Good afternoon. My name is David, and I'll be your conference operator today. I would like to welcome everyone to the SYNNEX Fourth Quarter Fiscal 2019 Earnings Call. Today's call is being recorded and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. At this time, for opening remarks, I would like to pass the call over to Ms. Mary Lai, Head of Investor Relations. Ms, you may begin.

Thank you, David, and good afternoon, everyone. Welcome to the SYNNEX fourth quarter fiscal 2019 earnings call. Joining me to review our two announcements from earlier today are Dennis Polk, President and CEO; Marshall Witt, CFO; and Chris Caldwell, President of Concentrix. After the prepared remarks, we will open the call to a question-and-answer session. Before we begin, we remind everyone listening, discussion contains forward-looking statements within the meaning of the federal securities laws, which statements include any predictions, estimates, projections or other statements about future events, including the company's projected financial results and the expected separation transaction. Actual results might differ materially from those mentioned in these forward-looking statements as a result of the risks and uncertainties discussed in today's earnings release, in the Form 8-K we filed today and in the Risk Factors section of our Form 10-K and in our other reports and filings with the SEC. We do not intend to update any forward-looking statements. Also during this call, we will reference certain non-GAAP financial information. A reconciliation of non-GAAP and GAAP reporting is included in our earnings release and the related Form 8-K available under the Investor Relations section of our website. This conference call is a property of SYNNEX Corporation and may not be recorded or re-broadcasted without our permission. And now, I will turn the call over to our CEO, Dennis?

Thank you, Mary, and thank you to everyone joining us today. I wanted to start off the call by acknowledging our very successful Q4 results announcement, which Marshall, Chris and I will review in more detail later, but to also acknowledge the news release we issued today regarding our intention to separate SYNNEX and Concentrix into two publicly traded companies. Over the past decade, we have regularly asked ourselves, does it make strategic sense to separate SYNNEX and Concentrix given the distinct differences of the two businesses? Our investors have continually asked us this question as well. To-date, while able to separate, we have not for many reasons, mostly though we believe best to nurture both these segments under one entity. With the Convergys transaction one year ago, we expected it would be some time before we could consider a separation again due to the years and effort expected to successfully integrate Convergys into Concentrix, especially so given the size of the transaction. Also we expect that it would take significant time to stabilize the business, as Convergys was on a steady revenue decline path at the time of the acquisition. Well, as a result of the true entrepreneurial spirit and capability of SYNNEX and Concentrix and under the excellent leadership of the management team, we substantially completed the integration and stabilized revenue growth in just one year, far ahead of expectations. This aspect, along with the dynamics of operating a nearly $5 billion a year, 225,000 plus associates, CRM services entity under the umbrella of a technology distribution company moved us to the belief that the two segments operating independently would be more beneficial for all stakeholders. Equally important in this decision is the fact that the markets that both business operate in have been and will continue to go through rapid change. Considering this aspect, we believe that having each business be independent to address the individual market dynamics in the nimblest way will enable the best opportunity for each entity to grow and drive returns, especially so in the significant markets that each segment has to address. I will talk about a few more aspects related to the separation later in my prepared remarks, but let me now turn over the call to Marshall to discuss our Q4 results, Marshall?

Thanks, Dennis. And regarding the proposed separation, we expect the transaction to be a tax-free share distribution to SYNNEX shareholders, resulting in two publicly traded companies. We anticipate filing the associated Form 10 in February with the effective date of separation expected in the second half of 2020. The capital structure of each segment will be detailed in the Form 10. However, given early indications from financial partners, we expect both segments to exit separation with strong capital positions resulting from continued operating performance and cash flow generation. Please refer to the investor presentation published on our website. Now, let's discuss Q4 results. We are pleased to report that we've exceeded expectations for all the Q4 financial metrics we previously guided to in September. On a consolidated basis, total revenue was an all-time record of $6.6 billion, up 19% compared to $5.5 billion in the same quarter of last year. FX did not have a significant impact on our top-line or bottom-line. Our consolidated gross profit dollars totaled a record $795 million, up 21% or $140 million versus a year ago, and gross margin was 12%, an improvement of 27 basis points from the prior year quarter. Total adjusted SG&A expense was $456 million or 7% of revenue, up $70 million in absolute dollars, but down 4 basis points as a percentage of revenue compared to a year ago quarter. We posted record consolidated non-GAAP operating income dollars and operating margin in the fourth quarter. Non-GAAP operating income was $338 million, up $71 million or 26% year-over-year. Non-GAAP operating margin of 5.1% was a 31 basis point expansion from the prior year period. Shifting gear to Q4 operating performance by business segments. First, on Technology Solutions. Technology Solutions delivered its highest ever revenue of $5.4 billion, an increase of 17%…

Thank you, Marshall. Regarding our Q4 results, as you heard from Marshall, Q4 was another record quarter with exceptional results in all categories. Our Technology Solutions segment achieved revenue of $5.4 billion and non-GAAP operating margin of 3.3%. Our core TS business grew slightly better than market and continues to perform well in all aspects. Contributing to our core TS business growth was solid contribution from PC, software, cloud and networking product categories. Geographically, the U.S. was the main driver of our growth, but the rest of our geos performed well and were essentially in line with expectations. In addition to the core business growth, the large project and integration business we discussed as being a positive in our third quarter was equally positive and much more than expected in our fourth quarter. This was mainly due to the unpredictability of this business, the mix of what we sold and orders that were not expected to transact in the quarter but ultimately did. Our Concentrix business also delivered in Q4. I would like to now turn the call over to Chris to discuss Concentrix results and outlook. Chris?

Thanks, Dennis. With the announcement today the Concentrix team is both energized and focused on ensuring that we continue to execute and enhance Concentrix as we’ve heard to separate the two businesses. We feel that this is a natural progression coming at the right time with our size, scale and abilities that allow us to be more aggressive in reaching our goals. We believe this will result in benefit for the SYNNEX shareholders, our team members around the world and our clients. This exciting announcement tops a very foundational change year for Concentrix and a strong fourth quarter with Concentrix continuing our trend of like-for-like cost and currency revenue growth and year-over-year margin expansion. By the end of the quarter, our main integration activities were essentially complete and the related synergies contributed to a 120 basis point expansion in our pro forma adjusted operating margin. Fourth quarter revenue for Concentrix totaled $1.21 billion, an increase of approximately 25% on a reported basis. On a like-for-like constant currency basis, revenues were up a little under 1% with currency fluctuations causing just under a 1% headwind this quarter. We are going into a new year with a strong pipeline that has a good representation across our verticals, geographies and capabilities. We have also executed well on our strategy to rebalance our portfolio with telecom revenues now under 23% of revenue for the fourth quarter representing an impact of 4% to our pro forma growth rate but giving us a healthier business and more balanced business. Adjusted operating income for the quarter was $161 million, up from $129 million in the year ago period. Adjusted operating margin was 13.3%, up from 13.2% in the fourth quarter last year. It's important to understand, on an apples-to-apples measurement, taking into consideration when Convergys acquisition happened,…

Thanks, Chris. As Chris indicated, 2019 was a special year for Concentrix. As well, it was a special year for all of SYNNEX. We ended the year with nearly $24 billion in revenue. The third year in a row increasing our top-line by approximately $3 billion. We were able to do so because of investments made in the preceding years. Going forward, we will continue to invest in our business as we adapt to our marketplace and prepare for the next opportunities. Before commenting on our Q1 outlook, I wanted to touch on the item mentioned by Marshall that will affect our 2020 revenue. While the decision by a major customer to consign components to us for integration is not ideal from a top-line standpoint. We treat the decision as another area to partner on with the customer versus focused on the revenue implications. As such, we will ensure a smooth transition. Equally important, we are focused on earning a solid return on the design and integration services we provide and we expect this to continue as Marshall indicated. While the top-line will decline we will benefit from lower cash used in this business and we will ensure this capital is properly utilized. Now, turning to our outlook for Q1 fiscal 2020. In our Technology Solutions business, we expect the market to remain competitive. We are confident that we can leverage our line card and cross-selling efforts to maintain our sales momentum. As a result, we expect our core TS business to grow better than markets. Regarding our project and integration business, while the last two quarters have been much more than expected, we see Q1 at a more normalized level, essentially in line with Q1 2019. In Concentrix, as Chris noted, we expect our Q1 to be within normal…

A few for you, Chris. The growth in the quarter, actually when you exited the quarter, I think you were talking about growing in line with the market. So I was just curious, when do you think you will see that happening going forward?

Yes, Vince, I think we're going to continue to see consecutive growth that we are doing. I think we were a little more aggressive in kind of Q3, Q4, replacing some of the lower margin business and closing some of the facilities that went along with that, that impacted a bit. But underlying based on our pipeline, we continue to see a great confidence to continue to get back to that rate within 2020.

And could you give us some color on how voice performed versus non-voice and maybe within non-voice how RPA is performing?

We saw sort of balanced growth actually on both the voice and non-voice parts of the business. RPA had sort of a less of an impact with the business. In the last quarters, we’ve had a lot of sort of some integration already done. New deals tend to come across with some of the automation already completed. So, it wasn't necessarily a meaningful part of the revenue mix.

And then it looks like you've done a nice job stabilizing at Convergys for sure. I'm just curious, year-end now, is there any meaningful churn from Convergys clients?

No, we had the business 100% integrated. We had obviously common clients across the two and no meaningful churn whatsoever.

And Dennis, I think someone mentioned that you expect growth in the Tech Solutions business at a premium to the market. How should we think about the growth in the market in 2020, any help there would be good?

Sure, Vince. As far as the product sets that we carry today and represent in the market, we see that in the next year growing between 2% and 4%, and as I indicated in my remarks, and is always our goal, we expect to grow faster than the market rates.

Thank you. Operator, next question please.

Your next question comes from the line of Matt Sheerin with Stifel. Please go ahead. Your line is open.

Yes, thank you. Thanks for taking the questions and congrats on the decision to spin out the two businesses. I guess first question on the spin out. Was there any consideration by the Board instead of spinning out two public companies to look at an alternative transaction perhaps with PE or a strategic buyer in either of the two segments? Was there a reason -- was that something that you've looked into?

Hi, Matt. This is Dennis. Thanks for the question. Yes. So, our Board as part of the process to make the decision that we announced today asked us to look at all potential opportunities for each business segment. Technology Solutions and Concentrix. And once we analyzed everything -- each possibility has its positives and negatives, but once we analyzed everything, we believe that the separation process that we announced today was the best option for our company.

Were there any particularly top three reasons why you went that route?

Yes, Matt, what I would do is first call out and remind folks what Marshall called out in his script regarding the presentation we posted on our IR site today where we detail the rationale, the why now aspects, how we believe this will create value for all stakeholders, for our business including our customers, our partners, our associates, and shareholders. So, I think if you take a look at that presentation, you'll get a lot more of the detail of why we thought the spin process to deliver Concentrix as a public company to the market is the best alternative.

Got it, okay. Thank you. And then on the revenue recognition change with the Hyve customer. I understand the lower revenue. How does that impact your gross profit dollars and operating profit dollars because I imagine there was some margin that you made on some of the pass-through of those components. I know there was a carrying cost throughout recently and you did mention that earlier, but could you just quantify that any impact on the operating margin or operating profits?

Hey, Matt, this is Marshall. Our expectations are that operating profit dollars are anticipated to grow. Operating margin will improve, and don't lose sight what Dennis had mentioned to you that we will see overall working capital needs go down, which will help our debt levels and lower interest expense.

Okay, so it doesn’t sound like there's any negatives, it just sounds like it’s a positive move for you. Okay, very good. And I think that's it from me.

[Operator Instructions]. Your next question comes from the line of Shannon Cross with Cross Research. Please go ahead. Your line is open.

I was just curious -- maybe Chris and Dennis, if you can talk about how you see these two businesses on a go-forward basis? I guess there’s obviously been some consolidation in the industry. Concentrix clearly has been a consolidator. Would you assume that that's sort of the same track you want to go on, or again sort of maybe going back to Board discussion, but is this something where you think the value creation might be through a bigger transaction where maybe either TS or Concentrix becomes part of the bigger company? I'm just -- I'm trying to think about how you're thinking about this from maybe a little bit longer-term perspective.

Yes. Shannon from the Concentrix perspective, we continue to see opportunities in the markets to consolidate, and we will continue to be participating as a consolidator in the marketplace.

Shannon, this is Dennis. From a TS perspective, I'll refer you back to the investor deck that we posted today. On Slide 11, you can see the strategic playbook that we have for our TS business. Being a separate company from Concentrix does not change the strategy of the company, but being a standalone business will allow us a few opportunities that we haven't had to-date. But again, the strategy has not changed, and if you follow the deck that we have, it's three-pronged. We really want to continue to optimize our core business. We think we run a very efficient company, but we always know we can improve it and offer more returns as a result. We think we can -- that's number one. Number two, we think we can drive significant organic growth by investing in a few more areas in our business. Number one is line card expansion. We have a very healthy line card, and while it's not the easiest thing to do to add an additional vendor relationship, we do think we have the ability to do so going forward, so opportunity for growth there. We're significantly investing in all the offerings around anything as a service and cloud solutions, and we'll continue to do that as the market expands and offers opportunities, and then we’re going to continue to invest in our team. We've actually hired a lot of sales, product, and business development folks over the past year somewhat under the radar, but that's helped us grow our business. And as we absorb those additional headcount, we will then go for a round two and continue to invest in that area of our business and we expect that will drive organic growth as well. And then last but not least, we have been a consolidator in this industry through M&A and other strategic investments. We haven't done as much in the last couple of years since our Westcon-Comstor acquisition, primarily as a result of the fact that we are very focused on the Convergys transaction and that was -- came with a lot of capital contributed to it. So as a separate company while the ability to focus solely on the M&A needs, if you will, of the TS business, and that's what we plan to do.

Okay, that's very helpful. And then just one question, we've been out at CES and met with your partners on the PC side and clearly there are challenges with access to CPUs, which obviously did not manifest itself this quarter, I would assume there was a fair amount of channel still going into the quarter. So I'm just curious, do you anticipate there being a time where what Intel is doing with PC partners at this point, will actually hit your numbers or is there a reason why we should think that you can kind of get through this and all we need to worry about is typical PC trend? Thank you.

Sure. Shannon, this is Dennis. So the reality is we've been dealing with this situation essentially on and off for the last year and I think what we see -- what the market sees, which is we expect it will probably continue for a couple of more quarters at least. But we've been able to I think navigate it fairly well, work with our partners to ensure that product is delivered as soon as it can and the plan is to continue to do that for the next couple of quarters as the situation plays out.

Your next question comes from the line of Adam Tindle with Raymond James. Please go ahead. Your line is open.

Good afternoon, this is Madison on for Adam. And thanks for taking my questions. Marshall, I know it's early, but I was hoping you could help us better understand some of the balance sheet dynamics between the two businesses, maybe anything related to cash conversion cycle and how can we think about the allocation of debt between the businesses post spin?

Yes. We expect it to be about 50-50, in our prepared remarks and then what I’d said, we absolutely believe given where we're projecting in terms of strong balance sheets for both entities, additional improvement in operating performance and cash flow that, that will only bolster that comment.

Okay. And any differences around cash conversion cycles between the businesses?

There is unique differences clearly for TS, it's a full spectrum of cash conversion from AR to inventory to APU. And as we said in the past with Concentrix it's predominantly the AR DSO cycle.

And then Madison, it’s Dennis. Just follow up on the capital side. As Marshall indicated we're following a form F 10 as part of this transaction and there'll be more information about the go-forward capital structure in that document.

And then just a quick follow up here. I know the spin will qualify as tax-free, but would there be any tax implications for a potential buyer to come into play here?

Yes. So as we said, we expect this to be a tax-free spin and will be a pro rata allocation through dividend to our SYNNEX shareholders.

[Operator Instructions]. Your next question comes from the line of Tim Yang with Citi. Please go ahead. Your line is open.

On Concentrix, I think the target for top-line growth is mid single-digit and you're growing at low single-digit percentage in 2019. I think you mentioned that you have some portfolio optimization. I think the question is, are you comfortable with your current end exposure right now and how should we think about the timeline for achieving the targeted growth?

Yes. So we see the market growing between 3% and 5% and our expectations is that we will achieve that in 2020. We're very comfortable with our portfolio right now, we're very comfortable with our pipeline right now and we've actually sort of been more aggressive at sort of rebalancing our portfolio over the last quarter and a bit to make sure that we have a more rich margin profile and a more diverse profile across our verticals. So, quite happy where we're at.

And timeline for achieving the target growth?

Within 2020 we said that we are comfortable of achieving within our 2020 timeline between the market growth rates.

One quick follow up. You have -- you had a very strong result in TS business for some of your vendors mentioned, enterprise spending remains pressured. Can you help us understand why there is a disconnect between your performance versus your vendors? Thank you.

Hi, this is Dennis. Yes, I think a couple of reasons for that. One, we've been executing very well in the marketplace overall, part of that -- I will go back to what I said before, we've been investing in the business. Additional sales headcount, additional BD and product folks that really helped us take share. So that's allowed us to grow faster than the overall market. Also, as we talked about in our Q3 results and as I mentioned in the script today, our integration and systems design business, we've been able to cross-sell additional services to that customer set, which are more distribution like, more supply chain like services and we benefited by that again as well in the quarter.

Your next question comes from the line of Ananda Baruah with Loop Capital. Please go ahead. Your line is open.

Hey, just a couple from me. Dennis and Marshall and Chris as well. Dennis, you talked earlier about having -- both companies having opportunity to do some things now separately that maybe -- they weren’t able to previously. Can you talk about what some of those more material things might be, whether they’re revenue related, strategic related, optimization related? We'd love to know what those things might be. And then I have a quick follow-up.

Hi, Ananda, this is Dennis. So to be clear, the separation doesn't immediately change anything with regard to either segment. Our strategies for Concentrix at SYNNEX has been in place for quite some time and we've been executing on them. But having two companies under one umbrella does have the situation come up now and again where you have to make a decision between the two. That won't occur going forward. That's the key, first thing that will happen once the separation occurs. But then when the independent companies have their own management teams in place, their own Board of Directors, they'll be able to specifically focus on their strategies. And by doing that, along with a separate capital structure, I think the long-term prospects of each individual entity will be better than they are today. But to emphasize the strategies of the business aren't changed because of the separation. They're just improved as a result.

Yes, understood, understood. And then just with regards to kind of comments that you guys made on the TS side, how you’ve sort of been -- this is my term, like kind of on pause, you haven’t done much M&A wise there, you'd be open to doing stuff again. Can you help us just think about where you think the industry still could benefit from consolidations? There's been a lot of consolidation at the CTA level, the VAR level, there hasn't been as much. Are there any other areas? Just kind of like that higher level would be helpful. Appreciate it.

Sure, Ananda, it’s Dennis again. I'd say two areas that would benefit the industry. One would be further consolidation. I do think a larger set of, call it, power distributors, if you will, will benefit the market more by offering streamlined services and efficient services to the OEM and our community. That's number one. And number two, I think we can as a distribution channel can use our resources to invest in other services to further help our partners out, be it OEM or a VAR to extend their offerings to the end customer.

Any types, particular types of services that pop out?

Yes, I go back to one of the strategies that we talked about in the investor deck, we're investing in cloud-related services and anything around anything as a service. And so there might be possibilities to do investments in those areas beyond the organic ones that I talked about

[Operator Instructions]. There are no further questions at this time. I will turn the call back to Mary Lai for closing remarks.

Thank you for joining us today and appreciate your time and your interest. We look forward to speaking with you next time. This concludes our conference call. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.