TD Synnex CEO Talks 2024 Growth Plans, AI Bets

“We today have about 40 vendors that will make us kind of overweight, if you will, in AI. So we believe we’ve got a great start in that category. But that is the new area that everybody’s talking about, and we feel as if our history puts us in a great position to really take advantage of being in the front of the market in the AI segment moving forward,’ TD Synnex CEO Rich Hume tells CRN.

Shaking Off PC Business Issues

Numberswise, the fiscal fourth-quarter 2023 and full fiscal year 2023 looked tough for TD Synnex, with revenue and both GAAP and non-GAAP net income down over the comparable periods of fiscal 2022.

However, according to Rich Hume, CEO of the world’s largest IT distributor, with dual headquarters in Fremont, Calif., and Clearwater, Fla., fiscal 2023 was actually a good year, with financials about what they were expected to be as TD Synnex moves past issues in the PC business caused by the COVID-19 pandemic.

“We’ve been moving through this PC ecosystem decline that has been occurring all year long,” Hume told CRN. “We said that as we move through time, those declines would become less, which is actually what transpired.”

Looking ahead, impacts from the COVID-19 pandemic are having what may be their final appearance, Hume said.

“So let me start with the first half of the year,” he said. “We believe that PC sales will start to grow. And we’ll be working off the tougher comparison for our Advanced Solutions business. And then in the second half of the year, what I would refer to as the COVID adjustment for the PC and Advanced Solutions categories, will be largely behind us. So we would anticipate broad growth across the business in the second half of the year.”

Going forward, TD Synnex will expand its focus on more advanced technologies, and in particular on AI and the cloud, Hume said.

“We today have about 40 vendors that will make us kind of overweight, if you will, in AI,” he said. “So we believe we’ve got a great start in that category. But that is the new area that everybody’s talking about, and we feel as if our history puts us in a great position to really take advantage of being in the front of the market in the AI segment moving forward.”

TD Synnex By The Numbers

For its fourth fiscal quarter 2023, which ended Nov. 30, TD Synnex reported revenue of $14.41 billion, down 11.3 percent from the $16.25 billion the company reported for its fourth fiscal quarter 2022.

That was $40 million lower than analyst expectations, according to Seeking Alpha.

This included Americas revenue of $8.4 billion, down from last year’s $10.0 billion; European revenue of $5.2 billion, down from $5.4 billion; and Asia-Pacific and Japan revenue of $838 million, slightly up from $834 million.

For the quarter, TD Synnex also reported GAAP net income of $187.5 million, or $2.06 per share, down from last year’s $221.23 million, or $2.31 per share. On a non-GAAP basis, the company reported $285.6 million, or $3.13 per share, down from $329.8 million, or $3.44 per share.

Non-GAAP earnings beat analyst expectations by 46 cents per share, according to Seeking Alpha.

For all of fiscal 2023, TD Synnex reported revenue of $57.56 billion, down 7.7 percent from the $62.34 billion it reported for fiscal 2022.

Americas revenue for the year was $34.57 billion, down from $38.79 billion. European revenue was $19.42 billion, down from $20.29 billion. And Asia-Pacific and Japan revenue was $3.6 billion, up from $3.3 billion.

Looking forward, TD Synnex expects first fiscal quarter 2024 revenue of $14.0 billion to $14.7 billion, compared with the distributor’s first fiscal quarter 2023 revenue of $15.1 billion.

TD Synnex also expects GAAP net income of $147 million to $192 million, compared with last year’s $167.0 million, and non-GAAP net income of $232 million to $277 million compared with last year’s $279.2 million.

Here is more of what Hume had to say in an interview with CRN.

TD Synnex reported Americas revenue down 16 percent to 17 percent year over year for the fourth quarter. What happened?

Hume: “Without getting too far into it, actually, the gross billings were only down about 9 percent. It’s the accounting for certain transactions that net down. So typically, software would be in the category of things that get netted down, or part of our Hyve [integration] businesses where the goods are consigned but we still provide the service and make the same profitability. So from what was billed in perspective to the customers, there was a 9 percent delta there, so 17 percent becomes 8 percent. Our gross billings were actually at the high end of our guidance range. And the revenue was just below the midpoint of the guidance range. So all of this is within the context of expectations.”

But that’s still down 8 percent. What caused that the drop?

“As you know, we’ve been moving through this PC ecosystem decline that has been occurring all year long. We said that as we move through time, those declines would become less, which is actually what transpired. And in addition to that, our Advanced Solutions business, some of its growth in the past has been fueled by a backlog. The backlog is now sort of run down, and the Advanced Solutions business is sort of a flattish category, if you will. So as we look forward, what we said is we would anticipate that our billings and revenue in the first half of this coming year would be flattish, and then we anticipate the back half of the year to have a mid- to high-single-digit growth. So much like what many are talking about in the industry, we think that as we move through the FY ’24 time frame, it starts out a bit tepid or weaker, and then will improve as we move through the year. And again, it is important to note that all this is in the context of the guidance that we had previously provided to the market.

“So for fiscal ’24, softer first half, and we expect the first half of the year for things to be flattish, and in the second half we would anticipate mid- to high-single-digit growth.”

So what’s going to lead the growth of the second half of the year?

“So let me start with the first half of the year. We believe that PC sales will start to grow. And we’ll be working off the tougher comparison for our Advanced Solutions business. And then in the second half of the year, what I would refer to as the COVID adjustment for the PC and Advanced Solutions categories, will be largely behind us. So we would anticipate broad growth across the business in the second half of the year.”

As you look at the second half of 2024, what are the strategic priorities of TD Synnex?

“Not a surprise: It’s high-growth technology. So hybrid cloud, analytics, AI, cybersecurity and hyperscale infrastructure. These are the markets that are outpacing the overall IT market. And we’ll continue to keep ourselves steadfastly focused on those categories, along with, obviously, all of the infrastructure and PC ecosystem stuff we do. But we would anticipate those areas showing a bit of higher growth.”

And for the second half of 2024, do you see TD Synnex engaging in any new programs or technologies that you want to bring to your channel partner customers?

“Well, obviously, the thing that everyone is talking about right now is AI. We've had the benefit of having built an analytics practice that is 10 years in the making. It actually originated with our acquisition of Avnet Technology Solutions back in the day. And we have since adopted our analytics practice globally and broadly. And what’s important about that is the foundation of AI is data. And so we’ve had the privilege of having many analytics vendors on our line card. And we today have about 40 vendors that will make us kind of overweight, if you will, in AI. So we believe we’ve got a great start in that category. But that is the new area that everybody’s talking about, and we feel as if our history puts us in a great position to really take advantage of being in the front of the market in the AI segment moving forward.”

Any other big initiatives for 2024?

“Again, we want to focus on high-growth technologies and on continuing to advance our cloud platform. Because as we move through time, there are more customer requirements around that platform, and we feel as if we have a great baseline, and we will accelerate investment and capabilities within that platform as we move throughout the year.”

Looking beyond TD Synnex, how do you see the state of distribution overall?

“Well, I see the state of distribution as being quite healthy and quite vital moving into the future. We’re 40-plus years into this as a category, not just TD Synnex, but some of our competitors. And every day, our vendors are after us to help them to do more and more and more. As new technologies emerge, they first make their way into large enterprises, then they get packaged and make their way into what I’ll call the ‘volume’ part of the market, the small and midsize part of the market. And that’s where the channel really performs. And I think that the demands on distribution and the business partner ecosystem in total by our vendors get greater through time, and we fully intend to respond to those requirements and really help the entire ecosystem to benefit.”