Tech Data Corporation (TECD)

Barclays Capital Global Technology, Media and Telecommunications Conference

May 22, 2012 11:45 AM EST

Executives

Robert Dutkowsky – Chief Executive Officer

Jeffery Howells – Executive Vice President, CFO

Presentation

Moderator

Compare to:
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» Tech Data's CEO Discusses Q1 2013 Results - Earnings Call Transcript
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» Tech Data CEO Discusses F3Q2012 Results - Conference Call Transcript

Okay. I think we need to get started. We are delighted to have Tech Data here with us today. We’ve had coverage of Tech Data for a while. They are good friends of ours in the industry. They have an exciting story to tell as well as some very good execution of late.

With us today is the CEO, Bob Dutkowsky and Jeff Howells, the CFO. Bob is going to go through a presentation for a little bit and then we’ll get into Q&A. So with that, Bob?

Robert M. Dutkowsky

Thank you, Ben. Good morning everyone. Thank you for your interest in Tech Data. My goal this morning is to quickly give you a snapshot of our Q1 results which we announced yesterday. And then give you a quick view of our strategy in terms of where we are headed as a company and I may make some forward-looking statements in this presentation. So I’d ask you to check with our filings with the Securities and Exchange Commission, as well as our Investor Relations website.

As I said, we announced Q1 yesterday. It was a very good quarter for Tech Data. It was a quarter that delivered record first quarter operating income, record net income and record EPS. Net income grew 6%. EPS grew 20% and we had a return on invested capital metric of 15%, which we believe is the best in the industry in our organization in our class. Sales grew actually 1%. We reported a minus 7%, because there were three actions that took place in the quarter. You’ll recall that we announced and left our operations in Brazil and Colombia at the end of Q4 and so we had that revenue in the comparison this quarter. Foreign currency exchange impacted the top line by about $230 million. And then we changed the presentation of some revenues for Warranty and Fulfillment contracts and that impacted the top line by $200 million, but had no impact below that. And so that’s how 1% sales growth translated into 7% decline. So, solid quarter for the company. We believe we grew with the industry in Q1 and we delivered exceptionally strong performance at the profit line and the return on invested capital line.

Question we always could ask is what products were hot, what segments were hot and which ones were cold in the quarter? So we built a little green arrow, red arrow chart that you can see. You could see from a geography perspective, although everyone talked about how poor and how soft the European economy is, three of our best performing countries in the quarter were European countries, Germany, the UK and France, as well as Peru in Latin America. Softer, Southern Europe as you would expect. Spain, Portugal and Eastern Europe showed up for the first time on this list in several quarters.

Strong segments at the end-user market. Predominant strength in SMB, that is our preferred market space and the Consumer continued to be soft in both geographies. And from a product point of view, anything that had to do with mobility, whether it would be cell phones or tablets were exceptionally strong. Software and Digital Signage were areas where we continued to see strength and Printers and Suppliers and Consumables were our weakness in the quarter.

Just to give you a quick highlight. Remember Tech Data has two major footprints, the European footprint and the Americas footprint. Our European business, excluding all the items that I talked about earlier, was up 1% in sales for the quarter and delivered the highest operating income for Q1 in our history.

The Americas business, again excluding the items, was up 2% in the quarter. Very strong operating margin performance and we had the highest first quarter operating income in 10 years. So very strong performance both from the top line and the bottom line both in the Americas and in Europe.

We have a very disciplined –a very strong balance sheet and a very disciplined approach to how we use our capital and our cash. We completed the latest $100 million buyback authorization in the quarter. We bought about $42 million worth of stock in the quarter. That brings our aggregate buyback over the last six years to $1 billion. 24.5 million Shares we bought about 38% of the available stock and that $1 billion in purchase is under $41 a share on average. So we believe that we’ve used the shareholders capital very efficiently from a buyback perspective. In that same timeframe, we bought 14 different companies that have helped us grow our footprint, diversify us into other business areas and bring in very important human capital to specialize in areas that we didn’t have the skill set to be able to support.

As you look into the future, we see the same process for our capital allocation. We’ll continue to look at share buyback as appropriate. We’ll continue to do targeted M&A and we’ll continue to fund organic growth.

The company built a very strong base supporting the desktop ecosystem. The company is approaching its 40

th

year in business and it really grew up supporting that desktop space, the PC and printer environment. And in order to be successful in that environment, you have to have a set of sales and marketing skills, you have to have a very strong credit management infrastructure to be able to fund our customers, to be able to place products into the market place and you obviously have to have a strong logistics engine.

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