter wind down and then you also mentioned the customer running data [ph] Concentrix the government related one, that one I assume is that completely out of the equation for the February quarters?

So I'll start up with -- that your question on Japan. So I don't want you think about what I discussed as a situation similar to Beats where we had a large franchise and then through sale of that business that franchise went away, this is different. We've enjoyed good success in Japan where we have a very broad selection of technology related products that we sell into retail. Some of these products have enjoyed pretty significant success in sell-through over the past couple of years. We're still selling that product, but demand seems to be saturating a little bit there. So we're not seeing the same levels of sales that we saw even six or eight months ago. However, we do have a good pipeline of new products that we're starting to onboard and so through that, what I call a transition of hot product that just takes a little bit of time. Really my comment on Japan was intended to talk through the 20% decline that we saw in local currency and how we expect to grow. And it was a combination really of my Line Card comment products in addition to the overall market improvement.

In terms of, Jim its Chris, in terms of the contract from Concentrix side, this will be the last quarter that we have it and as mentioned in the prepared remarks it will contribute our $80 million set this quarter.

Great. And then my last question is, as you mentioned that you're onboarding, I think you said around 6,000 staff this quarter. How is that compared to maybe last year? And are you telling us this because there's like an operational learning curve there that we could build into our models and be prepared of, so it's a little bit softer margins this quarter and then a lot stronger the next? I'm just trying to context this 6,000. So I'm sure there is seasonality in this business all the time when you're bringing in people and bringing them out. And so if you can just help us understand your comment around quantifying the staff coming in?

Jim, good question, so to kind of give you a compare over compare, 6,000 is probably roughly around double of what it was last year in terms of bringing on new headcount into the organization to the quarter. It’s primarily driven by obviously the new ramps, new business that we've been winning and as well as expansion of existing clients that we have. While some of it is seasonal, we tend to call that out versus sort of the vast majority of these are more permanent into the business. We call it out for sort of two reasons, one is to kind of give you an idea from the cost that flows into our business as we ramp because obviously all these people come in, we need to train them, built the facilities around them and everything else that kind of goes along with it. So it does give some softness to margins, but also really specifically this quarter also gives you an indication of the pipeline of business that's replacing the contract that's going away, that will continue to allow us to grow sort of above market.

Thank you, and the timing as a profitability of these big contracts, are they normal, are we looking at a couple of quarters of investments or losses or how should we think about -- we just want to prepare for any near-term speed-bumps, if there are any, or are they just going to come on profitable from day one?

So, Jim sometimes our expectations are that they don't turn profitable until six to seven months out, just with number of different uniqueness' within the contracts and client sets that we have in the different geographies that we work. But generally after six month they’re profitable. For the most part though they start to produce revenue with 90 days to 120 days and so you'll start to see that as we onboard this group of staff within this quarter, it will be sort of Q1, Q2 that you start to see the benefit of this increase.

Great. Thank you very much, and congratulations to you and your team at SYNNEX.

Thank you. Our next question is coming from Osten Bernardez from Cross Research. Your line is open.

Hi. Yes, thanks for taking my call. So just had a quick question with respect to Canada. You mentioned improved commercial demand there. Could you just sort of break down any particular verticals or end solutions that sort of supported that growth there?

Overall in Canada, the trend that we've been seeing, I guess that high level first is the commercial part of the business has been more stable and growing than the retail side of the business and if you've been following Canada, you’ve probably seen over the past 18 months there has been some significant changes in the overall retail landscape. But all that said really the strength in commercial was pretty broad based. For us though I do believe we did a little bit better than the market with the increased focus that we put on say the enterprise business in Canada as an example. But the core commercial business that we do, in the key categories like notebook and also in software and networking those all showed good strength this past quarter.

Got it. And then following up on Hyve, with respect to the two new customers you mentioned who could potentially grow in volume in terms of how meaningful they are to the overall business, is that a function of these two new customers perhaps testing your Hyve solutions against other solutions? Or is that a prediction potentially based on their need for increased capacity over time? And how long would it take theoretically for that to sort of come to fruition for you?

Osten, it's probably a longer answer than we have time for on the call, but it's more of the former, where as I said it's a very long, sale cycle and involved in that sales cycle is not just conversation, there is a lot of eyes on our technical capability and things that we need to build as pilot. So once we do get approved and certified as a supplier than from there we see more and more opportunity to become one of the more consistent supplier on a very large piece of business and that's really what I’m speaking to.

Got it. Thank you very much.

Thank you. Last one in the queue is coming from Mr. David Rold from Needham & Company. Your line is open.

Understand that the Concentrix contract was known to be sun-setting for some time. Just want to understand, would you typically have that much advanced notice with other contracts? Just trying to get a sense going forward whether we should incorporate any near term run-off?

So, David, generally you don't get that much visibility because this was a years of visibility, but normally with the types of projects and work that we do, it’s quite complicated and quite sticky. So, if there is an ebb or flow in the business, it tends to be seen in a number of quarters to a year in advance with the work that we do.

Okay. That's all for me. Thank you.

Thank you. At this time there are no further questions.

Thank you everybody for joining our conference call and we look forward to seeing you in the coming weeks.