Good afternoon. My name is Cindy, and I will be your conference operator today for the SYNNEX Corporation 2017 Fourth Quarter Earnings Call. [Operator Instructions]. Today's conference is being recorded. If you have any objections, you may disconnect. At this time, I would like to pass the call over to Mike Vaishnav, Senior Vice President, Corporate Finance and Treasurer at SYNNEX Corporation. Please go ahead.

Thank you, Cindy. Good afternoon, and welcome to the SYNNEX Corporation Earnings Conference Call for the Fiscal 2017 Fourth Quarter and Full Year Ended November 30, 2017. Joining us on today's call are Kevin Murai, President and CEO; Dennis Polk, COO; Marshall Witt, CFO; and Chris Caldwell, EVP and President of Concentrix Corporation. Please note that some of the information you will hear today consist of forward-looking statements within the meaning of the federal securities laws. Such statements may relate to, without limitation, market, demand, investment, growth, non-GAAP net income and diluted EPS, amortization of intangibles, margin, revenue, costs, expenses, shares, tax rate, tax savings, seasonality, profit, budget, adjusted operating margin, strategy, overall performance and succession plan. Actual results or trends could differ materially from our expectations. For more information, please refer to the risk factors discussed in our Form 10-K for fiscal 2016 and discussion of forward-looking statements in our earnings release and Form 8-K filed with the SEC today. SYNNEX assumes no obligation to update any forward-looking statements, which speak as of their respective dates. Also, during this call, we will reference certain non-GAAP financial information. Reconciliation of non-GAAP and GAAP reporting is included in today's earnings release and related Form 8-K on our website at www.synnex.com. This conference call is the property of SYNNEX Corporation and may not be recorded or rebroadcast without our specific written permission. Now I would like to turn our call to Kevin Murai for the business update. Kevin?

Thank you, Mike, and thanks to all of you for joining our call today. As you've seen, in addition to our fourth quarter results, today, SYNNEX announced board and leadership changes that will be effective March 1 of this year. I will be retiring as President and CEO, and Dennis Polk will take on this role. The last 10 years at SYNNEX have been nothing sort of spectacular, and I am so fortunate to have been able to work with an incredible team and the best individual leaders in our industry. Together, we accomplished great things. Dennis has been a great partner to me and has played a key role in establishing our strategy and overall execution of the business. I am confident that under Dennis' leadership, SYNNEX will continue to grow and flourish. And I am excited that I would be able to continue to play a role in the company's strategy and growth as Chairman of the Board. Now I would like to discuss Q4 and full year 2017 highlights before turning the call over to Marshall. After Marshall, Chris will provide an update on Concentrix, and then Dennis will discuss his thoughts on the business. For our fourth quarter, revenue was a record $5.3 billion driven by strong market demand across the majority of products and services. Our Technology Solutions business turned in another strong performance, growing over 20% when excluding Westcon-Comstor. By product segments, we experienced broad-based growth, including client devices, peripherals, servers, networking and print and cloud-based software with softer demand in on-premise software and components. All of our market segments experienced growth, including SMB, public sector and retail. The Westcon-Comstor team hit the ground running and for Q4 experienced double-digit revenue on GP dollar growth in the comm store and security division. Concentrix delivered…

Thanks, Kevin. First, I'll review our results of operations and key financial metrics, and then I'll conclude with guidance for the first quarter of fiscal 2018 before turning the call over to Chris. Our Q4 revenue, net income and EPS, both GAAP and non-GAAP, exceeded our expectations. On a consolidated basis, total revenue was $5.3 billion, up 36.7% compared to $3.9 billion in the same quarter of the prior year. Adjusting for FX, revenue increased 36.3%. Technology Solution revenues were $4.8 billion, representing an increase of 41%, compared to the prior year quarter. The Westcon-Comstor acquisition performed well and exceeded expectations. Adjusting for the acquisition and FX, revenue increased by 22%. This increase was primarily due to continued demand for a system design integration solutions and broad-based growth across the rest of the TS portfolio. Concentrix revenues were $534.4 million, up 6.8% from $500.4 million in the prior year quarter. Adjusting for FX, revenue increased 5.8%. The increase was primarily due to increased volume and the expansion of services to existing customers and the impact of the Tigerspike acquisition. Now turning to gross profit. Our gross profit on Q4 revenues was $462 million or 8.7% of revenues compared to $378.8 million or 9.7% of revenues in Q4 of 2016. The increase in gross profit dollars was primarily due to the acquisition of Westcon-Comstor. The decrease in gross margin was primarily driven by the higher mix of TS business due to Westcon acquisition and customer and product mix in our systems design and integration solutions business. Q4 total SG&A expenses were $269.4 million or 5.07% of our revenue. That compared to 5.74% of revenue or $223.2 million in the fourth quarter of fiscal 2016. The increase in OpEx was due to the Westcon-Comstor acquisition, investments in our system design integration solutions…

Thanks, Marshall. I'm really pleased with how we closed the fourth quarter and our fiscal year for Concentrix. In Q4, we achieved some important milestones highlighting the growth and success of our business. As Marshall mentioned, revenue for the quarter was $534.4 million, the highest amount achieved in any quarter. The majority of the 6.8% year-over-year growth reflected new client additions as well as additional business from our existing clients. EBITDA for the quarter was $81.5 million, a 13.7% increase over the same period last year, growing twice as fast as our top line. This was the higher -- highest-ever quarterly EBITDA for Concentrix. We added 22 new accounts to our portfolio this quarter, 10 of which were from our recently acquired digital team, Tigerspike. Although some of these deals are smaller in size, they provide an entrée into new relationships. We're excited about our existing client base as seeing value in our digital offerings. This past quarter also featured Double 11-day in November in the Asian region, and I'm happy how we've helped some of our clients manage their significant volume peaks for that day. Finally, this quarter, as like others, we are proud to have received 17 new awards, including the Asia's Best Company to Work For in the Philippines region. Our over 100,000 team members are key to our success. As I reflect back on 2017, I'm pleased with the progress we're making. We've added to our differential offerings, which has helped us reach the $2 billion revenue mark. We have done that by making strategic decisions on which clients and geographies to engage with, sometimes eroding our revenue base in the short-term for longer-term benefits. We've grown our EBITDA over 44% this year while continuing to make investments in staff development, infrastructure in new countries and…

Thank you, Chris. First and foremost, I want to thank Kevin for his leadership and direction over the last 10 years, during which, shareholder value increased significantly, and SYNNEX continued as a premier company in each of our business segments. I also want to thank our Chairman, Dwight Steffensen, and the rest of the SYNNEX board for their support, insight and confidence in me. Their guidance has provided a steady compass for SYNNEX leadership to successfully transition from Bob Huang to Kevin and now to me. I'm honored to be the next CEO of SYNNEX, and I accept this role with gratitude. And my commitment to our associates, partners, customers and shareholders will be to continue to successfully navigate SYNNEX through an ever-changing and complex global marketplace. As Kevin stated, and I reiterate, you're only as strong as the leaders that support you. I am fortunate to continue with a team that is the best in the industry and is one of the primary contributors as to why I'm so confident in our ability to continue our momentum into 2018 and beyond. Our foundation, built under Bob and then Kevin, is strong and something that I plan to leverage. We will continue with our drive and entrepreneurialism that Bob instilled from day 1 and still exist through today. We will also continue with a partner and associate focus, along with the business diversification strategy that Kevin brought to our business. This all goes along with our excellent leadership team in place that has been very important in shaping our culture. In a sense, it's business as usual, but this shouldn't be taken that we will remain static. One of the key elements of our success at SYNNEX is the continual challenging of our business to be relevant to all stakeholders,…

Thank you, Dennis. Before I turn over this call to our operator for the question. [Operator Instructions]. And with that, let's turn over the call over to the operator for the question. Cindy?

[Operator Instructions]. And our first question is from Adam Tindle from Raymond James.

First of all, Kevin, congrats on a stellar run in the CEO seat, and congrats to Dennis on the new role. Just wanted to start maybe first on Q4 results. I know gross margin is typically up sequentially, and I would have thought that adding Westcon would have been even more of a tailwind this year, but it looks like gross margin was actually down slightly on a sequential basis. Could you just give us a sense of what's contributing to this? Others are talking about a difficult competitive environment. And how we can think about a normal gross margin?

Yes. Adam, first of all, thank you for your congratulations as well. Q4, really, when you break down the different businesses, Concentrix, we do report separately, so you do see where our operating performance is there. Within Technology Solutions, if I do break down, our distribution business grew at a clip, we believe, faster than overall market, but our gross margins held relatively steady in that part of the business. Westcon-Comstor was accretive to that overall business, and it was really our systems design and -- our systems design business that, on the one hand, had much higher-than-forecasted revenue, and a big part of that was due to some unanticipated acceleration of shipments into Q4. But with that, it was really the mix of customers and products that we had in that incremental revenue where the margins were on the lower end of what we actually supply out of that business. And that really was the reason that our margins were somewhat lower than in Q4 for TS.

Okay. And just one for Chris, when you think about the double-digit operating margin for fiscal '18 in Concentrix, it implies nearly 100 basis points of margin expansion, which is above growth in recent years. Can you just walk us through the key drivers? And how you arrived at that goal? How much is mix? Operating leverage? Ramp costs? Attenuating, et cetera?

It's a couple of things. First of all, as we made in the prepared remarks, we are being very selective on the types of the clients we're driving as well as bringing new technology into those clients, which tends to erode some of our standard revenue but drives a higher operating margin for us. And so that's been planned and kind of baked into our operating results of where we see the business going. Also, as we talked about in the last couple of years, by focusing on insurance and banking and health care in some of the higher-margin, more stickier verticals, we've seen better growth in those areas because of our effort, and we're starting to see the returns of some of those into our operating performance as well. And then clearly, we're just being very focused on continuing to drive operating leverage in the businesses as we manage our costs effectively and get scale in some of the jurisdictions that we've opened up in, which is just sort of the blocking and tackling of day-to-day business.

Okay. So just to be clear, I know in the past, you've had a goal to grow revenue like 7% to 10% in Concentrix, but it sounds like the margin could be achieved through actually if revenue doesn't even grow and potentially decline in 2018.

Our goal is always to continue to grow, but we're more focused on getting operating leverage and margin expansion that we've talked about. And that's really been in the plans to drive that through this year.

And our next question is from Matt Sheerin from Stifel.

Just following up on Adam's question regarding some of the margin pressures that you saw in TS relative to the Hyve business. You haven't really talked about a big mix issues in that business in the past. So could you elaborate on that? And is that also because you're broadening your product portfolio and your customer set? Or are there some competitive issues in line with that?

Matt, it's Dennis. It really comes down to mix, like we talked about before. And what we mean by mix is the mix of customers. We had a concentration in just a few of our larger customers in the quarter. As you would expect, larger customers typically have a little more pricing power, and that will bring margins down. And that's what occurred in the fourth quarter.

And you said that there was -- it looks like some pull-in on to Q4, but it sounds like you're guiding TS overall to seasonal trends. In fact, Kevin sounded relatively positive or continued to be optimistic in terms of growth opportunities in the core business. So are you expecting that Hyve business to continue to have a good strength? Or could it be lumpy and maybe down a bit sequentially as you've seen in the past?

Yes, Matt, understand. Given the pull-in, if you will, that occurred, we're a little more cautious on Q1. But I think what we talked about in the past, this is a business that's very hard to predict. So right now, we're staying conservative on the first quarter but also ready for an increase in business as well.

Okay. And just quickly, as quick follow-up, you mentioned due to the lower tax rate that you would be giving some of that benefit back to shareholders, could you be more specific about that? Does that mean that you might increase dividends? Or look at a buyback?

Yes, Matt, as part of our earnings press release, we also announced an increase in our quarterly cash dividend to $0.35 per share. So that is one component, of course, of what we will do with the benefit coming from lower tax rates. Obviously, the other two key areas are continued investment in the growth of our business as well as paying down debt.

And our next question is from Frank Atkins from SunTrust.

Congratulations from me as well. Wanted to ask a little bit about Concentrix. Any areas of strength or weakness by industry, sector or geography?

So Frank, we saw strength in Asia, primarily driven by Double 11-day within the quarter. And then we are also seeing sort of some strength in the health care space. That's more of a North American comment.

Okay. That's helpful. And then if I could ask a little bit more about the tax issue. What is baked into that forecasted rate and some of those numbers you gave? Is that just the reduction in the corporate tax rate? Does that include some of the territorial-oriented provisions? If you could walk us through kind of preliminary thinking on that tax rate.

Frank, this is Marshall. The Q1 forecast is 30% to 31%, and that reflects the reduction in the corporate tax rate. As I've mentioned in my prepared remarks, we anticipate in Q1 to make the adjustments associated with repatriation and with deferred taxes, but we are still looking at that to ensure we understand it fully before we make an adjustment there. That will be considered onetime.

And our next question is from Shannon Cross from Cross Research.

Thank you very much. Kevin, congratulations in your retirement and Dennis congratulations to you too. I guess, my first question is, from a tax perspective, more on the business side and also the increased minimum wage and some of the changes that you talked about at Concentrix, how are you thinking about geographic position of headcount? Was there any slowdown during December in terms of maybe RFPs in that as people are trying to understand the implications of what it could be? And then maybe a pickup afterwards? I'm just -- I'm trying to think about how both of these things sort of have impacted how you're thinking about running Concentrix in 2018. And then I have a follow-up.

So Shannon, just from a Concentrix standpoint, that doesn't really change our strategy. Some of our clients have looked at it to see what the impact is, but it doesn't necessarily change where they're putting staff or anything else. Really, the focus from most of our clients is adapting more technology, focusing more on RPA and other things that will kind of change their business overall as a whole, and we don't expect to see any material impact from our clients changing their buying habits.

Okay. And you talked about again on Ontario, I mean, do you anticipate having to shift headcount around? Or are customers more willing to give back, for instance, on pricing, in order to offset the pressure you might feel from a higher minimum wage?

Yes. And specifically in Ontario, we're seeing a bit of a combination of both. We're seeing some clients who understand the benefit of being in that local market and, therefore, looking at making adjustments to their cost models for that. We are seeing some clients that over the next number of months will migrate out to other markets that are more cost-effective for the work that they need to be done. Overall, in our portfolio, that does have an impact, but it's not a substantive headcount. It's just that the labor costs tend to be higher within that marketplace.

Okay, great. And then I have a question. I'm not quite sure, I mean, TS and Hyve, and I'm not quite sure where it would hit, any thoughts on Intel and Meltdown in some of the comments, some of the concerns that are out there just in terms of capacity? I mean, it seems sort of a quick rush that maybe if capacity is an issue with regard to some of the data center servers, that could be a positive for Hyve, maybe overall, it could be positive for the server market over time. I'm just curious to think about and maybe, I don't know, services it could drive some incremental revenue. Is that just stretching it too much? Or is there something there that we should think about?

Yes. Shannon, we've certainly seen all the same things that you have. Frankly, I think it's a little bit early to really understand if there's going to be a positive or negative implication on that. We certainly haven't heard a lot yet from the market. But certainly, as we do, we'll be ready to reap the benefit, if there is any.

And our next question is from Ananda Baruah from Loop Capital.

Kev, we're going to miss you. I don't know what to say.

Thank you, Ananda.

I'm down, but I'm happy for you. And great job, obviously. It's been a pleasure working with you. Look forward to hopefully [indiscernible]. I guess, just a couple, if I could. Clarification, the 22% adjusted TS growth that's in the press release and adjusted for Westcon, is that apples-to-apples as if Westcon were with you a year ago? Or is that without Westcon?

Ananda, that's without. It's excluded completely.

Okay, got it. And then you said Westcon was going double -- grew double digits itself, I believe.

Yes, specifically in the security and comm store divisions.

Okay, great. And I guess, what are you guys seeing as general demand drivers? Obviously, demand has been pretty sticky for you guys. What dynamics are you seeing? What specific dynamics in the marketplace would you tend to attribute the ongoing strength to?

Yes. I think from an overall macro level, the economy has continued to be very strong. And you see it in so many other areas, low levels of unemployment, more reinvestment back in the business. And so the overall watermark, I'm sorry, overall water level of demand has increased. In particular, when we continue to see strength in demand in some of our Broadline product categories like print, as an example, I think that is a good sign that the overall market continues to be very healthy, and that's what we've seen for the better part of 2017 and certainly through our fourth quarter. Strategically or when you look at technology trends and growth drivers there, those continued to be the same. We're continuing to see more and more investment shift towards cloud-based compute. More and more investments shifted towards more end-to-end solution, IoT-type solutions, and that is adding another layer of growth and a growing part of our overall portfolio. So that's really where we're seeing growth come from right now, Ananda. And I think the overall message on market growth on -- in the technology business is that it's been strong, and it remains strong right now.

All right, Kevin, appreciate the contact. And with regards to Hyve, I guess, and then just kind of cloud, CSP and general public cloud, two questions. What's your expectations for project build-out in calendar 2018 relative to calendar 2017 from an industry perspective?

From an overall industry perspective, especially where our business is focused more on the hyper scale market, we expect to continue to see that market continue to grow and grow faster than the overall technology market.

Got it. Okay. So it's a follow-through. And then just with regard to the Hyve specific, best you can tell the mix dynamic, do you think -- do you view those as being more temporary? Or is there something contextual going on inside of the customers that you won deal -- that you did business within Q4 inside of the product portfolio that could have some kind of a tail to the mix dynamics for a little while here?

Yes, Ananda, this is Dennis. So I think it will exist for a while, this dynamic, where we're more concentrated on a few customers as those customers are growing quite quickly. And then as we have a good pipeline right now. But as we bring that pipeline in, it does ramp slowly. So again, the dynamic of the larger customer will survive that for some time. So I think for the next couple of quarters, we'll see similar circumstances.

And our next question is from Jim Suva from Citi.

As a quick follow-up to the server demand and the chip security vulnerabilities around like Meltdown and Spectre, have you seen like a pause at all? Or just continuing? I know it's kind of relatively new, but I'm just wondering, I mean, some industries are talking about a slowdown of 10% to 30%, which could be a big uptake to the demand. But others are saying well, maybe the paths will then alleviate that and back your status quo or enterprises slowing down or we're just even outside in a few days. Any type of change of behavior or none, whatsoever?

Yes. Jim, it still is too early to tell. Our -- the view that we have on the pipeline is relatively short, and so we haven't seen any notable change. And so I don't know what the implication will be.

Okay, great. And for cash flow on this quarter, can you comment on that about any puts or takes for this quarter versus maybe, say, normal a year ago?

Jim, it exceeded our expectations. We knew would be positive, but happy with the $250 million for the quarter.

And our next question is from Lou Miscioscia from Pivotal Research Group.

Kevin, again, congratulations from my end, too. Just curious how you plan to spend your time, and why now as you're moving on, I guess, to other things?

Yes. Well, I'd tell you, Lou , I've built up such a list of things that I need to get done kind of my honey do list that I've got to start tackling at this point. But I got to tell you, I am so grateful for the time that I've been here at SYNNEX, and the last 10 years have really been the highlight of my career. So work with great people, great leaders and -- but I have every confidence that Dennis and the team will continue to take this company forward the way that we have over the past 37 years. But I am looking forward to my retirement, and it would be golf, and it would be many other things on that task list.

Okay, great. Enjoy that. Marshall, I guess, when we look at the tax rate, can you help us understand 30%? And obviously, why not lower? And if you could help put it in context, you're one of the first companies to report here in calendar year '18, so any insights or thought you had would be helpful to us as analysts.

Yes, Lou, so just as a reminder, effective January 1, 2018, so it's the blended rate for Q1. So that's why when you look at the range for the full year, 28% to 30%, that has a lower end, if you will, than Q1, which is 30% to 31%. And again, as I said earlier in the conversation, it's the corporate rate that is reflected right now as we're doing further analysis on the repatriation and the deferreds.

Okay. And then over to Chris, you mentioned RPA. Could you tell us how that's playing out in the sense are clients starting to push it a lot harder for you? And are you all getting some revenue as you're creating the applications in a robotic process automation process? But unfortunately, once you get that, it then drops the revenue. And if you could mention maybe a typical product project, I guess, once implemented drop by 25%, 35%, 40%, is it pretty material?

Yes. So Lou, we've been doing it for sort of almost 16, 18 months, and have it in most of our accounts where we're seeing traction. And generally, we're taking into accounts versus letting a competitor take it into the accounts, or we're using it for new accounts. We're winning business by showing how it can drive savings. The savings can be pretty material. Generally, there are smaller projects, but it can be anywhere from 40% to 60% of savings. And we tend to see it as a benefit because it gets rid of some of the very monotonous work. It tends to allow our staff to do higher-value processes, and we tend to make a higher margin off of it because there is technology involved. So it's a little painful going through, but frankly, it produces a much better result both for the client and for us on the exit of it.

Okay. Last question, just tied to that, and good luck, guys, on the new year, Chris, when you look at your, let's say, the 100% of revenue stream, how much can be RPA-ed over time? And how much has been? And is it a very high number in comparison to all the different work you're doing?

It's a material number for us in terms of our work can be RPA-ed, but obviously, as we're doing that, we're getting new work into the business. You haven't seen our revenue decline by 40% because we're filling it up with other new deals and continue to share within our clients. I think, overall in the market, RPA will continue to grow through the course of this year. I think next year, it will probably have a much more meaningful impact because a lot of the projects that are in the industry tend to be 8-month payback, year paybacks. And then after that goes, it will be a much more transformable change that will happen, but I see that more as a 2019 comment. Clearly, if you talk to a lot of the industry analysts, they feel like this market is big and continue to grow quite robustly over the next sort of 24 to 36 months.

And we show no further questions on queue at this time. I'll now hand it over back to Kevin.

Thank you very much, Cindy. And thank you, everybody, for joining our call today. Have a good evening.