Tech Data (TECD) Tops Q3 EPS by 85c, Revenues Beat; Offers Q4 EPS/Revenue Outlook Above Consensus

Tech Data (NASDAQ: TECD) reported Q3 EPS of $3.02, $0.85 better than the analyst estimate of $2.17. Revenue for the quarter came in at $9.34 billion versus the consensus estimate of $8.92 billion.

• Net sales were $9.3 billion, an increase of 11 percent compared to the prior-year quarter. On a constant currency basis, net sales increased 12 percent.
  • Americas: Net sales were $4.1 billion (44 percent of worldwide net sales), an increase of 13 percent. On a constant currency basis, net sales increased 14 percent.
  • Europe: Net sales were $4.9 billion (53 percent of worldwide net sales), an increase of 9 percent. On a constant currency basis, net sales increased 12 percent.
  • Asia Pacific: Net sales were $0.3 billion (3 percent of worldwide net sales), an increase of 6 percent. On a constant currency basis, net sales increased 12 percent.
• Gross profit was $556.6 million, an increase of $30.5 million, or 6 percent. As a percentage of net sales, gross profit was 5.96 percent compared to 6.23 percent in the prior-year quarter.
• Selling, general and administrative expenses (\"SG&A\") were $396.7 million, or 4.25 percent of net sales, compared to $416.8 million, or 4.93 percent of net sales in the prior-year quarter. Non-GAAP SG&A was $368.6 million, a decrease of $21.8 million, or 6 percent. As a percentage of net sales, non-GAAP SG&A was 3.95 percent, compared to 4.62 percent in the prior-year quarter. Included in SG&A and non-GAAP SG&A expenses is a $25 million benefit from the collection of a previously reserved accounts receivable.
• Worldwide operating income was $146.9 million, or 1.57 percent of net sales compared to $79.6 million or 0.94 percent of net sales in the prior-year quarter. Non-GAAP operating income was $188.0 million, an increase of $52.3 million, or 39 percent. As a percentage of net sales, non-GAAP operating income was 2.01 percent, an improvement of 40 basis points.
  • Americas: Operating income was $112.4 million, or 2.72 percent of net sales, compared to $55.6 million, or 1.52 percent of net sales in the prior-year quarter. Non-GAAP operating income was $124.8 million, an increase of $39.3 million, or 46 percent. As a percentage of net sales, non-GAAP operating income was 3.01 percent, an improvement of 68 basis points.
  • Europe: Operating income was $39.9 million, or 0.81 percent of net sales, compared to $29.9 million, or 0.66 percent of net sales in the prior-year quarter. Non-GAAP operating income was $66.2 million, an increase of $12.8 million, or 24 percent. As a percentage of net sales, non-GAAP operating income was 1.34 percent, an improvement of 16 basis points.
  • Asia Pacific: Operating income was $2.7 million, or 0.97 percent of net sales, compared to $2.4 million, or 0.91 percent of net sales in the prior-year quarter. Non-GAAP operating income was $4.6 million, an increase of $0.7 million, or 18 percent. As a percentage of net sales, non-GAAP operating income was 1.64 percent, an improvement of 17 basis points.
  • Included in worldwide and Americas operating income and non-GAAP operating income is a $25 million benefit from the collection of a previously reserved accounts receivable.
  • Stock-based compensation expense was $8.1 million, compared to $8.3 million in the prior-year quarter. This includes $0.6 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 $114.2 million, compared to $37.3 million in the prior-year quarter. Non-GAAP net income was $116.3 million, an increase of $39.6 million, or 52 percent. Included in net income and non-GAAP net income is an $18 million (net of tax) benefit from the collection of a previously reserved accounts receivable.
• Earnings per share on a diluted basis (\"EPS\") were $2.96 compared to $0.97 in the prior year quarter. Non-GAAP EPS were $3.02, an increase of $1.02, or 51 percent compared to the prior-year quarter. Included in earnings per share and non-GAAP earnings per share is a $0.47 benefit from the collection of a previously reserved accounts receivable.
• Net cash generated by operations during the quarter was $155 million.
• Return on invested capital for the trailing twelve months was 8 percent, compared to 9 percent in the prior-year period. The adjusted return on invested capital for the trailing twelve month period was 12 percent, essentially flat from the prior-year period.

"I am pleased to report that our teams delivered a strong Q3 performance with great execution across our three regions. Worldwide sales grew 11 percent and we achieved high double-digit non-GAAP operating income and earnings per share growth. In addition, we generated $155 million in cash from operations, earned an adjusted return on invested capital of 12 percent, paid down $100 million of debt and returned $44 million to our shareholders through share repurchases," said Rich Hume, chief executive officer. "Our Q3 results reflect the powerful combination of our end-to-end portfolio and strong execution by our global teams. They also validate the strategic role we play in the IT Supply chain – delivering high value through our end-to-end portfolio to channel partners across the broad spectrum of IT products and solutions."

GUIDANCE:

Tech Data sees Q4 2019 EPS of $3.90-$4.20, versus the consensus of $3.77. Tech Data sees Q4 2019 revenue of $10.5-10.9 billion, versus the consensus of $10.28 billion.

For earnings history and earnings-related data on Tech Data (TECD) click here.

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