Tech Data 3Q17 Earnings Call Notes

Tech Data’s (TECD) CEO Bob Dutkowsky on Q3 2017 Results

Bought Avnet’s Technology solutions business

“we remain especially excited about the pending acquisition of Avnet’s Technology Solutions business. Since we spoke to you last on September 19, we’ve established an integration management office which consists of key functional leaders from both teams across the regions who are responsible for putting plans in place that will ensure our integration goes smoothly for our customers, vendors and employees. I’m pleased to report that the teams have made good progress on our integration planning effort including two major integration milestones.”

election did have an impact on the environment but it’s not changing the way that we think about our business going forward

“Yes, so first off the impact of the election, I think the election had the whole infrastructure in an unstable environment. How close the election was made it very difficult for management teams and CFOs to project forward? How investments and infrastructure may play out? How tax rates may play out et cetera, et cetera, etcetera? So, I think it had a cooling effect on the market and you may now see that some of that’s been lifted. In terms of the capital impacts on tax rate, we’ve looked back on it and we’ve seen de minimis impact on our business when one of those changes happen. So in terms of our thought process going forward, we don’t have a lot of, it’s not impacting the way we think of the business.”

Tech Data 1Q16 Earnings Call Notes

Tech Data (TECD) Bob Dutkowsky on Q1 2017 Results

The iPhone was down but everything else was up

“And Matt, let me give you just a little bit more color on Apple in the quarter; the iPhone, as you well know, was down, but every other Apple category for us was up in the quarter. iPads, desktop, beats [ph], accessories, notebooks, the whole product line was up in every category. So Apple is not just iPhones for us, I think that’s an important distinction.”

Opportunities when vendors bring more products into the channel

“I think the important other pocket of market share gain that’s available, is when a vendor brings more products into the channel. So for example, as well documented recently, Dell has moved more of its product from direct sales into the channel, and that is pure market share opportunity, that some distributor is going to win. And we believe in the last few quarters, we have done very-very well, winning those jump balls, where vendors bring more product to the channel.”

Clearly European data center slowed

” We have had a really good run in the data center, in both geographies, both in the Americas and in Europe, and clearly, the European data center slowed down in the quarter. From our perspective, I don’t necessarily have much value to add, other than, if you read all the reports from all of our vendor partners, and their prints for the quarter, you can see that there is a pretty consistent message that performances were down in all of the broad category, short of networking. And we had good networking performance across our footprint.”

Transitions happening in the data center from spinning disk to solid state storage

“I think that the transitions that are happening in the data center, for example from spinning disks to solid state storage and flash, those are transitions that don’t happen overnight, they evolve, and that’s a broad array of vendors that are bringing those products to the market, and we are fairly well positioned. The market share leaders in those, for example in flash and solid state are companies like HP, EMC, IBM and we have access to all of those products.”

IT spending environment is muted

“And by geography and by segment and by technology, our view is, all of that feels muted right now, compared to the last few quarters. So it’s important to note, that Tech Data can still deliver good results, even in that muted market environment, because of our ability to optimize our coverage and the customers that we sell to. So muted is not necessarily a bad thing, it’s just the reality that we don’t see the strong growth that has existed in the IT spending environment, like it has been, say over the last four or five quarters. And again, we are one datapoint for you, but look at the performance of our vendor partners and their outlooks as well, and you will hear the same tone everywhere.”

Chuck Dannewitz

Solid sales growth in most product categories

“At a product level, the Americas growth was driven by solid sales growth in most product categories, including desktops, notebooks and new form factor tablet, PCs. Mobility, consumer electronics, networking and security products also delivered solid growth in the quarter.”

Tech Data FY 4Q16 Earnings Call Notes

Robert M. Dutkowsky – Chief Executive Officer & Director

Desktop was strong in the Americas

“the desktop was strong in the Americas and the notebook was stronger in Europe. Networking and security was strong in the Americas. So, it’s different by geography. And that’s one of the strengths of our model is the diversity that we have in our line card, whereas we’re aggressively marketing and selling security products into the data center, and we’re selling PCs and laptops and notebooks and mobility products at the same time.”

No issues with PC inventories

“Our inventory levels are in line and we don’t see any issues with PC inventories.”

PC category broader than just windows PCs

“The PC category is broader than just Windows PCs. The Chromebooks and some of the other devices that categorize themselves as PCs all added together, I think, delivered the strength in results there.”

The Apple business is much broader than the iPhone

“Remember, our Apple business is much broader than just the iPhone. It’s the notebooks. It’s the desktops. It’s iPads. It’s Beats. It’s Apple TV. It’s Apple Watch. The Apple product line has gotten much broader than what it was a few years ago. So, there’s a lot more to sell. We’re selling it to more customers, and we’re executing very well and gaining share in selected places.”

IT distributors specializing

“From my perspective, what you’re seeing is that each of the IT distributors are specializing and separating themselves in different areas and in different specializations. The idea that it’s easy to compare us as we diversify further and further from just pick, pack and ship says that we’re finding areas of differentiation to distinguish ourselves in the minds of our vendor partners and our customers. ”

Our areas of focus are different

“Our areas of focus are different than the areas that our competitors have. The line cards that we bring to the market are different. The skill sets that we have are different. The cost structures we have in our internal infrastructures and the capabilities that we have in our IT systems are clearly different. And it gives us each the ability to change and differentiate ourselves in the marketplace.”

Tech Data 3Q15 Earnings Call Notes

Tech Data’s (TECD) CEO Bob Dutkowsky on Q3 2016 Results

Europe strong

“in Europe, our team continued to execute exceptionally well, delivering record Q3 sales and earnings.”

Americas softer

“In the Americas, a softer than expected market in Q3 resulted in sales that were slightly below our expectations, leading to lower operating leverage in the quarter compared to Q2.”

Cloud adoption increasing

” cloud adoption through the channel has been slow and measured, but growth is beginning to accelerate, albeit from a small base.”

North America is clearly moderating

“we think that North American environment — growth is moderating. It’s not as robust as it was earlier in the year or at the tail end of last year. And I think you have to break that apart a little bit. The U.S. has a certain dynamic; Canada certainly with its dependency on oil has a different dynamic.”

There are pockets of strength in SMB

“So, clearly, the Americas — the North American demand is moderating. And yes, there are still good pockets of opportunity. In the quarter, we just reported, as Chuck described, SMB continued to be a strong area. We delivered double-digit growth in the Americas in SMB. So, there are pockets of strength.”

Enterprise is weaker but we are more SMB focused

“if you look at the results that some of the larger resellers have already posted, you can see that at the higher end of the curve, growth is not that strong. But remember, that’s a smaller part of Tech Data’s business. We are predominantly an SMB driven go-to-market model. So, strength in SMB is good for us. Weakness at the enterprise level doesn’t hurt us as much as maybe other players.”

The HP split was a massive undertaking

“The HP split was a massive undertaking, not only for HP but for its partners all throughout the ecosystem. And so, Tech Data dedicated a lot of resource and effort to help the HP split go smoothly in the channel. And I think it’s been a success so far.”

Change creates opportunity though

“change typical represents opportunity for us in the marketplace. If there is confusion in the market, the resellers and borrowers turn to Tech Data for clarity. So, the split created confusion. We were able to manage it very effectively. And I think the two smaller more nimble parts of HP are going to create more opportunity for us going forward.”

Kind of an answer/non-answer to question of slowing iPhone sales

“your comments on Apple are interesting. But keep in mind that the iPhone represents only about a third of our Apple sales. Apple is performing very well in the desktop, in the laptop, and mobile space. We sell the Apple TV; we sell the Apple Watch. So, this is not just an iPhone phenomenon that’s being manufactured inside of our growth story around Apple.”

The reality is that IT spending is moderating in the Americas

“we’ve responded the realities of the market. We don’t make the market; we don’t create the demand; we respond to the realities of it. And the realities are that IT spending is moderating in the Americas. It’s reflected not only in our results but in all of the results in the ecosystem. Our competitors, the vendor partners, we sell their products, and the publically traded reseller customers that are ours are all kind of point to the same place of some moderating demand in the Americas. So, I don’t think it’s our role to explain why, it’s our role to get — to grow as much as we can profitably inside the market opportunities that exist, and to be as efficient and as effective as we possibly can be to put products and services into the market”

We do sell cloud solutions

“we’ve responded the realities of the market. We don’t make the market; we don’t create the demand; we respond to the realities of it. And the realities are that IT spending is moderating in the Americas. It’s reflected not only in our results but in all of the results in the ecosystem. Our competitors, the vendor partners, we sell their products, and the publically traded reseller customers that are ours are all kind of point to the same place of some moderating demand in the Americas. So, I don’t think it’s our role to explain why, it’s our role to get — to grow as much as we can profitably inside the market opportunities that exist, and to be as efficient and as effective as we possibly can be to put products and services into the market”

Cloud is a slow and measured deployment. It’s still in awareness and education mode

“Our $200 million performance in the cloud, I think speaks to the reality of what’s really happening in the cloud. It’s a slow and measured deployment. There are opportunities there. And our infrastructure and our set of offerings position us very well, as momentum builds in the cloud, we will be — we are prepared to be able to take advantage of that. Where the channel is today is very much in awareness and education mode, trying to get the resellers to understand the cloud environment, get the resellers to understand the transitions their business models need to take and to get them to begin the transact there.”

Tech Data 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Strong IT demand environment

“Tech Data delivered an outstanding quarter in Q2 of fiscal 2015 and improved IT demand environment together with strong execution by our teams in both regions, produced record Q2 sales and earnings per share, results that exceeded our expectations.’

US driven by PC business

“On a product level, the region’s growth was driven by strong sales of broadline products, mainly PCs and good performance in our advanced infrastructure solutions or AIS division. For the first six months of fiscal ’15, Americas sales grew 6% from the prior year to $5.2 billion”

Optimistic demand environment will continue, but margins may not be sustainable

“While we remain cautiously optimistic that the current demand environment will continue, the margin opportunity presented to us in Q2 is not assured to be sustainable during the second half, therefore we will take our usual conservative approach to plan for more normalized margins and if demand tries to exceed our expectations, we will once again have an opportunity to over achiev”

Color on geographies/products

“from a end market perspective SMB was strong in the U.S. Education and healthcare were both up double digits. From geographic perspective in Europe, Italy, Iberia, the Nordics, Switzerland, Germany were all up double digits. So they were both vertical strength and geographic strength in the quarter as reported. Couple of the highlights from the product perspective, software was up 5% worldwide. The tablet — an interesting data point, tablets were down 2% but ASPs were up and that was primarily driven around a mix change.”

Ya, PCs have benefitted from XP, but there’s other things at work too

“on the PC, clearly the conversion away from XP has benefited the whole ecosystem. And we’ve all been able to take advantage of that transformation. But, I think you also have to factor in that there are other growth factors in the PC market. Employment clearly grew over the last few quarters and that drives PC purchases, as does just the ageing of he fleet that was installed, clearly over the last years or so PC demand was down, that fleet aged and now with some renewed confidence in the strength of the economies, as well as enhancements in growth and in employment, that’s driven the PC market very nicely.”

Tablets are good at some things, PCs better for others

“I think the other factor that’s come into play in the PC space is the penetration of tablets has really grown and the performance and capability of the tablet is now very clear. It does some things well. There’s other things that it doesn’t do as well, that the PC is optimized to perform.”

Server refreshes likely over next 12 months

“The server cycle is kind of yet to be seen. The Windows Server update really will start to come into fruition in the middle part of next year. Customers and enterprises will start the planning process now…server refreshes that we believe will happen in the latter part of this year and early next year”

IT distributors have to adapt to a constantly changing environment

“That’s the process of running an IT distribution business when the technology is constantly changing you have to optimize. You have to take the opportunity to match up your resources, you skills and your investment streams with the real opportunities that exist.”

Europe shuts down in August

“I would caution you to not necessarily look at August as a indicator of what volumes are in Europe because a lot of August means shut down in Europe where countries are operating on 20% of available staff because of the tail end of the vacation season.’