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.’