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Synnex CFO: Concentrix Spin-Off Expected By Year-End

'Continued effort on this project and its completion are all [contingent on the premise] that overall economic activity continues to grow and there are no major additional shocks like what occurred in Q2,' says Synnex CFO Marshall Witt.

After delaying the deal earlier this year, IT distributor Synnex expects to complete the spin-off of its Concentrix business within the next six months.

“We're targeting to complete the [spin-off] sometime in the calendar fourth quarter of this year,” Synnex CFO Marshall Witt told investors during an after-the-bell earnings call Thursday. “Continued effort on this project and its completion are all [contingent on the premise] that overall economic activity continues to grow and there are no major additional shocks like what occurred in Q2.”

Fremont, Calif.-based Synnex saw revenue fall 3.3 percent in the second quarter. Shares, however, traded higher, up 14.94 percent to $116.88 on Friday even as the broad market was down.

Synnex generated $5.53 billion in revenue in the quarter ended May 31 versus $5.72 billion in the year-ago quarter. Net income was down sharply to $57.0 million compared with $114.5 million a year ago, a decline of 50 percent.

“The start of our quarter was certainly more robust than the end, driven by the burst of buying as the shift to [work-at-home] occurred. At the end of the period, we saw products supporting the office environment, such as networking infrastructure, servers, desktop PCs, printers and supplies, slowed down as a result of the lack of employees on-site at end customer offices. This aspect contributed to TS [Technology Solutions] distribution being flat year over year,” said Synnex President and CEO Dennis Polk.

The company’s Concentrix business generated revenue of $1.07 billion, down 8 percent year over year, said Chris Caldwell, who leads that business.

“We anticipated a challenging quarter,” he told investors. “As you see in our results, we executed extremely well under the circumstances and delivered a much-improved performance than we originally had visibility into. … The revenue decrease was all COVID-related and broke into two parts.”

Travel and transportation business fell off as those businesses no longer needed services, and lockdowns and quarantine efforts limited the ability of the Concentrix staff to work, Caldwell said.

“Through the course of the quarter with very aggressive action, we were able to drive our performance by moving a significant portion of our staff to working from home and being productive, move staff from accounts no longer needing capacity to clients who saw increases, and take advantage of a few opportunistic short-term deals where people needed capacity quickly,” he said.

Synnex said in January that it was spinning off its Concentrix unit, with Caldwell expected to take the reins as CEO of Concentrix once the deal closes. Polk delayed the deal in late March, citing the uncertainty around COVID-19. During remarks yesterday the company said that barring any financial shocks, the deal is still in the works.

“We are still very much committed to finalizing the [spin-off] and believe we are on a path to do so by the end of the year, as long as the macro environment accommodates,” Polk said.

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